Apple and Singapore-based Creative had sued each other in California, Texas and Wisconsin. The International Trade Commission was also investigating complaints each has made accusing the other of infringing patents related to the devices.

Creative had asserted that its ZEN Patent covered the user interface in Creative NOMAD and ZEN portable digital media players and the iPod, iPod nano and iPod mini. The investigation was based on a complaint filed by Creative Labs of Milpitas, California, and Creative Technology of Singapore on May 15, 2006. The complaint alleged violations of section 337 of the Tariff Act of 1930 in the importation into the U.S., the sale for importation, and the sale within the U.S. after importation of certain portable digital media players that infringe Creative’s ZEN Patent. Creative had requested that the ITC issue a permanent exclusion order and permanent cease and desist order.

And on May 19 Apple filed a counter-suit against Creative in the company’s ongoing legal dispute over patent rights involving their rival digital music players. Apple claimed Creative Labs infringeed four patents in its hand-held digital players. The suit was filed in a Wisconsin District Court on May 15, the same day Creative filed a lawsuit and a trade complaint against Apple.
Also, on June 6 Apple filed a second copyright lawsuit and a trade complaint in the US against Creative Technology, claiming Creative infringed three patents relating to using icons, and displaying and editing data. Jobs & Company are asking for cash damages and a court order to stop Creative from further breaches. At the same time, Apple asked the International Trade Commission in Washington to block imports of Creative’s music players.

"Creative is very fortunate to have been granted this early patent," Apple CEO Steve Jobs said in a press release. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."

In the same release Sim Wong Hoo, chairman and CEO of Creative said: "We're very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative. Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X- Fi audio enhancement products. We expect that the one-time licensing payment of $100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006."

The one-time licensing payment won't materially affect Apple's financial performance, Apple spokesman Steve Dowling told the [url=http://news.yahoo.com/s/ap/20060823/ap_on_hi_te/creative_apple]Associated Press[/url]. The payment will add 85 cents per share to Creative's earnings in the current quarter, which ends Sept. 30, Hoo said.

Michael Kroll, a Syosset, N.Y.-based patent attorney and engineer, called the one-time payment "nickels and dimes" for Apple, which has a market capitalization of $57.4 billion, reports the AP. "A settlement doesn't mean anyone's right or wrong. In general it's just the cheapest way to get on with life," Kroll said. "You do what's best at the time. I'm sure that's what Apple was thinking."

The announcement came after U.S. stock markets closed. Apple stock closed Wednesday at US$67.31, down 31 cents from the previous day. In after-hours trading on the Nasdaq Stock Exchange, it lost another 20 cents. Creative stock closed Wednesday at $6.01, down 5 cents from the previous day. After the settlement was announced during after-hours trading, the share price surged nearly 34 percent, gaining $2.04.