Gateway, HP to Face Off at ITC on Patent Fight
A one-week trial before an International Trade Commission (ITC) administrative law judge is set to open March 21, pitting Gateway against Hewlett-Packard in a patent infringement case, Gateway said in its 10-K filed at the SEC.
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HP filed the ITC complaint last May, alleging Gateway infringed 7 patents related to PCs. Gateway, which has denied the allegations, said 3 of the 7 patents cited in the complaint have been withdrawn. Gateway filed a separate complaint at the ITC in July 2004, alleging HP had infringed patents on multimedia functionality in PC keyboards and displays. A trial on Gateway’s allegations is scheduled to begin May 23, Gateway said.
Gateway and HP also have sued each other in U.S. Dist. Court, L.A., alleging infringement of the same patents involved in the ITC case. Amiga Development, an IP holding company controlled by Gateway Chmn. Ted Waitt, also sued HP for patent infringement. Gateway and affiliates Spotware Technologies and Amiga Development own about 400 patents, the company said. HP has said it controls about 6,000 PC-related patents.
Meanwhile, Gateway said in its 10-K that Best Buy accounted for 23% of Gateway’s $3.6 billion revenue in 2004 and 30% of its $6.3 million in accounts receivable. Overall, retail sales represented 41% of Gateway’s 2004 revenue, which surged to $1.4 billion from $211.4 million a year earlier. Gateway traced the jump to its acquisition of eMachines and the Gateway brand’s emergence at retail. Gateway-branded products are being sold at Best Buy, Circuit City, CompUSA, Costco, Office Depot and Micro Center.
Gateway moved to expand distribution of its own brand after closing 188 company-owned stores last year. Gateway still wants to sublease 100 retail locations in the U.S., it said. Gateway’s 2004 retail sales offset declines in its direct and professional businesses. Direct sales dropped to $1 billion from $1.9 billion a year earlier, while those to the professional market fell to $1.14 billion from $1.19 billion. The retail segment’s operating income improved to $43.1 million from $8.4 million a year ago, while the direct business swung to a $25 million operating profit from a $98.5 million loss. Professional business operating income shrank to $58.3 million from $78.3 million. Convergence and non-PC products, including LCD and plasma TVs and digital audio players, accounted for 22% of 2004 revenues.