RealTime IT News

Intergraph, Gateway Settle 'Clipper' Spat

Intergraph has only one company left to settle with as part of its so-called "OEM case."

The Huntsville, Ala.-based chip design and production firm narrowed the field of litigants to just HP when it settled its outstanding litigation with computer maker Gateway earlier this week.

Poway, Calif.-based Gateway is now expected to pay a total of $10 million to license the rights to Intergraph's Clipper System and Processor patents and additional royalties for the next five years. The patents relate to computer system memory management technology. A spokesperson for Gateway told internetnews.com the company is "pleased that this matter is settled."

Intergraph's so-called "OEM case" was lobbied against Dell, Gateway, and HP including its Compaq division. Intergraph has dismissed its case against Round Rock, Texas-based computer maker Dell in exchange for a comprehensive licensing agreement. A U.S. District Court Judge recently ordered Intergraph, HP and Gateway to consider mediation.

An HP spokesperson declined to comment on its outstanding litigation.

Under the terms of the Gateway settlement, the company will pay Intergraph $5 million upfront with an additional $2.5 million paid out in July and October. In addition, Gateway will make future royalty payments to Intergraph of $1.25 per unit for certain U.S. sales of Gateway computer systems through February 2009.

Separately, Gateway also obtained a Clipper license for eMachines, which it recently acquired and agreed to pay royalties to Intergraph of $1.25 per unit for certain U.S. sales of eMachines computer systems for the next five years as well.

While the settlement is not an admission of guilt, it does speak to the growing number of computer manufacturers and chipmakers that are paying Intergraph seemingly to keep it out of court.

Take for example, Intel , which recently agreed to pay $225 million to Intergraph as part of its longstanding argument that the Itanium processor contains Intergraph's Parallel Instruction Computing (PIC) patents. Even though a Texas court ruled the technology was there, the two sides eventually settled out of court.

AMD filed its preemptive legal strike back in January 2004 against Intergraph saying the Clipper technology was invalid or was not present in AMD's chips. In April 2004, AMD reversed its stance saying it will pay Intergraph $10 million, plus 2 percent of profits for the next three years.

In September 2003, Texas Instruments settled its "Clipper" lawsuit with Intergraph, electing to prepay the royalty as a one-time, lump sum of $18 million.

While Intergraph started out in the hardware business, the company found overwhelming competition as Intel came into power in the 80s and 90s. Now the $550 million-a-year company said it relies on its visualization software to make intelligent maps in 2D and 3D.

Intergraph Executive Vice President of corporate development Reid French recently told internetnews.com that the company would continue to use the capital built up from its IP licensing to continue to develop its software products.