Ariba Settles Patent Infringement Litigation with ePlus

Customers and partners will be unaffected by claims, Ariba says in announcing $37 million settlement

Customers and partners will be unaffected by claims, Ariba says in announcing $37 million settlement

Sunnyvale, CA — February 16, 2005 — Spend management specialist Ariba will pay $37.0 million to solution provider ePlus under a settlement agreement reached in connection with the companies' recent patent infringement litigation.

On February 7 Ariba was found liable by a jury in the United States District Court for the Eastern District of Virginia for infringing three U.S. patents held by ePlus. (See previous article.) At that time, Ariba announced its intention to provide its customers with software updates designed to avoid the alleged infringement. Because of the settlement, such software updates will not be necessary, Ariba said.

Under terms of the settlement announced this week, Ariba will pay the $37.0 million to ePlus during the quarter ending March 31, and the litigation, which has been pending in a federal court in Virginia, will be dismissed in its entirety. The companies have agreed to a mutual release of claims, including claims for damages for past infringement.

"In Customers' Best Interests"

In addition, Ariba and ePlus have entered into a broad cross-license of their respective patent portfolios, which Ariba said would ensure that its customers and partners will be unaffected by ePlus's infringement claims against Ariba.

Bob Calderoni, chairman and CEO of Ariba, said in a statement that his company continues to believe that a jury finding of Ariba's liability in the case was erroneous. But he added that because of the time and cost of the appeals process and the associated distraction to Ariba's business, the provider believed that pursuing that course would not have been in the best interests of its customers, partners, investors or employees. "We look forward to putting this case behind us," Calderoni said in the Ariba statement.

Phillip G. Norton, ePlus' chairman, CEO and president, said in a statement from his company that the settlement was in the best interest of ePlus and its customers, as it eliminated the uncertainty of the trial and an appeals process that could have taken several years. "We believe the settlement affirms the value of ePlus' intellectual property, and will create better marketplace awareness of our software and enterprise cost management solutions," Norton said.

Terms of Settlement

The agreement calls for Ariba to pay ePlus $37 million in three cash installments, all due by March 31. Any late payment by Ariba of the settlement amount would result in an automatic revocation of Ariba's license rights, without refund.

As part of the agreement, ePlus has also obtained a cross-license to all Ariba patents, patent applications and foreign patent counterparts presently owned by Ariba, and any acquired by Ariba for three years after the settlement date.

ePlus had originally claimed royalty damages of $76.0 million to $98.0 million, and the trial judge had the discretion to enhance any actual damages award by up to three times. In addition, Ariba was subject to a potential injunction against future infringement, which the solution provider said could potentially have diminished its ability to provide certain elements of its spend management solutions to its customers.

ePlus said the patents in question involve electronic procurement, and the inventions allow end-users to perform a variety of functions, including conducting electronic searches, selections and comparisons, as well as review items in multiple supplier catalogs; finding equivalent items and suitable replacements; generating purchase orders from multiple vendors; and electronically checking inventory.

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