March 25, 2004 5:49 PM PST

HP files patent suit against Gateway

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Hewlett-Packard sued Gateway for patent infringement on Wednesday as part of a stepped-up campaign to seek compensation for what it claims as its intellectual property.

Hewlett Packard Development Company, a wholly owned subsidiary of Palo Alto, Calif.-based HP, filed the suit Wednesday against Gateway in a district court in Southern California. The suit alleges that Gateway infringed certain HP patents and refused to properly compensate HP for their use.

An HP representative said the company has not specified monetary damages, but it is seeking compensation for past patent infringements and a structure for compensation going forward. A previous patent agreement between Gateway and HP lapsed in 1999.

HP and eMachines settled a similar patent infringement case about 18 months ago, according to an HP vice president, Joe Beyers. That settlement and HP's acquisition of Compaq took the focus off Gateway, but Gateway's acquisition of eMachines prompted HP to pursue the matter again, Beyers said.

A Gateway representative said the company intends to defend itself vigorously.

"The fact is both companies are in possession of significant patent rights in the area of computer technology, and it's premature of (HP) not to take that into consideration before proceeding with a lawsuit," said Bob Sherbin, a Gateway spokesman.

The suit centers on six patents related to PCs, including a patent on 1-inch notebook computers and power management. But the lawsuit could be expanded to cover more, because HP has about 6,000 patents related to PCs, according to an HP representative. The company has about 21,000 patents worldwide.

The Gateway suit is the first for HP's intellectual property group, which was formed early last year in a move meant to increase licensing of HP's technology portfolio. Licensing has been viewed as a way to get a greater return on HP's substantial research and development budget.

"HP has not taken enough financial advantage of its patents," said Roger Kay, an analyst with research firm IDC.

Beyers said HP has seen revenue from royalty income increase by 50 percent, but would not comment on how much that amounted to.

"We've been proactive with our licensing program, allowing others to use our licenses, and many have taken them and given us fair value," he said.

Beyers would not comment on who HP has struck these licensing agreements with. He did say that the company was not just looking for cash from the licenses and the recompense could take a number of forms.

Historically, when technology companies have been at each other's throats over patents, they've settled flare-ups by cross-licensing technology from one another. But it's not clear what Gateway could offer HP, Kay added.

"This suit highlights that value is held by a limited number of players in the PC market, and Gateway is low on that totem pole," Kay said.

 

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