A 2 1/2-year legal battle between Costa Mesa-based Emulex Corp. and computer giant Digital Equipment Corp. over trade secrets and technology patents ended Wednesday with an announcement that the two firms have settled all pending litigation.
Financial details of the settlement were not disclosed. Digital said it has dropped its patent-infringement and trade-secret lawsuit against Emulex, and Emulex said it will not pursue a separate suit in which it accused Digital of unfair business practices.
Wall Street apparently welcomed the news. Emulex stock, which trades over the counter, gained 19% to close at $7 per share, up $1.125. Digital closed at $120.50, up $3.25 in New York Stock Exchange trading.
Under the terms of the settlement, Emulex will be licensed to make certain computer disk and tape controllers and communication products incorporating Digital technology. Emulex said it will pay Digital for the licenses, but the sum was not disclosed.
Emulex is a leading manufacturer of computer components designed for use with Digital products. Between 65% and 75% of Emulex's total sales are attributable to the Digital market.
The settlement comes three weeks after Emulex announced a reorganization and management shake-up that included the ouster of former President Steven Frankel and three vice presidents. The company consolidated its three product divisions into a single unit.
Michael J. Lewis, chief financial officer for Emulex, said the reorganization and the settlement "are totally unrelated."
Lewis said Emulex is "delighted to be able to focus on building quality products and not have any of our attention diverted by a legal battle."
The conditions of the agreement, Lewis said, are similar to settlements Digital has reached with other companies it has sued over patent and trade-secret issues.
Battle Began in 1985
The legal jousting between the two computer companies began in July, 1985, when Digital filed a suit alleging that Emulex infringed on Digital patents and obtained its trade secrets by hiring a former Digital engineer, Charles Hess.
In August, 1986, Emulex sued Digital, alleging that the Maynard, Mass., computer maker had violated obligations to provide Emulex with computer products and services and had interfered with the sale of products and services to Emulex by other companies.
In April, 1987, Digital won a temporary injunction ordering Emulex to stop developing and selling certain products compatible with Digital computers. Last October, a federal court lifted the ban, allowing Emulex to proceed with work on those products.