Amazon will pay $40 million to Soverain Software to settle two patent infringement lawsuits.

In a regulatory filing, Amazon said it will make a one-time payment of $40 million to Soverain in the third quarter of 2005 to resolve the litigation. The settlement will include "dismissal of all claims and counterclaims, mutual releases, and a non-exclusive license to Soverain's patent portfolio," according to Amazon's filing.

Amazon expects to account for the $40 million charge on its third quarter fiscal balance sheet under the category "other operating expense," the filing stated.

"We are pleased to have reached an agreement with Amazon, and to have them as one of our patent licensees," said Katharine Wolanyk, Soverain president, in a statement.

So what’s it all about?

Soverain filed against Amazon alleging patent infringement on January 12, 2004. The complaint alleged that Amazon's Web site technology infringed three patents obtained by Soverain covering Internet server access control and monitoring systems as well as network sales systems. Soverain wanted damages, royalties and legal fees.

The ecommerce company amended its complaint on October 6, 2004 alleging that Amazon had infringed two additional patents in the areas of digital active advertising and payment and purchase transactions authorization technologies.

Clothing giant, Gap had been a defendant in both cases alongside Amazon, but the retailer entered into a patent license agreement with Soverain in February.