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Software industry

Microsoft Settles Patent Dispute with Stac Electronics

Strategic Insights

— 1 min read

Microsoft Corporation has agreed to pay $US83 million ($A112 million) to Stac Electronics, a small data-compression company, in exchange for a 15 percent share in the company and the right to use its popular disk compression technology. The agreement marks an end to 16 months of legal wrangling between the two companies, which had been at odds over patent infringement. Stac had successfully sued Microsoft in January 1993, alleging that the software giant had infringed its patents for data compression. A jury later ruled in Stac's favor, ordering Microsoft to pay $120 million in damages.

Key Takeaways:

  • Microsoft will pay $US83 million ($A112 million) to Stac Electronics in exchange for a 15 percent share in the company.
  • The agreement grants Microsoft the right to use Stac's popular disk compression technology, which makes a computer's magnetic disk able to store more data.
  • Stac had initially sued Microsoft in January 1993, alleging patent infringement, and a jury later ruled in Stac's favor, ordering Microsoft to pay $120 million in damages.
  • Microsoft's revenue is $4 billion a year, while Stac's revenue is $37 million per year.
  • The two companies will share all existing disk compression patents, as well as any patents they receive during the next five years.
  • Microsoft will pay $1 million per month in royalties to Stac, beginning in July, for 43 months.
  • Microsoft will have the right to attend Stac's board meetings and advise the company on strategy and directions, but will have no vote.

Statistics:

  • Microsoft's revenue: $4 billion a year
  • Stac's revenue: $37 million a year
  • Jury-ordered damages: $120 million
  • Settlement payment: $US83 million ($A112 million)
  • Royalty payment: $1 million per month for 43 months
  • Valuation of Stac: 15 percent share in the company

Sources:

  • "Microsoft pays $83 million to settle patent case." Los Angeles Times, Tuesday [no date mentioned]
  • Microsoft Corporation's financial statements
  • Stac Electronics' financial statements

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