SAN FRANCISCO - What's a name worth?
To find out, Cisco Systems Inc. and Apple Inc. may spend millions of dollars in a high-stakes legal battle -- and the winner could walk away with the rights to the coveted name "IPhone.''
In a lawsuit filed Wednesday, Cisco asked a judge to forbid Apple from using the name "IPhone,'' a Cisco trademark since 2000. The case hinges in part on whether Apple's phone -- a sleek, US$499 gizmo unveiled Tuesday to much fanfare -- could confuse shoppers looking to buy Cisco's IPhones.
Attorneys specializing in intellectual property said Thursday that Cisco will likely win, if the case goes to court.
"Cisco's argument will hold water,'' said David Radack, chairman of the intellectual property department at Pittsburgh-based Eckert Seamans Cherin & Mellott LLC.
"It'd be like if I sold spark plugs, then someone else said I'm going to sell carburetors with the same name. Yeah, they're different products -- but they're both sold in auto-parts stores, and someone who saw the brand name on a spark plug could reasonably think it was made by the same company.''
Last spring, Cisco began selling a line of bulky but inexpensive IPhones that make free long-distance calls over the Internet, a technology known as voice-over-Internet protocol. Amazon.com sells them for as little as US$12, though they require extra software and hardware and are usually sold in kits that start around $70 and can cost $200 or more.
Apple's IPhone is a sleek cellular gadget that delivers e-mail, websites, music and movies over the Cingular Wireless network. Apple's IPhone will be available in June for US$499 or $599 for a version with more memory.
Earlier this week, Apple spokeswoman Natalie Kerris called the lawsuit "silly,'' and Apple senior vice-president Phil Schiller said other companies have tried to use the name for VoIP phones -- but only Apple's IPhone is a cellular phone.
Despite that distinction, attorneys are curious about what defence Apple may offer, noting that the high-profile case could become the most closely watched naming skirmish since 1989, when Mead Data Central Inc. -- owner of the Lexis legal database _ sued Toyota Motor Corp. over its Lexus luxury brand.
Cisco's trademark with the U.S. Patent and Trademark Office describes "computer hardware and software for providing integrated telephone communication with computerized global information networks.''
According to the lawsuit, Apple's IPhone is "deceptively and confusingly similar'' to Cisco's --_ and, as technology advances, both phones could someday operate on the same networks and assume similarities in the user interface, hardware or software.
Cisco is asking Apple to pay Cisco's legal fees and relinquish all profits eventually made on the IPhone. Cisco also demands Apple destroy all labels, signs, packaging and other promotional material that includes the word "IPhone,'' a product it cost Apple millions to develop.
Apple first asked Cisco in 2001 to acquire or licence rights to the name. When Cisco declined, Apple embarked on a campaign of "confusion, mistake and deception'' in its effort to secure the rights, the lawsuit claims.
Apple went so far as to create a phoney company -- called Ocean Telecom Services LLC _ to get around Cisco's trademark, Cisco alleges.
In an application to the U.S. Patent and Trade Office in March, Ocean Telecom billed itself as a foreign company doing business in Trinidad and Tobago. The company listed its attorney as James Johnson. His contact information was an e-mail address from Google's free web-based Gmail service.
On Thursday, the Apple spokeswoman said the company would not discuss Ocean Telecom.
No one responded to an e-mail that the Associated Press sent to James Johnson's e-mail account.
Despite harsh words in the lawsuit, Cisco spokesman John Noh said Cisco's attorneys are still willing to negotiate with Apple. He emphasized that Cisco -- the most richly valued company in Silicon Valley, with a market capitalization of more than US$174 billion -- never wanted Apple to pay cash for naming rights.
Rather, Noh said, Cisco executives wanted to let Apple use the word "IPhone'' on the condition that both companies' phones could communicate with each other. He would not provide technical details.
"This is not about money. We were seeking to work closely with Apple to make our devices more interoperable,'' Noh said Thursday.
"Cellphones, work phones, home phones, personal computers -- they're all converging. The value of that convergence is limitless, and the key to that is industrywide interoperability. It's a core tenets to our business.''
Barry Cohen, a partner in the Philadelphia office of Thorp Reed & Armstrong, said Cisco had a strong argument. Judges usually allow products from different companies to share the same name only when they're starkly dissimilar -- Delta Airlines and Delta Faucet, for instance.
"Those are clearly two businesses that don't overlap, except for maybe the bathroom in an airplane,'' Cohen said.
Judges also consider possible expansions of the product lines in determining whether trademark infringement occurred. Another factor is intent -- did the company not know of another with a similar name? That can't be the case with Apple, which first approached Cisco about the name nearly six years ago.
Apple may argue that the word "IPhone'' is so generic and broad it should not be trademarked at all. Numerous English words have become so pervasive -- aspirin, escalator and elevator, for instance -- that they've lost trademark protection. (Apple has aggressively defended the word "IPod,'' sending threatening legal notices to people who use the word to mean any type of digital music player.)
"The problem with the genericness argument is that, if Apple goes that route, the next day Nokia could come out with an IPhone, and I can't imagine that would go over well with Apple,'' Cohen said.
If Ocean Telecom is the "alter-ego'' for Apple and applied for the trademark, as Cisco suggests, that could undercut the argument that the name is not worthy of trademark protection.
It's unclear why executives couldn't settle their naming skirmish. Grace Han Stanton, a trademark expert and partner in the Seattle office of Perkins Coie LLP, said Apple executives were likely anticipating the lawsuit long before they launched the IPhone Tuesday.
"Why choose IPhone when there's a known conflict? Maybe they wanted the media frenzy,'' Stanton said. "This added a lot of fuel to the IPhone fire.''
Peter Morici, business professor at the University of Maryland, acknowledged that both companies have ample resources for a multimillion-dollar court battle -- but why? Apple's marketing staff is among the most talented in corporate America and should be able to come up with a catchy new name.
"Apple doesn't need this lawsuit,'' Morici said. "A new, creative moniker would be a wise strategy.''
