Apple is more likely to reach a deal with Cisco Systems than to risk losing a trademark suit over the use of the name iPhone, experts say.
In going to court, Apple would have to spend a lot of money defending an arguably weaker position. "I'm 99% certain that this is going to end up a deal," Greg Gabriel, intellectual property attorney at the law firm Kinsella, Weitzman, Iser, Kump & Aldisert, says. "I'm virtually certain that this won't go to trial."
Indeed, Cisco, which sued Apple on Wednesday for allegedly infringing on the iPhone trademark Cisco has owned since 2000, said the companies had been in serious discussions during the last few weeks before Apple CEO Steve Jobs surprised the network-equipment company by announcing the iPhone at the Macworld conference on Tuesday.
"I was surprised and disappointed when Apple decided to go ahead and announce their new product with our trademarked name without reaching an agreement," Mark Chandler, Cisco general counsel, said in a company blog. "It was essentially the equivalent of 'we're too busy.'"
Apple stopped talking at 8 p.m. Pacific time on Monday, and didn't contact Cisco after the launch, despite the two sides being "very close to an agreement," Chandler said.
Apple didn't return multiple requests for comment on Thursday. But on Wednesday, company spokesman Steve Dowling said, "We think Cisco's lawsuit is silly." He also pointed out that several other companies use the name iPhone for products. In checking the Web, Comwave and Teledex are examples of two companies that use the name.
Nevertheless, Gabriel wouldn't call Cisco's suit silly. "Cisco has a slam dunk here," he says. "Not only does Cisco have a 10-year-old trademark, but it has a product using the name iPhone."
But Henry M. Sneath, an IP attorney for the law firm Picadio, Sneath, Miller & Norton, isn't so sure that the issues are that clear cut. Assuming that it produced consumer surveys as proof, Apple could argue that the trademark is invalid because the vast majority of people think of Apple when presented with the name iPhone. Legally, a valid trademark must be associated with a company, not just a single product. "I-anything and people automatically think of Apple," Sneath says.
In defending its trademark, Cisco would have to show that Apple's use of iPhone is adding confusion to the market, meaning that people would confuse Apple's product with Cisco's. Besides showing that iPhone is a brand most associated with Apple, the computer maker could argue that there's no confusion since the two products are very different. A court, however, would unlikely consider the differences between Cisco's VoIP phone and Apple's cell phone relevant. "That's too fine a distinction to make in a trademark case," Gabriel says.
A potential problem for Cisco would be the fact that it owned the trademark for six years after acquiring Infogear, but didn't release a new or updated iPhone until last spring. "Trademarks can grow stale and lose their meaning," Sneath says.
One argument Apple is unlikely to make, according to both lawyers, is that the name iPhone is so generic that it shouldn't be a trademark at all. Such an argument would mean anyone could use the name, and take away any value it might have to Apple. "I don't think Apple would want to destroy the validity of the trademark," Gabriel says.
Apple has filed an application to use the trademark in Australia, according to the Cisco suit, which also claims Apple filed similar applications under the name of a different company in other countries.
Put it all together, and both companies would probably have to address "very murky trademark issues" in court, Sneath says, making it more likely that the two will eventually make a deal. "They would have to spend a lot of time and money to argue this out," Sneath says. "A dispute like this would be a costly endeavor."