From engadget:
"It is our belief that Apple intends to agree to the final document." Not so much. We're not quite sure what broke down in talks between Cisco and Apple, but they ain't playing friendly no more. Cisco just announced that it has filed a lawsuit in Northern California to prevent Apple from infringing upon its registered iPhone trademark. The word yesterday was that Apple and Cisco had been involved in "extensive discussions," and that they were expecting Apple to sign up for whatever final agreement they proposed. "Cisco entered into negotiations with Apple in good faith after Apple repeatedly asked permission to use Cisco's iPhone name," says Mark Chandler of Cisco. "There is no doubt that Apple's new phone is very exciting, but they should not be using our trademark without our permission." Obviously all we've heard so far is Cisco spin on the situation, but so far it sounds like they're being fairly reasonable with Apple on this -- it is their own dang trademark after all. So what gives, Apple?
Apple's Response to Cisco's lawsuit:

Oh no they didn't! By now you already know it's on, and the latest round in the iPhone v. iPhone dance-off comes from Apple spokesman Steve Dowling, who was quoted as saying the Cisco lawsuit is "silly" and that several companies are already using the term iPhone for VoIP products. He called Cisco's trademark "tenuous at best" and noted his company was the first to ever use the name for a cellphone. He goes on to boast that Cisco is gonna totally get served: "if Cisco wants to challenge us on it, we're very confident we'll prevail." Oh yeah -- Apple to Cisco: let's see you dance, sucka!