Gateway, HP Settle Patent Claims

Gateway agreed to pay HP $47 million to settle patent-infringement lawsuits, and the two companies will cross-license each other’s patent portfolios for seven years.

Gateway, which has struggled in a lagging PC market, will pay HP $25 million
within seven business days following the signing of a settlement and cross-license agreement. The remaining $22 million will be paid a year after that date.

The Irvine, Calif., computer maker said it will take a charge of $16.7 million to settle the claims. The remaining $30.3 million will go toward the seven-year license.

Accounting for the settlement, Gateway trimmed its net income for 2005 from $49.5 million to $32.8 million.

Gateway said in a statement these costs “are substantially less than the near-term litigation costs that will now be avoided.” For example, Gateway expects to save $12 million in litigation costs for 2006.

HP sued Gateway and eMachines in 2004 and 2005, claiming infringement of 27 of HP’s patents relating to personal computers. In counterclaims or independent actions, Gateway and AD Technologies asserted 13 patents against HP.

In other high-tech, legal news, storage systems vendor Quantum will pay Sun Microsystems $25 million to settle a patent infringement claim that Sun subsidiary StorageTek filed against Quantum in 2003. Sun acquired StorageTek last summer, assuming the case.

In a case similar to the Gateway/HP settlement, StorageTek and Quantum have also agreed to license some of each other’s patents. Like Gateway, Quantum also said it settled to avoid the litigation costs.

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