Marketplace Report: Apple Settles iPod Suit Apple Computer settled five patent lawsuits over iPod technology by paying $100 million to music device rival Creative Technology, which had threatened to block imports of the iPod until the patent issues were settled.

Marketplace Report: Apple Settles iPod Suit

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Back now with DAY TO DAY. Apple - the computer company, not the Beatle-music company - has settled a lawsuit with a tiny rival, Creative Technologies. This Singapore-based company had patented a technology for MP3 players to allow you to organize music titles and scroll through them. And the company says Apple had to pay them for using the technology, for borrowing it for the iPod. Apple will pay Creative $100 million. MARKETPLACE's Janet Babin is here. Janet, that's a big settlement for a big tech company that might have fought them in court otherwise.

JANET BABIN reporting:

Yeah. Some legal experts, Alex, think that a big reason Apple decided to settle instead of fight this is because Creative Technologies at the time also filed a claim with the International Trade Commission. And what the ITC can do in patent infringement cases is issue something called an exclusion order. And that means it can force a company to stop importing products into the U.S. iPods are made overseas, and then imported here. Arti Rai is a law professor at Duke University, and she told me why companies fear the ITC.

Professor ARTI RAI (Law, Duke University): It acts quickly. It tends to issue exclusion orders, and the exclusion order cannot be overturned until after an appeal is taken, which can take a long while. And so in the face of that fear of an exclusion order, I think Apple was inclined to settle.

BABIN: And because of the settlement, Rai thinks we're going to see more companies trying to file complaints, patent complaints, with the ITC.

CHADWICK: So is it clear that Creative had the patent and Apple actually took the technology from them?

BABIN: Yeah, there's debate about that. You know, some have gone so far as to call Creative Technologies a patent troll, a company that runs around and threatens everyone with lawsuits. But others think that it's very likely the two companies were working simultaneously, and Creative just got lucky to get the patent first. And according to court papers, Creative did approach Apple when it first applied for the patent, and the two sides talked about a licensing deal but nothing came of it. And Apple went ahead and introduced the iPod anyway.

CHADWICK: Well, with all the money it's made, maybe $100 million is a bargain.

BABIN: That's right, and everyone thinks Creative Technologies won out. It's a bargain for Apple, but also for Creative Technologies. Here's Arti Rai again with Duke University.

Prof. RAI: I think Creative won out. Having said that, the settlement - you know, for $100 million - is not going to cripple Apple in any way. And all things considered, it is much better for them than the alternative of an exclusion.

BABIN: And Creative now gets to be an iPod accessory. They get to put a sticker on their products that say made for iPod.

Coming up later today, we're going to find out about the collateral damage to the environment after a war.

CHADWICK: Thank you Janet Babin of MARKETPLACE, produced by American Public Media.

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