| | Cisco v. Apple over "iPhone"...iFoodfight...
January 17, 2007; Page A18 The Wall St Journal
Apple has been making itself irresistible copy lately, featuring simultaneously in the biggest scandal story of the day (backdating) and the splashiest marketing story (iPhone).
Then there's this bounty beyond anything we had a right to expect. How can you not love a company that launches one of the highest-profile products in its history and does it with a disputed name? And disputed not by some no-name outfit in a suburban office park, but by a Silicon Valley icon of the stature of networking giant Cisco Systems.
Cisco is a highly respectable organization; its CEO John Chambers has yet to receive his due for surviving an unprecedented Peril of Pauline in riding his company's market cap to $589 billion from $11 billion during the bubble (briefly making it the world's most valuable company), before the fall wiped out nearly half a trillion in shareholder wealth. That Mr. Chambers emerged without any sizeable particle of egg on his face -- and without anyone seriously challenging his probity or his company's books despite the fact that Cisco spent the '90s wallowing in the minefield of merger accounting -- is a feat that speaks for itself.
Cisco was fully in its rights to rush out a product called iPhone in the weeks before Apple's long-expected announcement. It did so based on a brand name that it had acquired in 2000 and that apparently lay around unnoticed in a closet till very recently. It was also within its rights to sue Apple when Apple, as everyone had predicted for years, introduced its own product called "iPhone." Nor is the settled order of the universe violated when one company resorts to a lawsuit against another not just to vindicate its rights but to advance its business strategy.
That said, trademark law, at bottom, is about protecting a company from a competitor expropriating its investment in branding. Cisco may end up as the owner of "iPhone," but it hardly had the knack of making the name worth anything. It took Apple to give its "property" any real value. It took one guy, Apple CEO Steve Jobs, uttering the word on a stage in San Francisco. Fans and critics alike talk about Mr. Jobs's "dazzling showmanship" and "marketing genius," as if his success was all about technique. It's not. It's about history -- his role in the birth of the personal computer, his proven gift for making products that people care about.
Cisco is a great company, too, making products that everyone uses. But it has never been in Cisco's genes or its business model to make products people care about. Here's another way of looking at it: Cisco right now is counting its lucky stars that Cisco, rather than somebody else, was the victim of Apple's theft.
If it was theft. At least four products already in the market bear the name "iPhone" -- a Surecom USB device, a software product from VocalTec in Israel, a VOIP phone by Britain's Orate Telecommunications and a line of hotel phones by California's Teledex -- in addition to Cisco's late-hit revival of the product name acquired from InfoGear. Apple may have some grounds to argue whether placing an "i" in front of a generic item like a phone is enough to create a trademark. While nobody called a music player a "pod" before, everybody has always called a phone a "phone."
What's more, ZDNet, the online news service, examined the paper trail and finds that Cisco may have failed to meet a six-year deadline to show it was making use of the trademark. Cisco did submit something just before an additional six-month grace period ended, but -- according to ZDNet, which backs up its report with a photo -- the filing consisted of slapping an "iPhone" sticker on a box for its Linksys Cordless Internet Telephony Kit.
All this adds up to an impression that Cisco's business plan for "iPhone" never amounted to more than an urge to exploit Apple's intention to launch a product of the same name, which had been speculated about almost since the iPod was introduced (the first mention in the New York Times of an Apple "iPhone" came in August 2002). In fact, the lightbulb seems to have appeared over Cisco's head only when Apple recently approached it about licensing or purchasing the "iPhone" name.
In his blog, Cisco General Counsel Mark Chandler plays to the gallery with talk about mom-and-Apple-pie values such as "interoperability" and "open" standards. He says Cisco's goal is not to shake loose some money, but to start a "collaboration." Of course, if such a partnership were appealing to anybody but Cisco, Cisco would hardly need to extort Apple's agreement by putting a gun to the head of its six little hostages. Because that's all Cisco has to offer -- those six little letters. In return, it wants a piece of the wholly owned money machine that Apple has created by convincing so many consumers to lock themselves into Apple's world and pay a hefty markup for the privilege. Collaboration is not Apple's game -- the company has been determinedly building its present prosperity on the closed standards of the iPod and iTunes. Cisco's proffer, in other words, is the equivalent of slipping and falling on Mick Jagger's sidewalk, then trying to parlay it into a place in the band (with royalties, of course).
We can only guess what goes on in Mr. Jobs's mind, but he likely believes it was written in the heavens and the book of ages that Apple's next product would be called "iPhone." He was not going to let a little thing like a trademark controversy thwart the onward march of destiny. Cisco will just have to be responsible for its own feng shui, he might have figured, which can't be too good when standing in the way of another "insanely great" Apple product.
No, it's not the conventional logic by which pregnant corporate strategic and legal risks are taken. But that's Apple being Apple. |
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