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Gateway To Pay HP Over Patent Issues

3/02/2006 08:58:00 AM Eastern

New York — Gateway last week agreed to pay Hewlett-Packard $47 million to settle an ongoing patent infringement suit.

Under the agreement Gateway will pay HP $25 million within seven business days and the remaining $22 million within one year starting from the day the deal is finalized. Gateway will write off $16.7 million of the payment for resolving the legal issues, and the remaining $30.3 million will be attributed to a seven-year cross licensing agreement the two companies signed as part of the settlement. The latter sum will be amortized over the life of the licensing agreement.

Gateway did not have to admit to any wrongdoing under the terms of the agreement.

HP took Gateway and its subsidiary brand eMachines to court in 2004 and 2005 claiming infringement on 27 HP patents by the two companies, some from when eMachines was a stand-alone company prior to its acquisition by Gateway. Gateway countered with a claim that HP and infringed on several of its patents.

The settlement dismisses all legal action taking place between the firms, the two sides said in written statements.

Gateway reported that it will have to restate its fourth quarter and year end, ended Dec. 30, financial results to take the $16.7 million charge for that period.