Microsoft to pay Gateway to settle claims

Microsoft and Gateway have reached an agreement to settle all past legal issues arising from the U.S. antitrust case against the software maker, the companies said Monday.

Microsoft will pay the computer maker $150 million over the next four years for the marketing and development of Gateway products that can run its software, in exchange for Gateway dropping all antitrust claims based on past conduct, they said.

The deal was reached in recent mediation between the parties, and comes as what appears to be a broad effort by Microsoft to settle its various legal issues.

The dispute originated in the mid-1990s during the U.S. antitrust case against Microsoft when U.S. District Judge Thomas Penfield Jackson identified Gateway as having its business negatively affected by Microsoft's dominance in the desktop software market. The statute of limitations for Gateway to bring claims against Microsoft based on this finding expired in late 2003, but the companies entered an agreement before that time to extend the period so they could negotiate a resolution.

Although Microsoft has agreed to provide Gateway with "periodic payments" totaling $150 million, the Redmond, Washington, company denies any liability.

Gateway Chief Executive Officer Wayne Inouye said in a statement that his company is happy to put the matter behind it and looks forward to greater cooperation with Microsoft.

At the same time that it announced its deal with Gateway, Microsoft detailed the financial impact that recent legal settlements are having on the company. The software maker said that it would take a pre-tax charge of $123 million for the Gateway settlement in the quarter ended March 31, 2005. It will also take a $41 million charge for its settlement with video player software maker Burst.com in the same period.

In 2002 Burst.com alleged that the software maker stole patented technology and trade secrets surrounding Internet-based video-on-demand for its Windows Media Player. The companies settled last month with Microsoft agreeing to pay Burst.com $60 million to drop all antitrust and patent infringement claims.

Microsoft also said Monday that it is taking an additional pre-tax charge of $550 million to reserve for certain antitrust-related claims.