Creative Technology’s the Zen Patent

INTEROFFICE MEMORANDUM

TO:        SIM WONG HOO, FOUNDER OF CREATIVE TECHNOLOG

SUBJECT:        ZEN PATENT ANALYSIS

DATE:        2/20/2017

The propose of this memorandum is to analyze Creative technology’s current potential tactical options for leveraging the Zen Patent. Creative Technology Inc. is a major global company focus on the audio and personal digital Entertainment market located in Singapore. In 2005, Creative technology was awarded the “Zen” patent which is an automatic hierarchical classification algorithm of music by the USPTO. Then Creative Technology wanted to launch its new MP3 product. Currently the MP3 marketplace dominated by Apple. However, Apple’s main product iPod has Apple’s hierarchical classification of music user-interface system which is consider as infringement by Creative technology. In order to pursue the best interests to leverage the Zen Patent, Creative technology could try to negotiate with other smaller manufactures; it could attempt to form an alliance with an industry giant like Sony or Microsoft to against Apple; and it could directly negotiate with Apple let them purchase the license of Zen Patent, if it don’t, Creative Technology should accuse Apple has infringed upon its patent rights by lawsuits. According to the current situation of MP3 product market, Apple captured around 41% market share with 140-percent growth. My recommendation is to secure the Zen patent by litigating and then negotiation with Apple to let them pay patent license fee. I believe it would be the best way to maximize benefit of Creative Technology Inc.

  Creative Technology had a difficult challenge ahead to monetize its Zen patent. To against a giant enemy like Apple, alliances seems an important component for Creative Technology to win the lawsuits. The first option is to negotiate with other smaller manufactures. The pros for negotiate with other smaller manufactures is pretty simple. As one of a global leader personal digital Entertainment company, Creative Technology could capture a significant resources and bargaining power to cut a better deal with smaller manufacturers. However, the cons of this strategy is comparing with Apple, the rival seems always have much more resources and capability to compete with Creative technology. Smaller manufactures’ loyalties are not guarantee. In fact, the smaller manufactures may not as helpful as we hoped.  The second potential tactical option is attempt to form an alliance with an industry giant like Sony or Microsoft to against Apple. As my perspective, it would be a very helpful option. The pros are very obviously. Legal process, especially intellectual property lawsuit would be long and expensive.  In any perspective, Creative Technology would be the one who doesn’t have resources to handle such long and expensive case. Industrial giants like Sony or Microsoft would provide a lots of legal law supports and capital funds to against Apple. However, the cons of form an alliance with an industry giant is we need to consider of losing control or our benefits in Zen patent. The industry giants would not help any potential rivals for free. Although against Apple seems good for both of Creative technology and industry giants, there still a high risk to lose our priority leverages of next step negotiation with industry giants.