Exhibit 10.109

 

Sun and Microsoft Confidential

 

[**] = information redacted pursuant to a confidential treatment request. Such
omitted information has been filed separately with the Securities and Exchange
Commission.

 

LIMITED PATENT COVENANT AND STAND-STILL AGREEMENT

 

This Limited Patent Covenant and Stand-Still Agreement (the “Agreement”) is
entered into as of this 1st day of April, 2004 (the “Effective Date”), by and
between Sun Microsystems, Inc., a corporation organized and existing under the
laws of the State of Delaware (“Sun”), and Microsoft Corporation, a corporation
organized and existing under the laws of the State of Washington (“Microsoft”).
Each of Sun and Microsoft and their respective Affiliates (defined below) as of
the Effective Date are referred to individually as a “Party,” and collectively
as the “Parties.”

 

In consideration of the promises and mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Signatories (as defined below) hereto agree as follows:

 

I. DEFINITIONS

 

Capitalized terms used in this Agreement and not defined in this Section I have
the meanings ascribed to them elsewhere in this Agreement.

 

“Affiliates” means, with respect to each of Sun or Microsoft as applicable,
persons or entities directly or indirectly (1) controlling Sun or Microsoft, (2)
controlled by Sun or Microsoft, or (3) under common control with Sun or
Microsoft, where control is defined as direct or indirect ownership of greater
than fifty percent (50%) of equity or other voting interest therein.

 

“Authorized Licensees” means a third party (including without limitation an
original equipment manufacturer (OEM), replicator, distributor, retailer or
User) that is licensed by a Party to exercise any or all legal rights with
respect to a product of such Party, including without limitation, copying,
using, selling or otherwise distributing such product.

 

“Change of Control” of Sun or Microsoft means the acquisition directly or
indirectly of more than forty percent (40%) of the total outstanding voting
stock of such Party by any third party (whether in a single transaction or
series of transactions).

 

“Clone Product” shall mean a product of one of the Parties that provides (a) all
of the same or substantially all of the same user interface and user commands,
or (b) all or substantially all of the application programming interfaces (APIs)
of a previously commercialized product of the other Party.

 

“Foundry Product” shall mean a product which was designed, manufactured,
reproduced, sold, leased, licensed or otherwise transferred through or by a
Party for the primary purpose of attempting to make such product licensed or
immune under the patent rights of the other Party to this Agreement.

 

“Past Damages” means (i) any and all damages (including damages for forgone
profits) that have accrued on account of any and all patent infringement that
has occurred before the Effective Date; and (ii) any and all damages (including
damages for forgone profits) that accrue after the Effective Date on account of
any and all patent infringement due solely to continued use by a User of each
individual copy of such other Party’s products that had been distributed by such
other Party and deployed by a User prior to the Effective Date.

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Sun and Microsoft Confidential

 

“User” means any person, corporation or other entity that uses a product of a
Party for its own internal use.

 

II. COVENANTS NOT TO SUE FOR CERTAIN PAST DAMAGES

 

1. Covenants Regarding Past Damages. Subject to the exception in Section IV,
each Party hereby irrevocably and perpetually covenants to the other Party not
to sue the other Party or its Authorized Licensees (“Covered Entities”), or
otherwise seek recovery from such Covered Entities, for Past Damages with
respect to the other Party’s products and technology. By way of limitation of
the foregoing, if an individual copy of a Party’s product that is licensed for
the purpose of replicating other copies of such Party’s product (a “Master
Copy”), has been distributed prior to the Effective Date, only each additional
authorized copy of such product that has been (a) made by a Party or its
Authorized Licensees from such Master Copy prior to the Effective Date in
accordance with prior practice and the normal course of business and (b) has
been deployed by a User prior to the Effective Date, shall be deemed subject to
this covenant. In no event shall this covenant apply to (a) any modifications of
a product made by any Authorized Licensee; or (b) any additional copies of a
product that are made or deployed by a User after the Effective Date.

 

2. New Affiliates. Any entity that becomes an Affiliate after the Effective Date
also shall covenant not to sue or otherwise seek recovery from the other Party
or its Authorized Licensees as set forth in the covenants in Sections II.1, and
shall be bound by Sections II.3 and II.4, as applicable. The only Affiliates
that shall receive the benefits of such covenants from the other Party are
Affiliates which are Affiliates as of the Effective Date.

