Some legal experts believe Cisco no longer has the rights over the iPhone trademark as based on information from the U.S. Patent and Trademark office and public reviews, the company apparently abandoned the trademark in late 2005/early 2006.
This information indicates that Cisco did not offer a product named "iPhone" between 1999 and December 2006. But they knew Apple was interested in the name because Apple had approached them and negotiations were ongoing. Jay Behmke writes:
If Cisco didn't launch a product using the iPhone name, their trademark registration would be canceled and they would have no bargaining chips with Apple. So in order to keep the trademark active, they had to file the Declaration of Use, and start selling a product under that trademark.
It is possible that the Declaration of Use is defective, as there was no continuous use, and the sample that Cisco submitted was for a product not released until 7 months later. The fact that the Declaration of Use was submitted only days before the deadline expires gives me the impression that they were scrambling to get a product to market, and had to file the Declaration before the product was ready.
If Apple can prove in federal court that the Declaration of Use contained misstatements of fact, i.e. that there was no continuous use, then Cisco's registration can be canceled. This could clear the way for the next company in line for the iPhone trademark, Ocean Telecom Services LLC (widely regarded as a front company for Apple). It could also explain why Apple decided not to sign the agreement Cisco proposed.