Cisco, Apple Make iPhone 'ourPhone'

Apple (Nasdaq: AAPL) and Cisco (Nasdaq: CSCO) have decided that two iPhones are better than one.

The two tech giants said late Wednesday they settled the dispute Cisco filed accusing Apple of infringing on its iPhone trademark. The deal will let Apple use the iPhone name for its upcoming cell phone product while Cisco continues to use the brand name on its Linksys Voice over Internet Protocol (VoIP) handsets.

The companies did not disclose specific terms of the deal, including whether or not any direct financial payments will be made.

Instead, they said in a brief statement that they agreed to "explore opportunities for interoperability in the areas of security, and consumer and enterprise communications.

"Both companies acknowledge the trademark ownership rights that have been granted, and each side will dismiss any pending actions regarding the trademark," the companies said. "Other terms of the agreement are confidential."

The settlement ends months of on-and-off again negotiations, removes the threat of an injunction that could have delayed Apple's iPhone launch planned for June, and may help Cisco build products to work with Apple's growing array of products.

Clear for Takeoff

The two companies were in talks about the use of the brand name before Apple CEO Steve Jobs debuted the iPhone at Macworld in early January. Cisco promptly filed suit, saying Apple's use of the name would cause consumer confusion and dilute the trademark it has held since 2000.

Apple countered by saying the two phones were entirely different and pledged to fight the case. About two weeks later, however, as Apple faced a deadline to respond to Cisco's claims in court, the two sides agreed to resume talks.

Cisco may well benefit from having its various networking tools work more effectively with Apple's gear -- it could be important in both home settings, in which Apple's transformation into an electronics device maker will be most felt, and in enterprise settings, where Apple servers and other solutions are embraced in certain industries such as publishing and education.

Cisco proved its chops by providing the gear to power Internet-facing networks, and now those networks are increasingly carrying more than just data. In both its corporate and home-networking units, Cisco is beefing up its video and VoIP technologies. Last year's purchase of set-top box maker Atlanta Scientific emphasized the company's desire to be a player in the delivery of video over IP networks.

Both companies saw their stocks move modestly higher in the wake of the deal, each up less than 1 percent, with Apple shares moving to US$89.52 and Cisco stock to $27.46 in mid-morning trading.

The Other Shoe Drops

Oddly, the settlement doesn't seem to address what Cisco said was the main reason it filed the suit: The potential for brand confusion, according to telecom analyst Jeff Kagan.

"It is confusing, but it is interesting to watch," he told MacNewsWorld. "The iPhone is a catchy name. But if it is the name of two manufacturers' products, it will be one of the more confusing things to happen this year."

For Apple, closing the suit now, prior to the rollout of iPhone, is critical. "Who knows what name would have been on the devices if it wasn't settled by then," Kagan added.

Without access to the full settlement agreement, it is difficult to know which side came out on top. Cisco CEO John Chambers has said publicly that all Cisco wanted was for the two phones to work together.

Attention will now turn to gauging the response consumers will give the iPhone when it starts selling in June. The touch-screen device, which eschews traditional keypads, will be available in two models, selling for $499 and $599 when bought with a two-year contract from AT&T (NYSE: T) -- formerly known as Cingular.

The pending launch of the iPhone now shifts the burden to content owners to make more video, music and other content available to work on next-generation devices such as the iPhone, claimed Gartner (NYSE: IT) analyst Mike McGuire.

"Current mobile devices don't always provide a good multimedia experience," McGuire said. The iPhone is aiming to change that, with competitors likely to follow with next-generation devices of their own. "The challenge is now to improve the content available for those devices," he added.