Northrop Grumman [NOC] and Cogent Systems [COGT] have reached an agreement to settle a lawsuit filed by Cogent against Northrop Grumman in 2005 alleging that Northrop Grumman misappropriated its technology and trade secrets for use in a British law enforcement fingerprint database program.
Term of the settlement, which must still be finalized, include Northrop Grumman paying Cogent $25 million to settle the litigation and another $15 million for a non-exclusive license to use Cogent’s fingerprint identification software in certain existing programs, including Britain’s IDENT 1 project. Another aspect of the settlement is a five-year research and development agreement between the two companies under which Northrop Grumman will pay Cogent $20 million for products and services.
Moreover, the companies say that with the litigation out of the way, they well be able to work as strategic partners to provide future customers with fingerprint identification technology and other biometric solutions.
Cogent’s Automated Fingerprint Identification Software is considered the premier software in the biometric industry for searching databases of fingerprint images with fingerprints of everyone from registered voters to criminals and terrorists. The company’s software is used widely around the world, including the United States.
While Cogent had previously said that it could potentially reap hundreds of millions of dollars in a court settlement, industry analysts had expected less. Still, analysts like the settlement for Cogent as it eliminates further litigation expenses, which totaled $13 million the last two years, and paves the way for Cogent to possibly join Northrop Grumman on various biometric-related projects for which it is the prime contractor.
Stanford Equity analyst Jeremy Grant believes that Cogent may displace L-1 Identity Solutions [ID] as Northrop Grumman’s partner on the Defense Department’s Automated Biometric Identification System project for the fingerprint database software component. L-1 would retain work for iris recognition, he says. Morgan Keegan analyst Brian Ruttenbur says there is a good chance that Northrop Grumman and Cogent will be working together on the next-generation solution for the FBI’s Integrated AFIS or the United Kingdom’s eBorders project. Awards for both of these programs are pending.
Northrop Grumman says the settlement will not impact its financial guidance this year.