The disagreement between Broadcom and competitor Emulex reached a major milestone over the weekend, when the latter agreed to pay $58 million in order to take the fibre channel patents listed in the suit off the table.
After it failed to push through with a hostile takeover of Emulex in 2009, Broadcom decided that its competitor violates several of its patents. In 2011 and one counter suit later, a judge found that Emulex’s BladeEngine2 and BladeEngine3 Ethernet controllers and Lancer chips do indeed infringe Broadcom’s IP and the case came to a standstill that lasted for three months.
Fast forward to March this year, the same court issued an order for Emulex to stop selling the said products in the U.S., but last week’s settlement loosens things up a bit for the networking vendor. The $58 million partially covers the XE201 Lancer processors, but at the same time doesn’t cover any of the Ethernet patents on the line. On top of that it also grants Broadcom protection from certain disputes related to the case, although that’s about everything that the two companies have disclosed so far.
“The agreement doesn’t cover Emulex’s ethernet products,” spokeswoman Katherine Lane said in the Wall Street Journal. The ethernet business represented about 20% of Emulex’s revenue in its last publicly reported quarter.
Broadcom shares, up 15% this year through Thursday’s close, were flat at $33.69 in late trading. Emulex, up 5.5% over the same period, slipped 4 cents to $7.20 after hours.”
Emulex certainly took a hit this week, but it’s good news for Broadcom. Shortly before the news emerged we’ve learned that the latter invested $26.5 million in extending its patent licensing agreement with MIPS, and the $58 million it was just awarded is more than enough to cover that.