iPhone, therefore iSue - January 19, 2007

There’s something very strange about the litigation between Cisco Systems and Apple Inc. over rights to the name, iPhone.

On one level, it’s a fairly routine claim of trademark infringement—the sort of litigation that erupts when two companies are unable to negotiate an equitable licensing deal.

But the respective routes by which Apple and Cisco got to this point hardly seem routine.

As the world now knows, Apple’s high priest, Steve Jobs, unveiled plans to introduce the new media/phone/email/etc., device later this year during his keynote address at the annual MacWorld conference on January 10.

The name of the new device, Jobs declared, is to be the Apple iPhone.

As Jobs well knew, however, Cisco already held a registered trademark for the name iPhone in the U.S., and promptly sued Apple the next day

Cisco inherited the iPhone mark with its acquisition of InfoGear which had registered the name with the U.S. Patent & Trademark Office in 1999.

To maintain rights to the mark, Cisco was required to file an affidavit with the PTO—called a Section 8 Affidavit—between the fifth and sixth anniversary of the original registration, affirming that the trademark is in genuine “commercial use” in the U.S.

In case of iPhone, Cisco’s deadline for filing was November 15, 2005.

According to the PTO web site, however, Cisco didn’t actually file the Section 8 until May 4, 2006, just before the six month grace period it was granted was to run out.

The affidavit was accompanied by a photograph of a phone that had once been marketed under a different name, but was now identified by Cisco as an iPhone.

To some legal experts (a category that does not include me) the tardiness—and apparently slapdash nature—of the filing raises questions as to the validity of Cisco’s claim of commercial use.

Nonetheless, the PTO accepted the filing and renewed the registration.

OK, so they were sloppy with the paperwork. Happens all the time.

But given that Cisco—like the rest of the world—was aware of Apple’s plans well before last May, and in fact had apparently already held conversations with Apple about the use of the name, you’d think their lawyers would have been a little more Johnny-on-the-Spot about the registration.

Unless, of course, you consider how Apple has handled the thing.

Not only did Jobs’ announcement virtually compel Cisco to sue, it opens Apple to a claim of “willful” infringement, which carries a penalty of treble damages.

Stranger still, Apple itself has not attempted to register the iPhone mark in the U.S., even though it has registered the mark in many territories outside the U.S.

There is a pending application for registration of the iPhone mark in the U.S., but by Ocean Telecom Services LLC, based on a previous registration it filed in Trinidad and Tobago.

The Ocean Telecom filing is based on an “intent-to-use” the iPhone mark for a device that sounds strikingly similar to the Apple iPhone. That’s led many to speculate that Ocean is in fact a front for Apple, and that the filing, based on the Trinidad and Tobago claim, is simply an effort to establish priority over Cisco’s claim.

For a company that is already under investigation by federal prosecutors over the back-dating of options, that would be a strange bit of skullduggery just to claim a trademark.

I’s all enough to make you wonder if there isn’t something else at stake apart from the iPhone trademark.

So, in the spirit of the speculation the case has already engendered, here goes:

If I were running Cisco, I would be far more concerned about Apple’s plans for Apple TV than about its use of the name iPhone.

Even if its claim is upheld, the Linksys voice-over IP handset it now calls the iPhone is hardly a core product for Cisco.

Apple’s effort to do for IP-delivered video what the iPod did for IP-delivered music, however, strikes at the heart of one of Cisco’s principal strategic goals.

Cisco has spent over $7 billion in the last few years to acquire Linksys, Scientific-Atlanta and KISS Technologies in an effort to cobble together the pieces of a digital home network, from in-home routers, to set-top boxes, to networked DVD players.

As an equipment supplier, Cisco is best served if the home network develops based on open standards, for which anyone can write applications, that will run on Cisco-made devices.

Apple, however, is no friend of open standards. Like it’s market dominant iTunes/iPod system, Apple TV is designed to be a walled garden, streaming iTunes video content to a TV set equipped with an Apple TV set top.

If Apple achieves even a fraction of the market share in home video networking that it has in music, it would be very bad news for Cisco.

Unless of course Cisco is able to force Apple to open its platform.

If and when settlement talks ever get underway between Apple and Cisco, I doubt the iPhone will be the only issue on the table.

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