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Intergraph, Gateway settle Pentium patent suit

Gateway agrees to pay Intergraph at least $10 million to settle a suit alleging that Pentium-based Gateway PCs violated patents involving an Intergraph chip called Clipper.

Gateway will pay Intergraph at least $10 million to settle a Pentium-related patent-infringement suit, the companies said this week.

In addition to the $10 million, Gateway will pay Intergraph royalties of $1.25 each for certain Gateway and eMachines brand PCs sold in the United States (Gateway acquired eMachines in March). The royalty arrangement will be in place till Feb. 2009.

The settlement, announced late Wednesday, ends part of a suit filed by Intergraph against Dell, Gateway and Hewlett-Packard in December 2002, which charged that the companies' Intel processor-based PCs infringed on Intergraph chip patents. That suit stemmed from a 1997 filing against Intel, in which Intergraph claimed Intel's Pentium chips violated the processor patents. Intel settled that suit in April 2002 for $300 million, but the agreement didn't preclude Intergraph from suing computer makers who used Pentiums in their products.

Intergraph has already settled with Dell, leaving HP as the only party left in the suit. The Dell settlement was dealt with during the resolution of still another suit, this one involving Intel's Itanium processor.

Although it's now a software and services company, Intergraph was a prominent manufacturer of high-end desktops called workstations in the 1980s and 1990s. Workstations are used by companies for jobs like computer aided design. Intergraph created its own processor, dubbed Clipper, for the machines it sold. Despite shifting to Intel chips during 1993, the patents Intergraph procured in developing Clipper--patents related to computer memory management--have become the basis for a number of lawsuits the company has filed against others, including Intel, the three PC makers and Texas Instruments. AMD also settled a patent dispute with Intergraph, in April of this year, avoiding a lawsuit. As part of that settlement, AMD agreed to pay as much as $25 million.

Settlements related to Intergraph's Clipper patents have brought the Huntsville, Ala., company hundreds of million of dollars, including a total of $675 million from Intel.

Gateway's settlement with Intergraph gives the PC maker a license to Intergraph Clipper patents and provides for the resolution of all patent litigation between the two companies, the companies said.

"We are pleased to have resolved this component of our OEM (original equipment manufacturer) patent litigation. We are happy with the terms of the Gateway settlement, particularly the future royalty component," Halsey Wise, Intergraph's CEO, said in a statement.

A Gateway representative confirmed the terms of the companies' settlement.

The royalties paid by Gateway are likely to be small as they cover only those Gateway systems that incorporate Intel processors but use non-Intel motherboards and chipsets. Most of Gateway's Intel processor PCs also use Intel chipsets and motherboards, the representative said.

Intergraph plans to continue to pursue its patent case against HP. That case is set to go to trial Aug. 2, Intergraph said.