Microsoft and UK mobile maker Sendo have ended a two-year legal dispute over smart phones with a settlement.

Sendo sued Microsoft in December 2002, alleging the software maker stole proprietary technology and trade secrets and used those to launch itself into the mobile phone market. The lawsuit came one month after Sendo abruptly dropped Microsoft's software for its smart phone product and chose the rival Symbian operating system instead.

Microsoft denied the allegations and in February last year filed a countersuit alleging breach of contract. A trial in the case had been scheduled for early 2005.

The settlement ends all litigation between the companies, Microsoft and Sendo said in a joint statement. As part of the agreement, both parties deny any and all liability and Microsoft will surrender its four percent stake in Sendo, the companies said. Further details of the settlement, which also includes a "monetary component", are confidential.

With the litigation behind it, Sendo said it can now focus on product development and growth. "This means that we will no longer have to spend time and money on this case," said Sendo spokeswoman Marijke van Hooren. The case is thought to have cost the company around £6 million so far and with no resolution likely for another year, the company decided to take the money on offer and drop the case.

Microsoft, which has been busy clearing its legal docket, is also pleased to have this case resolved, its deputy general counsel Tom Burt said.

Sendo, a privately held company, partnered with Microsoft in 1999 to develop phones running Microsoft's Windows Mobile software for smart phones. In 2001, the software giant invested about $12 million in Sendo.

They appeared to be a good match until October 2002 when mobile phone operator Orange launched a smart phone based on Microsoft's software, but made by Taiwan's High Tech Computer. A month later, Sendo dropped Microsoft and said it would work with rival software.

Sendo in October last year unveiled, the Sendo X, its first smart phone using Symbian's operating system and Series 60 software from Nokia. In June this year, Sendo said it began shipping the Sendo X to mobile phone operators in France, Italy, the Netherlands, Portugal and Spain.