My view on the Apple-Creative fiasco

This week, in business world, we witness the drama between Apple and Creative. A few days back, I wrote something about this issue and it triggered several responses from the blogsphere. I thought that it might be interesting to distinguish the emotive from the business issues.

Before coming to the core of the issue, let me summarize the views which I have gathered from reading several blogs on this issue:

• “Suing your opponent is not the way to go forward”:

  Most comments fall in line with this viewpoint. The commentators in Tomorrow SG seem to associate this strategy to resemble those of the political landscape in Singapore. The arguments goes along this lines, “If you sue your opponent, it is bad on your part.” Is that a post-SG elections 2006 hangover coming from most people that fall along this line of reasoning?

• “Creative should go back to the drawing board”: This is a reasonable comment, because competition breeds innovation. Creative needs to examine how the strategy to market the Zen player went wrong. An interesting argument was brought up earlier in the Global Entrepreneurship Summit, where two professors from Stanford and NUS presented it as a case study for the theory of “crossing the chasm”. In their analysis, they did not fault Creative’s loss in the mp3 wars to branding and marketing, but they recognized that it played a part. They argued that the Zen player did not cross the chasm, because it went straight for the US market, instead of focussing on the Asian markets. They noted that by bringing Zen player first to US forces it to pit against Apple which already have a firm ground in the US markets.

Then we come to the crux of the issues that are involved in this case:

Creative sues Apple on the basis of this patent (No: 6,928,433 dated 9 August 2005 coincidentally Singapore’s National Day), entitled “Automatic hierarchical categorization of music by metadata”, that is described as a method, performed by software executing on the processor of a portable music playback device, that automatically files tracks according to hierarchical structure of categories to organize tracks in a logical order. A user interface is utilized to change the hierarchy, view track names, and select tracks for playback or other operations.

From reading the patents (if the lawyers can help me out here), I thought that the patent defined is very broad and can be extended to almost any kind of device. If it works, I can see them going after related companies specializing in mp3 players. I am sure that to file a patent of this kind in the US is common and costs money. Since we have a patent and the technology of our oppoents’ music players appear to match the description, why don’t we sue them for violation of intellectual property? This is different from people who keeps harping on using the legal route to be immoral. There is no morality associated with this type of business decision. If the people in this line of reasoning wants to harp on this kind of arguments, here is a question that they must consider (and yes, it’s a rhetorical type), “So what’s the point of having a patent and pay lots of money and you cannot use it because it sounds immoral?”

While Apple has now countersued Creative, the legal deadlock is going to last for a while. This whole fiasco is not a conflict of personalities. Creative’s failure in securing a significant market share should not be attributed to the failure of the CEO. There are many reasons that why Apple manage to garner the market share. For example, they concentrated in building a simple product instead of coming up with one that has tonnes of special functions. They went further than that, they slowly build up an assortment of accessories around the IPod and concentrate on the customer service. The IPod was first sold in the US markets before regional expansion, which ties to a simple rule in business model: always sell your product to customers close to you, and then expand.

I look forward to comments and opinions on this issue.

Author’s note: The comments of the post are strictly of the author’s own personal opinion on this issue.

Technorati Tags: Entrepreneurship, Singapore Entrepreneurs, Apple Computers, Creative, MP3 Players, Intellectual Property, Patent

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