Cognos, Business Objects Settle Suit

The two companies reach a settlement to a patent infringement suit that will require Cognos to pay $24 million to Business Objects over the next two years

Cognos Inc. and Business Objects S.A. have reached a settlement to a 2-year-old patent infringement suit that will require Cognos to pay $24 million to Business Objects over the next two years, the two companies announced late Monday.

Business Objects had alleged that Cognos Impromptu product for database reporting infringed upon its U.S. patent number 5,555,403 titled "Relational Database Access System Using Semantically Dynamic Objects."

At issue was Cognos use of plain English terms in columns and fields—the so-called "semantic layer"—and in how data joins were created between different files in databases, in Impromptu.

Cognos CEO Ron Zambonini dismissed the charges as "completely invalid" and said Cognos products supported such technology before Business Objects filed the patent in 1996.

"Its just baloney as far as Im concerned, but we thought it was more prudent to get the settlement," said Zambonini in a conference call with financial analysts Tuesday morning. "Technical issues tend to confuse juries."

Zambonini said he was confident Cognos would have won the suit, which was scheduled to go to trial May 20, but the risk of a lengthy appeals process and the possibility of an injunction by Business Objects to prevent Cognos from selling Impromptu until the appeal was resolved forced the company to settle.

Zambonini said Cognos was in the midst of the "strongest product cycle in company history" and said the current Series 7 release of its applications was doing particularly well. He said he feared a lengthy legal battle with archrival Business Objects would be a distraction that would hurt the companys sales.

"We wanted to protect our current and future products from lawsuits at a cost that was well within our resources," he said.

The settlement calls for Cognos to pay Business Objects a lump sum of $10 million by June 10, then quarterly installments of $1.75 million over the next two years, effectively licensing the patented technology from Business Objects. The company will not, however, be required to pay any royalties to Business Objects on past or future sales of Impromptu.

Cognos must also note the patent number on the software packaging, though it will not have to mention Business Objects by name.

"We wouldnt allow their name on our box," Zambonini said.

The companies also agreed to a five-year moratorium on patent litigation against one another. Zambonini said there will be no further litigation regarding this patent beyond that five-year window.

This is the second time Business Objects has reached a settlement with a competitor over U.S. patent number 5,555,403. In September 1999, Brio Software Inc. paid Business Objects $10 million to settle a similar patent infringement claim.

"This is an important day for Business Objects and our stakeholders," said Business Objects CEO Bernard Liautaud in a statement. "Once again the value of our patented technology has been recognized. Contrary to Cognos prior claims, we believe that this patent is valid and enforceable."