Free Essay

Zen Patent

In: Business and Management

Submitted By downsoul
Words 720
Pages 3
TO: SIM WONG HOO, CEO OF CREATIVE TECHNOLOGY
FROM: XIAO SHI
SUBJECT: THE BEST WAY TO LEVERAGE THE ZEN PATENT
-------------------------------------------------
DATE: FEBRUARY 13, 2016
This is to propose that Creative should exit the hardware business and MP3 market and take immediate seek settlement from Apple. This is the best way to protect Creative’s business and innovations as they would be able to avoid an endless and costly legal battle with Apple and leverage the Zen patent effectively.
There are several potential tactical options that Creative has toward the patent infringement issue against Apple. To begin with, an option would be to give up their patent and try to compete with Apple. Considering the growth that Apple has and their leading market position, this is probably the worst option for Creative. Plus, the superior user experience that the Zen patent brings in this fast growing MP3 market will undoubtedly drive spectacular revenue for Creative and thus there is no reason for Creative to give up the patent. Secondly Creative could sue to seek an injunction from allowing Apple to make their product. It is a really good option when people want to get rid of a potential competitor for a long time. In this case, Apple would not be able to manufacture its iPod when Creative litigate their claims. But would Apple give up on this attractive MP3 market just because of this? The answer is no without doubt. What they would do is to redesign their software, improve their iTunes whatever they need to better fit with their customers. They already knew the technology and Microsoft has a similar but fundamentally different patent. It is not hard to imagine that Apple would be able to create their own patent. In other words, it is just impossible for Creative to get rid of competitors that are ten times of their size like Apple. When Apple get their own technology and patent, the only thing they would do is to cannibalize all the market share that Creative got and thus this is either not the best option for Creative. It naturally comes to the next option, which is suing for infringement but let Apple know that Creative is also seeking settlement. Suing for infringement is critical as Creative definitely do not want Apple to think that they are afraid of them. But also what Creative should do is to make Apple think that they actually want to partner with them and seek payment for the work that Creative has done to this point as embodied in the Zen patent. Creative can take this strategy because Apple would understand that they are open to make a deal and Apple just want the same thing as Creative: get rid of a litigation with no end and resolve this as fast as possible. Next, Creative could also seek a settlement and then choose to exit the MP3 manufacturing business themselves. If Creative do both sue and settle as the last option stated, then they will actually go in a contradiction and competition with themselves. Creative make settlement with Apple and most likely they will get an interest in Apple’s manufacturing because they will receive product licensing fee for every iPod produced. At the same time, they also make MP3 player on their own to compete with Apple. Obviously they will compete with themselves and to both sue and make settlement is really in a contradiction. So to further entice Apple to settle, it is a good strategy for Creative to let Apple know that they could exit their MP3 business. Creative cannot shake Apple’s leading position but they can get good paid by selling off their manufacturing operations. Apple would be willing to pay Creative an attractive amount of money not only because the injunction would definitely be a threat to them but also because they can eliminate a competitor from the MP3 market.
In sum, with all the potential options stated above, the best action that Creative can take is to exit the hardware business themselves so that they would be able to build a partner relationship with Apple and at the same time, get paid hundreds of millions of dollars for the privilege. This action would help Creative sustain development as well as build partner relationship with big companies in the future.…...

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