HP Sues Gateway Over Patents

UPDATED: The world’s No. 2 PC manufacturer, Hewlett-Packard has filed an infringement lawsuit against Gateway over charges that Gateway did not extend licensing contracts on its patents.

Officials involved in the case, which was filed in San Diego, said the suit is a last-resort effort by the Palo Alto, Calif., PC giant to get the extensions after negotiations between the two manufacturers broke down.

Bob Mayes, an attorney in HP’s legal department, told
internetnews.com the company doesn’t wish to pursue the licensing disagreement through the courts, but felt it had no choice.

Officials at HP, he said, still want to peacefully resolve the issue before it goes further.

“We do not want to protract litigation and unfortunately litigation is
always the last recourse in a licensing program,” he said. “We aren’t
afraid to use the tools, but we don’t want to if we don’t have to; we’d rather resolve this in an appropriate business environment rather than the courts. However, we had to take this action to protect our IP,” he added.

The case revolves around two licensing issues between HP and Gateway: the
licensing agreement for use of certain HP-owned patents and intellectual
property (IP) with Gateway, and licensing deals signed between two former
manufacturing companies — Compaq and eMachines.

But the patent licensing process is a two-way street. David Hallisey, a Gateway spokesperson, told internetnews.com his company also possesses a large number of patents that affect HP.

“Our position is that both companies have pretty significant patent rights, we think it’s premature for them to go so far as to file a suit at this point,” he said. “We intend to vigorously defend ourselves against these claims.”

A deal between Gateway and Compaq, a company HP finished
acquiring in 2002
ended in 1999 and was never renewed, and hasn’t in the
five years since the contract expired, despite ongoing negotiations.

The lawsuit also includes claims against eMachines, a low-cost PC maker bought up by
earlier this year, with its own ties to HP.

Mayes said officials at HP contacted Gateway after hearing about the merger
plans, in order to discuss the effect the merger would have on its existing licensing
program through eMachines, given its existing problems with Gateway.

eMachines and Compaq had squabbled in the past, with Compaq settling a
cross-licensing issue in 2002 with eMachines that initially went through the
courts. That agreement was the basis of the talks between Gateway and HP
last week.

He said they came out of negotiations concerned about their IP and said HP
was forced to terminate its cross-licensing agreement with eMachines (now
Gateway) this past week.

“We didn’t think [Gateway] was going to properly deal with it,” he said. He wouldn’t comment on whether that means Gateway’s continued production of PCs
meant the manufacturer was illegal, saying he didn’t want to get into
details of the case.

The lawsuit comes a little more than two months after the creation of the HP
Intellectual Property (IP) Licensing Group, an initiative by the company to
“increase revenue and improve technical collaborations with partners,” a
statement said.

According to HP, the Palo Alto, Calif., company last year ranked 9th in the
U.S. in 2002 with 1,759 new patents in 2003, a 27 percent increase over the
previous year. Overall, the company said they have 21,000 patents, and gain
an average of 11 new patents a day.

At the time, Joe Beyers, HP vice president of IP licensing, said in a
statement this approach “has served us well, but in many cases we have
missed out on the opportunity to gain additional value from HP’s inventions
beyond product revenue. Capturing these additional opportunities is
important to HP as the competitive environment in which we operate continues
to intensify.”

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