Ouch. Cobalt Group’s out of court $20 million settlement with competitor Autobytel Inc. is a tough way to begin the holidays.

Autobytel sued Dealix Corp., a third-party online provider for car dealers, in early fall 2004 for patent infringement of Web-based lead management technology. At the time, Cobalt, which builds websites and provides online marketing services for new-car dealers and auto manufacturers, was close to announcing its acquisition of Dealix, which led to speculation Autobytel may have filed the suit to derail the takeover.

The settlement, which many had expected to be in the range of $6 million- $10 million, puts the controversy to rest. The question now is whether Autobytel will seek compensation from other competitors for similar patent infringements.

The agreement calls for Dealix to pay Autobytel $12 million by March 13, 2007. The remaining $8 million will be paid in three installments of $2.6 million each on Nov. 13 the next three years.

Dealix, which will receive a license from Autobytel for a series of patents and patent applications, admits no wrongdoing as part of the settlement. Other than the financial toll, the settlement isn’t likely to hurt Dealix, which is consistently ranked as one of the industry’s top online lead generators in dealer satisfaction by J.D. Power and Associates.

cbanks@wardsauto.com