Gateway, HP Settle Patent Claims

Gateway will pay HP $47 million in two installments over the next year.
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.

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