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Apple sued over Newton drop

Hardware vendor Harris, which licensed the Newton OS and other technology, seeks $17.2 million for alleged breach of contract.

Apple Computer has been slapped with a lawsuit alleging that the company violated a licensing agreement when it discontinued its MessagePad handheld computer line and its Newton OS last year.

Hardware vendor Harris Corporation filed suit in the Superior Court of Santa Clara, California, asking for at least $17,200,000 in restitution and damages for the alleged breach of contract.

In 1996, Harris licensed the Newton OS as well as other technology underpinning the MessagePad 120 and 2000 handhelds to create a "ruggedized" Newton handheld of its own. Harris cut the deal on the assumption that Apple would continue to develop and support the Newton OS and other MessagePad technology, the suit says.

But following the reinstatement of Steve Jobs as acting CEO in February, Apple abandoned the platform, frustrating its user and development community and leaving Harris unable to find any customers for its version of the device, Harris alleges.

Harris' negotiations to sell its product to Ameritech and Telecom Italia fell through as a direct result of Apple's decision to back away from the platform. Apple's course of action breached the licensing agreement between the two companies, according to the complaint.

"As a result of Apple's announcement, the marketability of Harris' Newton-based products disappeared over night," the suit says. "As a direct and proximate result of Apple's decision to discontinue its line of Newton-based products, Harris was precluded from consummating its prospective deals with Ameritech and Telecom Italia, and also was precluded from marketing Harris MessagePad 2000s to other potential customers."

This type of bad news is unusual for Apple of late, which is currently coasting on the success of its recent earning announcement and strong sales of its iMac. Apple's current momentum may not be derailed so easily, analysts say.

"It would be somewhat surprising if it was an enforceable agreement," said Daniel Kunstler, an analyst at JP Morgan, who doubted the suit would affect Apple's progress over the last year. "It does not strike me as a slam dunk for the plaintiff."

Apple declined to comment on the merits of the suit or the specifics of the licensing arrangement.