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6/19/2007
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Sun Microsystems Settle Patent Disputes With Azul

The dispute started in 2005 when Sun offered Azul a licensing deal for patents it claimed the startup had violated.

Azul Systems and Sun Microsystems, which have been embroiled in a patent-infringement dispute for more than a year, said Tuesday that they have settled all lawsuits related to the legal wrangling.

Scott Sellers, chief operating officer and co-founder of computer maker Azul, confirmed that the settlement was reached, but declined to provide details, saying the companies had agreed to keep the terms confidential. Sellers, however, said Azul was pleased with the agreement.

"We are very happy with the outcome," Sellers said. "Both sides realized over time that it would be better to focus our energy on products and customers, rather than lawyers and courts."

Sun was not immediately available for comment.

Michael Dortch, analyst for the Robert Frances Group, lauded both sides for coming to terms. "Settlement of their legal disputes is great news for Azul, for Sun, and for their shared and respective enterprise customers and prospects," he said in an e-mail.

With their legal quarrels behind them, Dortch said the companies now have a chance to work together on joint products. "With sufficient push from IT executives and developers, the two companies might even be persuaded to deliver pre-configured or pre-tested combinations of their respective offerings, which would definitely be attractive to a wide range of enterprise customers," Dortch said.

Sun sells computer servers and software, while Azul sells server appliances used in boosting the performance of transaction-intensive applications running on a network.

The dispute started in 2005 when Sun offered Azul a licensing deal for patents it claimed the startup had violated. At the time, Sun wanted an "outrageous settlement" valued at several 100s of millions of dollars, Sellers said.

When Sun threatened to file a lawsuit about a year later, Azul acted first and sued Sun in March 2006, asking a U.S. District Court in northern California, to rule that it hadn't infringed on Sun patents or trade secrets. About two months later, Sun sued Azul in federal court in San Jose, Calif., claiming the company had infringed on a number patents related to memory design in microprocessors, and technology that helps transfer information between chips.

Sun also claimed that Azul Chief Executive Stephen DeWitt, a former Sun employee, had used the company's intellectual property to develop products at Azul in violation of a non-competitive agreement with Sun.

Sellers said the companies settled about a year before the case was scheduled to go to trial, and just before the process reached a very expensive preparatory stage. While believing it had a strong, winnable case, Azul came to the conclusion it was better to settle.

"We had a strong case," Seller said. "But obviously there's a business practicality to it all, and money always plays a part in the decision to settle."

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