Creative Technology Singapore

On March 10, 2006 Sim Wong Hoo (Sim), founder and CEO of Singapore-based Creative Technology

(Creative), stepped into the conference room where his special task force on intellectual property was

waiting to meet with him. As Sim settled into his chair at the table head, he remembered the day when it

all started.

Seven months earlier on August 31, 2005, Sim was awaited the morning news on Channel NewsAsia. He

was curious to see how the Asian markets reacted to the string of good news that Creative had announced

the previous evening.

For the the period April 1 to June 30 2005, Creative posted its first quarterly loss in three years.

However, things were different now. Creative was awarded the “Zen” patent by the USPTO on Aug 9,

2005 that gave it proprietary rights to the use of its automatic system for MP3 music storage and retrieval.

The news about the Zen patent was made public on August 30, 2005 along with the launch of some

promising new products—the new X-Fi soundcard, the Zen vision, and the Muvo Vidz. Shares of

Creative jumped 6.9 percent to close at S$13.90. Evidently, the market was relishing the prospect that

Creative could reap millions of dollars from licensing fees and royalties.3

In the next couple months, Sim’s special IP task force researched the IP strategies of the various

competing manufacturers directly and indirectly related to Creative’s Zen patent. In today’s meeting, the

team was considering the various options that Creative had to leverage its Zen patent, improve its now

ailing stock price (Exhibit 1), and realize maximum advantage in a marketplace dominated by Apple

Computers, Inc. Sim believed that Creative should appropriate what it deserved for its pioneering effort as

embodied in the Zen patent and