Trademarks

Distinctive symbols of authenticity through which the products of particular manufacturers or the salable commodities of particular merchants can be distinguished from those of others.

Cisco and Apple Settle Trademark Dispute Over iPhone

Cisco and Apple, Inc. in February 2007 settled a dispute over Apple's use of the term iPhone, for which Cisco has held the trademark. The controversy erupted less than two months earlier when Apple introduced a new product called the iPhone, which had the same name as a product that had been introduced by Cisco in 2006. Experts on intellectual property said that they thought Cisco would win its trademark infringement suit against Apple, but the two companies reached an agreement before lengthy litigation ensued.

The name iPhone was first registered as a trademark by InfoGear Technology Corp. in 1996. Cisco acquired the trademark in 2000 when it acquired InfoGear. Cisco did not put the trademark into use until the spring of 2006, when it announced the release of its new iPhone, which is an Internet phone that uses the popular Voice over Internet Protocol, or VoIP. Cisco launched the produce through its Linksys division, which expanded iPhone with additional products late in 2006.

Apple began in 1977 as a computer company, but by the beginning of the new millennium had transformed itself into a manufacturer of a broader range of electronic devices. The company's popular products include the iMac and the iPod. In 2006, rumors swirled on the Internet that Apple was developing a new mobile phone product that would also be capable of playing music, surfing the Internet, and running the Macintosh operation system. Apple confirmed these rumors in January 2007 when it announced the introduction of the iPhone. Apple CEO commented, "Every once in a while a revolutionary product comes along that changes everything. It's very fortunate if you can work on just one of these in your career."

Apple's iPhone, which was first retailed at a cost starting at $499, works with a new touchscreen technology that Jobs described as "far more accurate than any touch display every shipped." The half-inch device automatically synchronizes a user's media, including movies, music, photos, and e-mail, so that users can access their files on their phones. The phones operate on AT&T's Cingular wireless network and supports technologies such as Wi-Fi and Bluetooth. At the time that the company introduced is iPhone, Jobs also announced the release of other products, including one that would allow computer users to watch movies on their televisions.

Just one day after Apple announced its new product, Cisco filed a lawsuit in federal court in San Francisco, alleging that Apple had infringed Cisco's trademark in the use of the term iPhone. Cisco acknowledged that it had approached Apple in the years prior to the launch of the products to negotiate a licensing agreement that would allow Apple to use the name. However, when Apple made its announcement in January, Cisco assumed that the companies could not reach and agreement.

According to Mark Chandler, Cisco's senior vice president and general counsel, "Cisco entered into negotiations with Apple in good faith after Apple repeatedly asked permission to use Cisco's iPhone name. There is no doubt that Apple's new phone is very exciting, but they should not be using our trademark without our permission." Chandler also added, "We certainly expected that since [Apple] had gone ahead and announced a product without receiving permission to use the brand, that meant that the negotiation was concluded."

Apple countered that it was entitled to use the term iPhone because its product is materially different than the Cisco product. Apple spokesperson Natalie Kerris referred the lawsuit as "silly," stressing that several other companies using the VoIP products were using the name iPhone. "We believe that Cisco's U.S. trademark registration is tenuous at best," Kerris said. "Apple's the first company to use the iPhone name for a cell phone. And if Cisco wants to challenge us on it, we're very confident we will prevail."

Under federal trademark law, both companies could share the iPhone trademark so long as the uses of the products are not confusingly similar. Apple has endured other controversies over its own name. For example, the company waged a battle with Apple Corps., which is owned by the Beatles, for several decades. This ongoing dispute was not settled until early 2007. At the launching, Jobs chose to demonstrate the capabilities of the iPhone by playing two Beatles songs.

Cisco said that even though the products may have been dissimilar at the time of the dispute, both products could later incorporate new features or work in different networks after further development. Industry analysts said that Cisco's argument had merit, because Cisco could add new features to its iPhone to make it more comparable to Apple's iPhone. For instance, Cisco could add cellular functionality to convert its product to a cell phone, or it could add memory to allow the device to support additional media functions.

Some commentators also noted that Cisco's move was strategic, emphasizing that the company had been aggressive in making new acquisitions. Company CEO John Chambers had been ambitious about increasing Cisco's production of consumer electronic products. Chambers also wanted to enhance the company's brand name. Other commentators questioned the move, noting that Cisco had little to gain through litigation over the use of the name of a product. Nevertheless, intellectual property experts said that Cisco was likely to prevail in its suit. In early February, Cisco took out a full-age ad in the New York Times to promote its iPhone and included the small "R" next to the name to indicate that it was a registered trademark.

Just weeks after Cisco filed its lawsuit, the companies agreed to suspend the litigation and return to the negotiating table. At this time, Cisco agreed to extend the time during which Apple could respond to the filing. On February 21, the companies announced that they had reached a settlement. Under the terms of the settlement, Apple could use the term iPhone and agreed to explore interoperability between the two companies' products in the areas of security and consumer and enterprise communications.