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MPEG Patent Firm Lawsuits Settled

The legal sparring is over between MPEG LA, the company that licenses key patents for MPEG video compression, and its former CEO and chief operating officer.

The terms of the settlements between MPEG LA and ex-CEO Baryn Futa and ex-COO Maria O’Reilly are confidential. In a lawsuit filed in May 2006 in the Chancery Court of Delaware, MPEG LA accused the executives of misspending company funds and alleged that the pair was romantically involved.

Futa and O’Reilly denied the allegations -- except for acknowledging that they had an intimate relationship that lasted less than two years -- and both countersued MPEG LA and its CEO, Larry Horn.

Sullivan & Cromwell attorney Garrad Beeney, who represented MPEG LA and Horn, said the settlement with Futa was “nailed down” Feb. 23. “MPEG LA is quite pleased with the outcome,” he added. “The company and Mr. Futa will go their own ways.”

Futa’s attorney, Robert Abrams of New York law firm Katsky Korins, declined to comment.

MPEG LA and O’Reilly settled in early January, according to court documents.

In its suit, MPEG LA alleged that Futa and O’Reilly spent the company’s money on things “that were plainly not in the best interests of MPEG LA” and that O’Reilly received an excessive salary -- $2.4 million in 2005 -- as well as lavish perks that included a $110,000 Porsche.

Futa’s countersuit claimed that he was owed at least $850,000 because MPEG LA breached its agreement with him. O’Reilly was seeking five years of salary, based on a severance agreement with MPEG LA, plus other monetary damages.

MPEG LA, founded by Futa in 1996, licenses patents related to MPEG, the video-compression technologies used in digital-cable set-top boxes. The Denver-based firm’s voting shareholders are Columbia University, Cisco Systems’ Scientific Atlanta subsidiary, Fujitsu, Mitsubishi, Panasonic, Philips Electronics and Sony.

Privately held MPEG LA doesn’t disclose revenues, but O’Reilly’s counterclaim alluded to its “collection of billions of dollars” in royalty fees. The company charges set-top-box manufacturers $2.50 per box for the rights to use more than 800 MPEG-2-related patents.