Apple, Cisco Still Playing iPhone Name Game

Cisco Systems (Nasdaq: CSCO) gave Apple (Nasdaq: AAPL) nearly one more week to respond to its trademark infringement lawsuit over the iPhone name, a sign that the two companies are close to striking a licensing deal.

The networking gear maker said late Thursday it would give Apple until Feb. 21 to file a formal reply in U.S. Federal Court. Cisco's lawsuit alleges that the proposed Apple iPhone dilutes its trademark and will cause consumer confusion.

Cisco filed the suit one day after the Apple iPhone debuted at last month's Macworld Expo.

Closely Watched Dispute

Although Apple was supposed to respond to the suit two weeks ago, Cisco issued an initial extension before that deadline struck, saying that it hoped the additional time would lead to a settlement deal.

On Thursday, Cisco made similar remarks in granting the new extension.

"Cisco is fully committed to using the extra time to reach a mutually beneficial resolution," the company said in a statement.

The closely watched dispute involves high stakes for both companies. Apple has much riding on the iPhone, the logical follow-up product to the iPod.

When it debuted last month, the iPhone's design won wide praise for breaking the traditional cell phone mold, eschewing traditional keypads for a touch-screen approach and offering iPod-level sound quality along with mobile productivity tools based on the Mac OS X platform.

For Apple, the trademark issue may likely be urgent. Consumer interest in the iPhone is high and Apple already has carrier partner (AT&T) in place. Apple must also allow enough time to produce iPhone-related marketing materials and brand-name packaging before the product is scheduled to ship -- reportedly sometime in June.

Common Goals?

Both Apple and Cisco saw their shares trading lower Friday in an overall down market.

Cisco gained control of the iPhone trademark in 2000 when it bought InfoGear Technology, which had registered the name in 1996. Late in 2006, Cisco's Linksys home networking division rolled out a line of VoIP (Voice over Internet Protocol) handsets under the iPhone brand name.

By then, rumors surfaced about an upcoming Apple-branded iPhone, which was so named to capitalize on the popularity of the company's iPod music player.

After the lawsuit was filed on Jan. 10, Cisco CEO John Chambers indicated that Apple could use the iPhone trademark if its phone was made compatible with Cisco's products. It is unclear whether or not that same standard applies now that Apple's iPhone cat is out of the bag.

Currently, Cisco's bargaining power is somewhat muted by the fact that it sells networking gear to Apple as well as Google (Nasdaq: GOOG), whose CEO Eric Schmidt recently took a seat on Apple's board of directors.

For its part, Apple has called the lawsuit "silly" and said the two iPhones are different because Apple's would use cellular networks while Cisco's uses WiFi connections over broadband networks.

Betting on Settlement

Both companies can likely make strong legal arguments -- Cisco can clearly argue the pedigree of its trademark claim on iPhone and Apple can say that the two phones use vastly different technologies.

"Both sides looked before they leaped," said intellectual property attorney Michael Graham of Marshall Gerstein & Borun. "It seems unlikely that Apple would have gone ahead with unveiling a product called iPhone unless it felt it had a solid legal argument."

Reports began to circulate earlier this week that a settlement was imminent. At issue may be how quickly interoperability between the two iPhones can be achieved.

While Cisco may want its Linksys products to work smoothly with Apple's iTunes Music Store, for instance, time may be running out for Apple to build compatibility into its first-generation iPhone.