 

3. Scope. Each Party also hereby warrants, represents and agrees that the
damages subject to the above covenant are not limited to those arising from
facts, losses, claims or matters disclosed or known as of the Effective Date of
this Agreement. Without limiting the generality of the foregoing, each Party
expressly waives any and all defenses, rights and benefits that it might
otherwise have in relation to this covenant under or by virtue of the provisions
of Section 1542 of the Civil Code of the State of California or any other
similar provision of the statutory or common law of any other state or of the
United States. Section 1542 of the California Civil Code reads as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

4. Assignment of Patents/Change of Affiliate Status. If either Party assigns any
patent that it owns or controls or any right to enforce such patent, the
assigning Party shall require as a condition of any such assignment that the
assignee covenant not to sue or otherwise seek recovery from (i) the other Party
or its Authorized Licensees as set forth in Sections II.1 and (ii) the other
Party as set forth in Sections II.2 with respect to such patent. If an Affiliate
ceases to be an Affiliate after the Effective Date, (a) the covenant and other
rights provided under this Section II to the other Party and its Authorized
Licensees with respect to patents owned or controlled by such Affiliate at the
time of the status change shall continue, and (b) if such Affiliate was an
Affiliate on the Effective Date, it shall continue to receive the benefit of the
foregoing covenant only to the same extent and with respect to its same products
that it received prior to its status change.

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Sun and Microsoft Confidential

 

III. STAND-STILL

 

1. Further Covenant. During the Stand-Still Period, each Party hereby covenants
not to bring or prosecute any judicial, administrative or other proceedings of
any kind against the other Party for or based on patent infringement on account
of the making, use, sale, offer for sale, importation, export or other
disposition or promotion of any of the other Party’s products. The foregoing
covenant is personal to the Parties and does not apply to any third party,
including any Authorized Licensee of either Party. The foregoing covenant shall
not prevent either Party from engaging in discussions with any third party or
the other Party regarding the licensing of its patents, or from enforcing its
patents against any entity other than a Party. Further, nothing shall prevent
the Parties from seeking damages after the Stand-Still Period terminates for
patent infringement occurring during the Stand-Still Period and not subject to
the covenants not to sue set forth in Section II of this Agreement. If either
Party violates this covenant, the other Party shall be free to immediately end
the Stand-Still Period. For purposes of this Agreement, “Stand-Still Period”
means the period beginning on the Effective Date and ending on the date six (6)
months after the Effective Date.

 

2. New Affiliates/Assignment of Patents/Change of Affiliate Status. Any entity
that becomes an Affiliate after the Effective Date shall be deemed included in
the term “Party”, as applicable, for purposes of Section III and shall be
subject to and receive the benefit of the covenant in Section III.1. If any
proceeding has been commenced prior to the date such entity becomes an
Affiliate, the affected Parties shall jointly apply to the applicable court or
agency to stay such proceeding until the end of the Stand-Still Period. If
either Party assigns any patent it owns or controls or any right to enforce such
patent, the assigning Party shall require as a condition of any such assignment
that the assignee covenant not to bring or prosecute any proceeding as set forth
in Section III.1 with respect to such patent. If an Affiliate ceases to be an
Affiliate after the Effective Date, (i) the covenant and other rights provided
under this Section III to the other Party with respect to patents owned or
controlled by such Affiliate at the time of the status change shall continue
until the end of the Stand-Still Period; and (ii) the Affiliate shall continue
to receive the benefit of the foregoing covenant until the end of the
Stand-Still Period, but only with respect to its products in existence as of the
time of the status change.

 

3. Change of Control of Microsoft or Sun (“Signatories”). In the event of any
Change of Control in a Signatory, this Section III shall immediately terminate
in its entirety, effective as of a date sixty days after the Change of Control
takes place, unless the Signatory that has not undergone a Change of Control
delivers express written notice that it is not terminating this Section III to
the other Signatory within such sixty (60) day period.

