Apple, Cisco gird for battle over iPhone
Trademark dispute leads to lawsuit between Silicon Valley titans
Apple Chief Executive Officer Steve Jobs made a daring, calculated move when he strode onto the stage Tuesday to introduce the iPhone.
Just a week before, the Cupertino technology company's attorneys had been negotiating with their counterparts at Cisco Systems to secure the right to the iPhone trademark, which Cisco has held since June 2000 and uses on the mobile and cordless Internet phones it introduced last month.
The two companies had held on-and-off discussions over the name since 2001, when Apple approached the San Jose networking company. After weeks of discussion in December, Cisco's attorneys felt they were close to a deal and had drafted an agreement.
"We had just one issue left," said Mark Chandler, Cisco's senior vice president and general counsel. "One niche, ancillary issue that was resolvable with one conversation."
Then Monday, the day before Jobs' appearance at the Macworld Conference & Expo in San Francisco, Apple's side went silent, Chandler said.
It's clear what happened next. On Tuesday, Jobs wowed the Apple faithful -- and some of the nonfaithful -- with a sleek, touch-screen cell phone that operates as an iPod and wireless Internet device. It will cost $499 to $599 and will be available in June.
He called it the iPhone. "We are going to reinvent the phone," he told the crowd of 4,000 employees, journalists, analysts and loyal customers.
The next day, Cisco, which even after the announcement thought Apple might sign its agreement, took the gloves off. It sued Apple over the name in U.S. District Court.
"We own the rights to the trademark and they shouldn't be using it," Chandler said.
Apple isn't backing down. Natalie Kerris, a spokeswoman for Apple, called the lawsuit "silly" and said the company is confident it will prevail.
Legal disputes between Silicon Valley technology companies are common, but in this case, the battle pits two stalwarts against each other, transcending a simple trademark dispute. Both companies are headed by high-profile leaders, John Chambers at Cisco, and Jobs at Apple. Both have played a critical role in shaping the technology industry. And both have deep pockets.
"It's an envious technology company feeling they have Apple by the tail," said Gene Munster, an analyst with Piper Jaffray.
Chandler said the agreement hinges on making Apple's iPhone interoperable and has nothing to do with money. Apple is known for creating its own system: Music and movies downloaded from its iTunes online store play only on iPods. The design, Apple says, is necessary to protect copyrighted material and to make its products and services easy to use. But critics say Apple's closed system hurts the growth of the digital media and consumer electronics markets.
Whether this is why Apple balked isn't clear. But it's obvious that Apple opted not to agree to Cisco's demands. It argued that its iPhone is a cell phone, while Cisco's iPhone is an Internet phone. And other companies have used the name iPhone to describe products and services, Apple said, making it a generic name.
While Apple may not own the little "i," it is known for its "i" products, starting with the iMac and continuing with the iPod and iTunes online store to iPhoto, iDVD and iMovie software. That could also come into play.
"Cisco asked for something they couldn't accept and this is a way to get out of it," said Jeff Lindgren, an intellectual property attorney at Morgan Miller Blair in Walnut Creek. "This is high-stakes poker."
Apple is no stranger to such legal wrangling.
It fought over the Apple name with the Beatles' record company, Apple Corps, for years. To this day, Beatles songs are not available on the iTunes music store.
Last year, Apple began going after companies using "pod" to describe their products or as their corporate name, sending cease-and-desist letters and requesting a name change. Podcast Ready, a Texas developer of podcasting software, received the letter in September and is still trying to resolve the matter with Apple.
"I'm kind of disappointed," said Russell Holliman, Podcast Ready's founder and CEO. He owns three Macintosh computers and an iPod and had hoped to work, not fight, with Apple. "Apple began as a startup in someone's garage and that's where we are right now. I've always been a fan of Apple and its culture."
That Apple is now being sued for infringing someone else's name is ironic, Holliman said.
Munster, the analyst with Piper Jaffray, offered 50-50 odds for a name change before the phone is released in June. "Whether you call it an iPhone or something else, it's still the best mobile phone in the world," he said.
Stupid Cisco.
You guys are taking Sakiale's comment way too seriously.
