Northrop Grumman Corp. said Friday that rival Honeywell International Inc. agreed to pay Northrop $440 million to settle long-standing patent infringement and antitrust claims, ending one of the more contentious legal disputes in the aerospace industry.
After more than 11 years of wrangling and tangled legal maneuvering that included what had been the largest patent-infringement award ever, executives at both companies said they agreed to settle so they could concentrate on operating their respective businesses. The dispute involved gyroscopes widely used in aircraft navigation systems.
"We are glad to have this long-standing issue resolved and are very pleased with the settlement agreement and award," said Kent Kresa, Northrop's chairman and chief executive.
Honeywell Chief Executive Lawrence Bossidy echoed Kresa, saying the dispute had been distracting to the company.
Settling the "time-consuming and distracting" case is "good news for the company and our investors," Bossidy said.
"Since the 1999 merger of AlliedSignal and the former Honeywell, significant resources have been spent to carry on the task of defending the new company against these long-standing claims," he said.
Litton Industries, acquired by Century City-based Northrop in April, filed two lawsuits against Honeywell in 1990 accusing the rival of infringing its patent on a key process to produce gyroscopes used in guiding commercial airplanes, and then monopolizing the market for the product.
A Los Angeles jury in 1993 found Honeywell liable on the patent issue and awarded Litton $1.2billion in damages, the largest patent infringement victory ever. In the second case, Litton was awarded $750 million in damages in addition to interest, attorney's fees and court costs totaling about $20million.
Honeywell appealed both judgments, and after going through various courts, the dispute still didn't appear any closer to a resolution. Analysts estimate Northrop and Litton spent at least $40 million in legal fees and other costs.
Investors and analysts seemed pleased with the pact. In trading on the New York Stock Exchange, Northrop shares rose 78 cents to $98.84, and Honeywell increased 27 cents to $32.70.
"They were saying let's get this thing out of our hair, let's get it over with," said Paul H. Nisbet, an analyst with JSA Research Inc. "It was a compromise that came out well for both sides."
The settlement allows Honeywell to continue to sell the ring laser gyroscopes and other inertial navigation systems free from any claims from Northrop, the companies said.
Honeywell said its annual revenue from inertial navigation systems is about $700 million.
"For about half a billion dollars, Northrop is essentially saying it's giving up its claim and it's OK for Honeywell to go ahead and market the product," Nisbet said.