Friday, March 3, 2006
PC maker Gateway Inc. has agreed to pay $47 million to Hewlett-Packard Co. to settle a series of patent lawsuits, with both makers inking a seven-year cross-licensing deal.
The agreement settles a series of lawsuits and countersuits that began in March 2004, when HP claimed in U.S. District Court in San Diego that five of its patents were being infringed by Gateway.
That month, Gateway had acquired its smaller rival, eMachines Inc., which already had a cross-licensing agreement with H-P. Shortly afterward, H-P exercised a right within the deal and terminated the license, Joe Beyers, H-P's vice president of intellectual property and licensing, was quoted as saying in an Associated Press report.
In 2004 and 2005, H-P filed additional suits against both Gateway and eMachines, including one with the International Trade Commission claiming that at least 27 of its patents were being breached. Gateway countersued H-P, claiming 13 of its patents were being infringed.
In recent months, there were hints the tide was turning in favor of Gateway in the long-running dispute, with the International Trade Commission reportedly overturning on appeal an earlier finding that Gateway PCs infringed on some Hewlett-Packard Co. patents.
Under the agreement, Gateway will pay $25 million to HP within a week of the deal becoming final and the remaining $22 million within a year. In a released statement, Gateway said it would take a $16.7 million charge against its 2005 financial results to account for the settlement. As a result, net income for the year was $32.8 million instead of $49.5 million. The change will be reflected in a 10-K filing the company plans to make with the Securities and Exchange Commission in the next two weeks.
Gateway said it plans to amortize the $30.3 million licensing fee over the next seven years, with $4.3 million being counted against profit annually.
By: DocMemory
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