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Cisco Systems (Nasdaq: CSCO) and Apple (Nasdaq: AAPL) seem to be returning to the bargaining table in the hope of working out an agreement on the use of the "iPhone" brand name for Apple's new mobile phone device.
The two companies issued a joint statement Wednesday announcing that Apple would be given an extension of time to file a formal response to Cisco's action in the U.S. District Court for the Northern District of California.
"Apple and Cisco have agreed to extend the time for Apple to respond to the lawsuit to allow for discussions between the companies with the aim of reaching agreement on trademark rights and interoperability," the companies said.
Cisco claims that Apple's planned iPhone, which won't be on the market until June, infringes on and dilutes its trademark by offering a product that is "deceptively and confusingly similar" to its line of cordless VoIP (Voice over Internet Protocol) phones sold by its Linksys home networking division.
Apple has expressed confidence over the use of the iPhone brand because its mobile device will operate over cellular networks, rather than in-home WiFi connections that the Linksys iPhone uses.
Cisco has responded by saying that either phone could evolve over time to become more of a direct competitor to the other.
The two companies were known to have been talking about an agreement -- likely one in which Apple would license the rights to the trademarked brand name from Cisco -- until the time when Apple CEO Steve Jobs debuted the phone at the Macworld Expo last month. A day later, Cisco filed suit.
Talking the Talk
Once the legal action commenced, both companies have been fairly tight-lipped about the proceedings. Neither company responded to requests for comments on the court delay, and it's not clear how long the extension will be, though it's likely that the two sides have set a deadline.
In its quarterly earnings conference call, Apple referred only briefly to the Cisco suit, saying it felt confident it would prevail.
Meanwhile, Cisco CEO John Chambers told The New York Times late last month that Cisco had been in talks with Apple for as long as five years over the "iPhone" brand and potential licensing agreements.
"All we ask is that people respect our trademarks and our intellectual property," Chambers told the newspaper. "We would have traded that for just interoperability."
If that's the case, it could make Apple more willing to talk. The company may have worried that Cisco would hold out for a significant licensing fee or royalty payment on the phones, which could have long-term financial implications, especially given that mobile phones are not considered a high profit-margin business.
Cisco acquired the "iPhone" trademark and brand name when it purchased Infogear in 2000. That firm registered the trademark in 1996, though a slew of other firms have filed for protection of similar trademarks.
High Stakes
Apple would likely be eager to reach a settlement. The proposed iPhone has generated significant publicity and consumer interest even though it will be months before it can be purchased.
It is key for Apple to secure the brand name.
Changing the brand name of the phone would probably require scrapping entire advertising and promotional campaigns that are likely completed or in the works. Apple's Web site home page has featured the iPhone since the day it debuted.
Still, "Apple must have had reason to believe it was moving forward on solid legal ground," said intellectual property attorney Michael R. Graham of Marshall Gerstein & Borun.
Graham noted that Apple had to be aware that Cisco and as many as three others had applied for trademarks for "iPhone" but felt it had superior rights to the name.
Going to trial could add years to the dispute and cost each company a lot of money. Apple also faces the risk that a judge might enjoin it from selling its iPhone.
That could be a significant blow to the company, given the mounting consumer excitement over the device's rollout. An alternative would be to settle the dispute out of court.
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