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Apple, Cisco Hang Up the iPhone Debate

Posted on: Friday, 23 February 2007, 12:00 CST

Soon there will be two iPhones on the market. Each will do different things, but at least the companies behind them won't be squabbling over who can use the name and how.

That's the result of an agreement between Apple (AAPL), which will make an iPhone that combines music and video-playing features with a wireless phone, and networking equipment maker Cisco Systems (CSCO), which manufactures handsets for placing Internet phone calls.

What's In a Name? The agreement, announced late on Feb. 21, ends a peculiar spat between the two Silicon Valley icons that had its genesis in an acquisition made by Cisco in 2000. That's when Cisco bought InfoGear, which a decade ago launched the iPhone, a product that until recently was all but forgotten.

Under the agreement, both companies can now use the iPhone name on various products. Cisco's Linksys consumer-networking unit will use the name on a line of handsets announced late last year, while Apple will use it on the device so famously introduced by CEO Steve Jobs on Jan. 9 [see BusinessWeek.com, 12/18/06, "Introducing the iPhone -- But Not from Apple," and 1/10/07, "The Future of Apple"].

Cisco and Apple further agreed to "explore opportunities for interoperability," among the devices, suggesting the parties came to agreement over a hot-button issue for Cisco, which filed a trademark infringement lawsuit against Apple on Jan. 10. However they laid out no specifics, suggesting that Apple may very well "explore" the interoperability issue by talking about it, but take few concrete steps to make it happen. Additionally, sources familiar with the terms of the agreement tell BusinessWeek.com that no money changed hands.

Carving Up the Apple However, the precise structure of the deal is confidential, and Apple's history of sharing trademarks with other entities has been thorny at best. The most prominent example is its now-concluded arrangement with Apple Corps, the holding company that represents the business interests of the surviving members of the Beatles. In the 1970s, the two companies agreed to limit each other's rights to the name "Apple" to certain fields of use, the computer company to computers and computer software, and the record company to music. Over the decades the boundaries between those fields of use blurred. The first time Apple produced software that could play music, the record company cried foul, which led to a restructuring of their agreement.

This back-and-forth debate over the legal semantics of the original and subsequent deals went on for the better part of three decades and ultimately culminated in a deal that had the computer company take over the rights to the name outright, and granted a long-term license to the record company for its uses of the name [see BusinessWeek.com, 2/5/07, "The Apples Come Together"].

If the Cisco-Apple deal is similarly structured, limiting each party to certain "fields of use," then both may have wandered into a minefield. The boundaries between Internet-based phones and wireless devices that operate on traditional cellular networks are blurring all the time.

A Web of Products Skype, owned by Internet auction house eBay (EBAY) is the world's most popular Internet calling service and it already produces a version of its software that works on wireless mobile devices running Microsoft's (MSFT) Windows Mobile. Since Skype already runs on Apple's Mac OS X operating system, a version of the Skype client could conceivably be developed for Apple's iPhone, which is said to run a slimmed-down version of OS X.

Additionally, Finnish wireless-phone giant Nokia (NOK) has been releasing phones that support an Internet calling technology known as Session Initiation Protocol or SIP. The technology is the basis for most corporate and some consumer Internet calling services, including those sold by Cisco, and also for other consumer services, notably the Gizmo Project. Motorola (MOT) and Sony Ericsson (SNE) (ERICY) have also expressed interest in bringing Internet calling to their handsets.

It wasn't clear exactly how the agreement spells out the kind of products on which Apple and Cisco may use the name in the future. A Cisco spokesman declined to comment beyond the terse language issued in the joint press release. But both are "free" to use the trademark on their respective products. That may work for the first generation of products to bear the iPhone name, whatever company makes them. But refined, multifunction iterations of each are likely to follow -- and keeping off the other company's turf may not always be easy.

Source: Business Week

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