Under the terms of the deal, announced Monday, Intel will pay $300 million to settle claims that its Pentium lines of chips infringed on patents held by Huntsville, Ala.-based Intergraph.
The company also agreed to pay up to another $150 million should a court overseeing a separate suit determine that Intel's Itanium chip infringes on Intergraph patents. Should Intel elect to appeal such a finding in the second suit, and lose, it would pay another $100 million, according to Intel spokesman Chuck Mulloy.
Intergraph, which once made hardware but now focuses on services and software, in the late 1980s and early 1990s made a chip known as Clipper to power its workstations. In 1993, it scrapped the effort and switched to using Intel chips. However, patents received for that chip formed the basis of Intergraph's claim.
The settlement brings to a close a more than four-year legal battle for Intel. Intergraph originally filed suit in an Alabama federal court in November 1997, alleging Intel violated antitrust laws, infringed on Intergraph patents, and violated state laws.
Getting Intel to pay anything is a comeback for Intergraph. A judge threw out the antitrust portion of Intergraph's suit. The patent claims in the original suit were alsoinitially, although an appeals court later reinstated them. Last July, Intergraph an additional claim in Texas alleging Intel's high-end server chip Itanium infringed on Intergraph patents. The court ordered settlement talks, which led to the resolution announced Monday.
Intergraph was seeking $2.2 billion in damages on its original patent claims and was asking a judge to triple that amount.
Mulloy said Intel was pleased with the settlement, which also results in Intel purchasing certain patents and both companies gaining a license to some of each other's patents.
"After more than four years, we are pleased that we were able to reach an agreement that both disposes of the case and is in the interests of both companies' shareholders," Mulloy said.
Intel said it plans to take a charge for half of the settlement amount in its first-quarter earnings, which are set to be released Tuesday.
"I think it's obviously very significant," said David Vance Lucas, Intergraph's general counsel. Lucas said that Intergaph will now look to restart licensing talks with other computer makers that had been on hold since the Intel legal action began.
Lucas said Intergraph believes there are companies that offer products that use Intergraph technology as well as other firms that could benefit by licensing Intergraph's patents. Although Intel did not concede the validity of Intergraph's patents, Lucas said the size of the settlement should influence other companies to license the technology.
"I think that will certainly assist us in our licensing effort," Lucas said.