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Gateway Settling HP Patent Dispute

Irvine-based Gateway Inc. said it has agreed to pay $47 million to settle its two-year patent dispute with Hewlett-Packard Co.

The companies will cross-license each other’s patents for seven years as part of the deal.

Gateway, which moved to Orange County from Poway in 2004, has attributed $16.7 million of the award to settle allegations of past infringement in connection with PCs made from 1999 on. The remaining $30.3 million will be paid over the seven-year life of the license.

Gateway said it is not admitting fault as part of the deal with Palo Alto-based HP.

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The computer maker said it will revise its results for the quarter and year ended Dec. 31 to take a charge of $16.7 million. Gateway’s net income for 2005 will fall to $32.8 million from $49.5 million.

Gateway said its settlement costs are “substantially less” than the litigation costs that will be avoided.

Gateway expects to save about $12 million in litigation costs this year.

The fight got under way in earnest in 2004, when HP sued Gateway in U.S. District Court in San Diego.

Hewlett-Packard Development Co., an HP unit that helps the company manage its patents, claimed Gateway infringed on six patents, including technologies that involved keyboard password functions and a computer’s casing.

Later in 2004, HP added four more patents to the suit.

HP sought an injunction blocking sales of the computers using the patents, unspecified monetary damages and attorneys’ fees.

Gateway denied the allegations and fired back, saying HP had infringed on five patents of its own, including a video monitor patent. Gateway also sought an injunction, unspecified damages and attorneys’ fees.

, Mike Mason

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