IBM reaches $400 million settlement deal with Compuware

IBM has agreed to spend $400 million over the next four years on Compuware software and services to settle all outstanding lawsuits between the two companies.

IBM has reached a settlement agreement with software developer Compuware, which sued IBM in 2002 for an alleged litany of violations including copyright infringement, antitrust law abuses and unfair competitive acts.

Under the deal's terms, IBM will spend US$400 million over the next four years on Compuware software and services, the two companies announced Tuesday.

Compuware's initial complaint in March 2002 charged IBM with using Compuware source code in IBM's File Manager and Fault Analyzer tools; illegally tying customer purchases of mainframe software tools to purchases of other key IBM software products; steering its services customers to its own products without fair competition; and denying rival vendors necessary technical information on IBM hardware and software. The trial on the case began in February in the District Court for the Eastern District of Michigan, near Compuware's Detroit headquarters.

Compuware's allegations set of a web of litigation between the two companies. IBM countersued Compuware in the Michigan court alleging violations of six IBM patents, and followed up in January 2004 with another patent-infringement lawsuit against Compuware, this time in New York's Southern District Court. Those lawsuits will cease as a result of Tuesday's deal, which settles all outstanding litigation between the companies. IBM said in a written statement that it does not expect the deal to materially affect its first-quarter 2005 earnings results

IBM will spend $260 million over the next four years on Compuware services, along with an additional $140 million to license Compuware software. IBM and Compuware also entered a patent cross-licensing agreement and will exchange technical information to insure interoperability of their products. Compuware's product portfolio includes management software for IBM's mainframes.

An IBM spokesman said the $260 million services component of the deal will not come directly out of IBM's pocket: IBM will offer Compuware subcontracting deals through IBM Global Services, valued at that amount. The settlement will not alter IBM's business practices in any way, he said.

A Compuware representative did not immediately return a call for comment.

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