Microsoft, Gateway Reach $150 Million Settlement

As part of an agreement to settle antitrust claims brought by Gateway in the mid-1990s, Microsoft has agreed to pay the computer maker $150 million over four years.

It was a long time coming, but Gateway Inc. and Microsoft Corp. announced Monday that Microsoft has agreed to pay Gateway $150 million over four years as part of an agreement to settle antitrust claims brought by the computer maker in the mid-1990s.

The agreement, reached in a recent mediation between the parties, stems from the U.S. Department of Justices antitrust trial against Microsoft in the 1990s (United States v. Microsoft). During that trial, U.S. District Judge Thomas Penfield Jackson found that Gateway and IBM tended to pay higher prices for Microsofts software because they were less willing to bundle its Internet Explorer browser with their PCs and because they favored rival Netscape Navigator.

"I cant get into the specifics of the talks, but obviously were very pleased an agreement was reached," Microsoft spokesperson Stacy Drake told Ziff Davis Internet. "This was one of the last big hurdles in what has been a very long journey here in the U.S. from that lawsuit."

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A Gateway executive was a key witness in the Microsoft antitrust trial. James Von Holle told the court of pressure he received from the Redmond, Wash., software maker when Gateway installed Netscape Navigator as its browser of choice and placed the AOL icon on the desktops of its computers. Government lawyers contended in the trial that the alleged tactic outlined in a Gateway document violated antitrust laws because it represented Microsoft using the market clout of its Windows operating system monopoly to pressure a company.

Following Jacksons findings of fact, Microsoft and Gateway agreed to extend the 2003 statute of limitations deadline for Gateway to file a lawsuit against Microsoft, in order for the parties to reach a settlement.

Under the deal, Gateway will use the funds for marketing, research and development, as well as testing of new products that can run Microsofts current and next-generation operating system and productivity software.

"We want to make it clear that under this agreement there are no limitations on Gateway in any way to use non-Microsoft products," Drake said.

Gateway, as a result of the settlement, will release all antitrust claims against Microsoft based on past conduct. Microsoft denied any liability, but both companies, in a statement released Monday morning, said they were pleased an agreement had finally been reached.

This is one in a number of antitrust claims that Microsoft has settled in the past couple of years. Last year, Microsoft and Sun Microsystems Inc. reached a $1.95 billion settlement to resolve antitrust and patent issues between the companies. Also last year, Microsoft and Novell Inc. reached a $536 million settlement, in which Novell agreed to withdraw from the European Commissions antitrust case against Microsoft.

"Weve resolved a lot of the conflicts stemming from that lawsuit," Drake said.

Gateway shares added 8 cents to reach $4.16, while Microsoft fell 5 cents to $24.89.

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