Microsoft Corp will pay $200 million to VirnetX Holding Corp and obtain a patent license to settle litigation accusing it of infringing two patents for communicating over the Internet.
Shares of VirnetX rose as much as 14.6 percent.
Both companies announced the settlement two months after a federal jury in Tyler, Texas, on March 16 ordered Microsoft to pay $105.75 million to VirnetX for willful infringements, an amount that could have been tripled.
The settlement calls for Microsoft to take a license to VirnetX patents for Microsoft products. Other aspects of the settlement and license are not being disclosed.
Based in Scotts Valley, California, VirnetX develops software and technology for communications over the Internet.
The company lost $40.59 million from its inception on August 2, 2005, through March 31, 2010, with revenue from royalties totaling $255,685, a May 7 regulatory filing shows.
Microsoft is based in Redmond, Washington, and is the world's largest software maker.
In morning trading, VirnetX shares were up 39 cents, or 6.4 percent, at $6.50 on the American Stock Exchange after rising to $7.00. Microsoft shares rose 7 cents to $29.00 on Nasdaq.
The case is VirnetX Inc v. Microsoft Corp, U.S. District Court, Eastern District of Texas, No. 07-00080.
(Reporting by Jonathan Stempel; Editing by Derek Caney and Lisa Von Ahn)