Settlement Reached Between Business Objects, Cognos

Cognos Inc. is paying $24 million to Business Objects SA to settle a patent-infringement lawsuit. Cognos will take a $23.2 million charge against its earnings for fiscal 2002, which ended Feb. 28.

In the two-year-old suit, Business Objects claimed that Cognos' Impromptu query-and-reporting software violated a patent that Business Objects holds on a method for accessing information in relational databases. The technology uses a semantic layer to insulate users from complex database structures. Two years ago, Business Objects settled a similar lawsuit it brought against Brio Software Inc. (then Brio Technology) for $10 million.

Cognos denied Business Objects' claims and, despite the settlement, maintains that it did not violate any patent. The settlement, according to a company statement, "reaffirms that Cognos makes no admission regarding the validity, enforceability, or infringement of any patent." Cognos says it chose to settle because the ongoing litigation was becoming a distraction and the company wanted to eliminate the risks associated with a jury trial.

"We truly believed in our right to continue to use technology that we had developed prior to Business Object's filing for and being granted a patent," Cognos CEO Ron Zambonini said during a conference call Tuesday.

Business Objects, however, portrays the settlement as a successful enforcement of its patent. The company says that with the $24 million, "Cognos will license the rights to the patent" and will place the notice "U.S. Patent No. 5,555,403" on each copy of Impromptu. The two companies also agreed to a five-year moratorium on any additional patent litigation.

Cognos will pay $10 million to Business Objects by June 10, then make quarterly payments of $1.75 million over the next two years. The $23.2 million special charge, the present value of the settlement, will reduce Cognos' reported pre-tax earnings for fiscal 2002 from $51.4 million to $28.2 million.