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priceline.com, Microsoft Settle 1999 Patent Infringement Case

priceline.com Inc. and Microsoft Corp. on Tuesday settled a patent infringement case relating to the software giant's Expedia Inc. subsidiary that dated back to October 1999.

The lawsuit, filed in U.S. District Court in Connecticut, alleged that Expedia infringed on at least three of priceline.com's patents when it introduced a buyer-driven ecommerce hotel-booking service. The suit also charged Microsoft with violating the Connecticut Unfair Trade Practices Act and sought declaratory relief, permanent injunctive relief and actual and punitive damages.

Terms of the settlement weren't disclosed, except to say that Expedia.com has entered into a licensing agreement with priceline to continue operating its Price Matcher services. priceline.com said it will receive royalties under the arrangement; however, the Norwalk, Conn.-based online travel company does not expect this arrangement to have a material impact on its business.

"We believe this settlement is in the best interests of our companies. This settlement resolves all legal issues between the parties and allows us to move forward," the two companies said in a joint statement.

Although the case hadn't yet made it to trial, the evidence presented by priceline.com didn't portend a case in which Microsoft could easily prevail.

According to priceline.com, Microsoft in early 1999 sought (and was provided with) detailed confidential information and technical data regarding priceline.com over an eight-month period. The meetings between priceline.com and Microsoft included a face-to-face discussion between then-Vice Chairman Jay Walker and Microsoft's former Chief Financial Officer Greg Maffei, who also served as chairman of Expedia Inc. That discussion, which covered a potential Microsoft investment in priceline.com immediately prior to priceline.com's March 1999 IPO, ultimately broke off when priceline.com would not provide Microsoft with prices on its shares below the initial public offering price, priceline.com contended.

Meetings continued in what priceline.com termed was "good-faith," through the summer of 1999, when during a face-to-face discussion between Walker and Chairman Bill Gates, Microsoft indicated the company had no intention of allowing patent rights to stand in its way. A few weeks following the discussion between Gates and Walker, Microsoft launched Expedia's Hotel Price Matcher service.

Microsoft wasn't immediately available for comment.