Apple Inc. was sued by Cisco Systems Inc. over its new iPhone a day after chief executive officer Steve Jobs introduced the device to fanfare in San Francisco.
Cisco sued Apple on Wednesday in U.S. District Court in San Francisco, alleging that use of the name violates its trademark. The lawsuit was filed after talks to share the iPhone name ended, said Cisco, based in San Jose, Calif.
Apple, maker of the iPod music player, failed to reach an agreement with Cisco on use of the name after five years of talks, and it chose to go ahead with the iPhone announcement this week. Apple's decision to proceed without legal rights to the name surprised trademark lawyers.
"This is a gutsy move by Apple," said William Heller of McCarter & English L.L.P. in Newark, N.J. "I wouldn't handicap this race just yet. There are lots of arguments on both sides."
The lawsuit pits two of Silicon Valley's biggest titans, Jobs and Cisco CEO John Chambers, against each other in one of the wireless industry's fastest-growing areas.
Cisco argues it has owned the trademark since 2000. Apple, based in Cupertino, Calif., called the suit "silly" and said that because the products were different - Apple's is a cell phone and Cisco's is Internet-based - they should both be allowed to use the iPhone name.
Cisco, the world's largest maker of networking equipment, said Apple invented a company with a fake name, Ocean Telecom Services L.L.C., to surreptitiously register the name in the United States and other countries.
Ocean Telecom filed its application with the U.S. Patent and Trademark Office in September, and Apple filed a similar application in its own name in Australia. Both cite a third filing in Trinidad and Tobago as being connected, Cisco said.
The U.S. application "is being held up" because of the Cisco trademark, Cisco said.
Ocean Telecom appears to be "either Apple directly or a company that is doing it for Apple," said Allonn E. Levy, a trademark lawyer at Hopkins & Carley in San Jose, Calif. "I can see where Apple says, 'Negotiations aren't going so well; we'd better have a Plan B.' "
Shares of Apple, which had gained 13 percent since the iPhone release, fell $1.20, to $95.80, in Nasdaq Stock Market composite trading. Cisco gained 1 cent, to $28.69. The stock jumped 60 percent last year.
Apple spokesman Steve Dowling said there was a difference between cordless phones marketed by Cisco's Linksys division and the cell phone Apple introduced this week.
"We are the first company to use the name iPhone for a cell phone, and if Cisco wants to challenge us on it, we are very confident we will prevail," Dowling said.
That position is "not consistent with the discussions we've had for several years," Cisco general counsel Mark Chandler said. "Apple approached us numerous times starting in 2001 regarding use of the iPhone name."