palmOne, PalmSource Settle Suit With Acer

palmOne and PalmSource have settled a joint suit against Acer. In September 2003, PalmSource filed a complaint against Acer in U.S. District Court for the Northern District of California, asserting claims arising out of a breach of contract regarding Acer's Palm OS License Agreement.

Acer became Palm OS licensee in May 2001. The company planned to tap the market for handheld computers in China and Taiwan. They released the first Chinese localized Palm OS handheld. The Acer s10 had a monochrome 160 by 160 screen, 16 MB of RAM, and runs a Chinese version of Palm OS 4.1. It also included memory stick expansion, MP3 playback and has a built-in voice recorder. PalmInfocenter even reviewed the first Acer s10 handheld.

Shortly after the release of the s10 the company began work on the S50 and S60 handhelds. The models improved on the S10 design by adding high resolution color screens. Acer originally planned to sell the devices in Europe and Asia, and later revealed they would become available worldwide. The handhelds went on sale in Europe and Asia, but never made it to the US. That was the last Palm OS related development to come out of the company.

In documents filled with the SEC, it was learned in April of 2004, that PalmSource and Acer have had major falling out. That action spawned a series of breach of contract lawsuits. PalmSource originally sought approximately $4.5 million in unpaid royalties and maintenance and support fees under the previous licensing agreement. (No. C03 04285 RMW)

Acer answered by filing a counterclaim seeking $4.9 million from PalmSource, including amounts Acer paid under the agreement. Acer alleged that PalmSource had breached the software licensing agreement by failing to provide development and marketing support. Acer further alleged the same conduct violated the implied covenant of good faith and dealing and PalmSource provided preferential treatment to Acer's competitors.

The case was first taken to Federal Court. On May 7, 2004, the Federal Action was voluntarily dismissed by stipulation of both parties. The case was still pending on the state level in the Santa Clara County Superior Court, (No. 1-04-CV-018484) and was settled outside of the courts on November 24, 2004.

The Settlement Agreement states Acer shall pay PalmSource a total of two million six hundred thousand dollars ($2.6 million) and releases PalmSource and palmOne from any further charges.

Thanks to the Voice of Reason for the tip.