CONTINUED:
Cisco sues Apple over iPhone trademark

For more than a year, Apple watchers have speculated about a new phone developed by Apple that would combine smart phone cellular technology with the full functionality of an iPod music and video player. Fans and bloggers had been referring to an Apple-designed mobile phone as the iPhone for some time, and Apple's repeated attempts at obtaining the trademark make it clear Apple hoped to use the moniker as well.

Cisco said in its complaint that Apple had first approached the company about acquiring the rights to the iPhone trademark in 2001. Over the years, Apple continued to make requests for the rights, including several attempts in 2006, Cisco said.

"Each time, Apple was told that Cisco was not interested in ceding the mark to Apple," Cisco's complaint reads.

Apple apparently was not willing to accept Cisco's decision, so it created a front company called Ocean Telecom Services that applied to use the trademark in the US on 26 September 2006, according to Cisco's complaint. That company, Cisco says in the filing, is "owned or otherwise controlled by Apple and is the alter ego of Apple". Around the same time, on 19 September 2006, Apple also filed for the trademark for iPhone in Australia.

In Ocean Telecom Services' US filing and in Apple's Australian filing, each company refers to a trademark filing made on 27 March 2006, in Trinidad and Tobago. In its complaint, Cisco said that it's the reference to this document that is almost identical in each filing that leads the company to believe Ocean Telecom is actually owned by Apple.

Longtime Apple watcher Roger Kay, an analyst with Endpoint Technologies Associates, was blunt in his assessment of the situation.

"This was just brass balls on the part of Steve [Jobs], to go in there and just grab that trademark and not pay a license for it or negotiate. It's the height of arrogance," Kay said. "He basically thinks he can get away with it."

It's likely, however, that the two companies will settle their differences, as prolonged litigation doesn't really serve either company, Kay said. "Apple is playing chicken with Cisco, and there's other companies I'd rather play chicken with," he said, referring to Cisco's deep pockets.

Cisco holds a clear advantage in the legal dispute as the trademark holder of record and having already released products using the iPhone name, said Bruce Sunstein, co-founder of the Boston law firm Bromberg & Sunstein. "The one who has a registration is in a better position than the one who does not."

Apple's only choice is to argue that its 'iFamily' of trademarks such as iPod, iTunes and iMac create confusion in a customer's mind as to who makes the iPhone, Sunstein said. It's not out of the question, but in general the company in Cisco's position with clear rights to the trademark has a stronger argument than a company making the family argument, he said.

Also, the applications for trademarks in other countries have no bearing on Cisco's iPhone trademark, Sunstein said. "The fact that Apple may have superior rights in Australia doesn't [give] them any rights in the US," he said.

Apple's Kerris had no comment on the status of negotiations between the two companies, including whether Apple had received documents from Cisco the night prior to the iPhone launch, as Cisco had stated on Tuesday.

In the US, courts evaluate trademark disputes based on a list of 13 factors, including how similar the trademarks are, how well-recognised they are -- and, crucially, whether there will be "any actual confusion" on the part of consumers.

Identical product names in similar areas have prompted courts to side with the original trademark holder in the past.

In one 2003 decision by a federal appeals court, a company selling Red Bull tequila sought a trademark. But the court ruled a malt beverage made by Schlitz and also called Red Bull was already trademarked, and granting a second one would result in a "likelihood of confusion" between the two alcoholic drinks.

Under federal law, the loser in a trademark dispute can be forced to hand over any profits it received as the result of selling the device in question, and signs, labels and packaging can be required to be destroyed.

CNET News.com's Declan McCullagh contributed to this report.