Sendo is based in Birmingham and makes non-branded phones for companies such as Virgin. It is also a former Microsoft partner. From 1999, the two companies worked jointly to develop the Z-100 Smartphone, a compact handset running Microsoft software and offering internet access, e-mail and multimedia functions.
In November 2002, however, Sendo ended the partnership unexpectedly, just weeks before the scheduled launch of its product. The company claimed that Microsoft did not provide access to source code and therefore Sendo was unable to tailor the necessary software.
The following month, Sendo sued Microsoft in Texas, listing 13 counts of fraud, negligent misrepresentation, breach of contract and civil conspiracy.
Sendo alleged that Microsoft misrepresented its software as being nearly complete despite serious flaws that made it incompatible with Sendo's hardware.
Sendo also claimed in its suit that Microsoft used the partnership agreements between the two companies, which gave it access to Sendo's proprietary technical knowledge and customer information, to steal trade secrets and disclose them to rival mobile makers based in Asia. It also claimed that Microsoft withheld payments specified in contracts between the two companies.
In February 2003 Microsoft lodged a counterclaim, alleging that Sendo not only "consistently failed to meet its contractual obligations to design and develop" the Z-100 phone by the agreed deadlines, but that it also misstated its financial situation to receive additional funding.
Microsoft argued that there was no basis to the allegations against it and that the case should be dismissed, but a Texas court rejected that request in October last year.
The case has now settled, and while the terms of the deal remain confidential, Sendo has confirmed that Microsoft will give up its shareholding in the small UK company. Both parties deny liability.