Kenexa (NASDAQ:KNXA) and Taleo (NASDAQ:TLEO) entered into a settlement agreement resolving all outstanding litigations between the parties. As a result, all litigations between the parties will be dismissed with prejudice. The settlement agreement includes a license of certain Kenexa intellectual property to Taleo and a license of certain Taleo intellectual property to Kenexa. The net cash effect associated with all intellectual property licenses and settlement of litigations was a $3M payment by Taleo to Kenexa.JMP Securities views Kenexa’s settlement with Taleo as a positive outcome for the company and believes the elimination of litigation expenses could provide 7c-8c of EPS upside in FY11. The firm reiterates an Outperform rating on Kenexa shares. Kenexa has a potential upside of 38.9% based on a current price of $24.58 and an average consensus analyst price target of $34.14.