Three of the San Francisco-based business reporters whose private phone records were obtained by investigators working for Palo Alto’s Hewlett Packard intend to sue the company for invasion of privacy, The New York Times reports. CNET News reporters Dawn Kawamoto (shown above at her desk in San Francisco), Stephen Shank-land and Tom Krazit have hired the L.A. firm of Panish, Shea & Boyle, which confirmed to the Times that a lawsuit is being prepared after months of negotiations with HP. CNET does not plan to join their lawsuit, but said that it might sue separately. When the spying came to light, the three were assigned to cover other companies and they do not plan to cover HP in the future.

Four other reporters — Peter Burrows, Ben Elgin and Roger Crockett from BusinessWeek and John Markoff from the NY Times — continue to pursue settlement discussions as a group, together with The New York Times Company. They are represented by a San Francisco lawyer, Terry Gross.

In settlement negotiations, the Times says that seven journalists requested an amount equal to several million dollars each, paid to them directly with their promise that most of the money, though not all, would be donated to charity. Hewlett-Packard’s offer was closer to $10,000 per reporter, roughly enough to cover the reporters’ legal bills, the Times said, quoting sources.

Two Wall Street Journal reporters investigated by HP, Pui-Wing Tam and George Anders, declined to seek compensation, the Times said. The Wall Street Journal indicated in December that it would not take part in settlement talks or any legal action.

(Photo credit: Peter DaSilva for The New York Times)