Microsoft is paying Sun Microsystems $1.95 billion as part of a deal signed last week--but Sun could gain as much as $450 million more over the next 10 years through a patent provision in the agreement. Santa Clara, Calif.-based Sun disclosed the 10-year schedule in a Thursday filing with the Securities and Exchange Commission that detailed the Sun-Microsoft pact, an alliance between bitter enemies that surprised the technology world. A patent provision in the agreement creates the potential for Sun to benefit from further Microsoft cash or from access to the software colossus" patent portfolio.
The 10-year payment schedule is part of a covenant the two companies signed that permits them to sue each other for patent infringement but discourages this by prohibiting the collection of financial damages from such a suit, said Lee Patch, Sun"s vice president of legal affairs. Microsoft agreed to pay Sun $900 million for the covenant governing patents up to the date of last week"s agreement, Patch said. According to the filing, Microsoft has the option to extend the covenant each year afterward for a further payment. If Microsoft extends the covenant for all 10 years, the payments total $450 million, Patch said.