Xerox filed a lawsuit against the company in April 1997, alleging that Palm's Graffiti handwriting recognition technology infringes on one of its patents.
Graffiti is a handwriting recognition system that allows a computer to more easily recognise letters. The letter 'A' for instance is written without the horizontal cross bar and the letter 'E' is written as a reverse 3.
Palm released a revised version of the technology in 2003 that evades the patent.
The settlement ends the litigation and provides Palm with a licence for three Xerox patents including the one covering the disputed handwriting recognition system.
The two companies also promised not to sue for patent infringements for a period of seven years.
Xerox does not expect the settlement to have much of an impact on its earnings. In a statement, the company said that the fee is expected to be offset against costs in other legal cases.
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