 

IV. PROVISIONS RELATING TO OPEN OFFICE

 

1. Notwithstanding the other provisions of this Agreement, with respect solely
to the product developed by Sun and generally known as Open Office, the
Covenants of Section II above and the Releases of Section III above shall apply
fully to Sun but shall not apply to Authorized Licensees of Open Office or any
other third party. Accordingly, Microsoft shall not be foreclosed by this
Agreement from seeking damages from Authorized Licensees of Open Office for
copies of Open Office made or acquired prior to the Effective Date of this
Agreement. Nor shall Microsoft be foreclosed from seeking any damages from Sun,
its Affiliates, Authorized Licensees or any third party for any copies of Open
Office made or deployed by a User after the Effective Date.

 

2. In the event that Microsoft elects to sue or otherwise seek recovery from an
Authorized Licensee of Open Office for copies thereof that were made and
deployed by a User prior to the Effective Date of this Agreement (“Deployed
Copies”), upon request, Microsoft agrees to promptly reimburse Sun for any

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Sun and Microsoft Confidential

 

Reimbursable Damages. Sun shall promptly notify Microsoft of any Claim, shall
provide Microsoft with the opportunity to take control over and responsibility
for the defense and/or settlement of such Claim, and shall reasonably cooperate
with Microsoft in litigating the defense of such Claim, including in all
discovery and trial preparation efforts. Microsoft will not have any obligation
to reimburse Reimbursable Damages unless Sun abides by the foregoing
requirements. Microsoft shall also be relieved of its obligation to reimburse
Reimbursable Damages if Sun breaches any warranty in Section VII.4. As a
condition to accepting control and responsibility for such defense, Microsoft
shall acknowledge in writing that such third party claim constitutes a “Claim”
and, as such, would give rise to Reimbursable Damages if determined adversely.
In the event that Microsoft accepts control and responsibility for such defense,
Sun shall be entitled to participate in such defense at its own cost. “Claim”
means any claim that Sun is liable to indemnify or otherwise reimburse any
Authorized Licensee or third party for damages it has been ordered to pay by
final judgment or settlement arising from a claim asserted by Microsoft against
such Authorized Licensee or third party that any Deployed Copy of Open Office
infringes any patent of Microsoft. “Reimbursable Damages” means the amount of
any adverse final judgment awarded by a court of competent jurisdiction, or
Microsoft approved settlement, against Sun that is based on the Claim.

 

3. The Parties acknowledge that the product currently marketed by Sun as Star
Office shall not be affected by this Section IV.

 

V. PROVISIONS RELATING TO CLONE PRODUCTS AND FOUNDRY PRODUCTS

 

Clone Products and Foundry Products shall be treated under this Agreement in the
same manner as products until April 1, 2007, after which they shall be treated
in the same manner as Open Office.

 

VI. EXTENSION OF COVENANTS

 

1. Extension Mechanism. Provided that Microsoft does not Break the Peace prior
thereto, and provided that Microsoft gives Sun at least thirty days written
notice, on [**] Microsoft may pay to Sun the annual extension fee for 2004 set
forth in the Annual Extension Fee Schedule attached as Exhibit A (the “Annual
Extension Fees”). On each subsequent anniversary thereof (each, an “Extension
Date”), provided that (A) Microsoft does not Break the Peace prior thereto, (B)
Microsoft gives Sun at least thirty days written notice, and (C) Microsoft paid
the Annual Extension Fee on the previous Extension Date, Microsoft may pay to
Sun the applicable Annual Extension Fee to extend the mutual Covenants set forth
in Section II to apply to the just completed year. In such case, (i) the
Effective Date referred to in Section II shall be deemed to be the applicable
Extension Date, and (ii) the Affiliates of each Party shall include those
entities that are Affiliates on the Extension Date. If Microsoft Breaks the
Peace at any time, Sun shall be entitled to retain all Annual Extension Fees
paid prior thereto. In addition, if Microsoft Breaks the Peace prior to April 1,
2011, Microsoft shall pay to Sun the additional amount of [**]. For purposes of
this Section VI, Microsoft “Breaks the Peace” if it brings or prosecutes any
judicial, administrative or other proceedings of any kind (i) against Sun or its
Authorized Licensees for or based on patent infringement on account of the
making, use, sale, offer for sale, importation, export or other disposition or
promotion of any of Sun’s products other than Open Office, or (ii) against Sun
for or based on patent infringement on account of the making, use, sale, offer
for sale, importation, export or other disposition or promotion of any of Open
Office.

 

2. Conversion of Covenants. On April 1, 2014 (“the License Date”), provided that
Microsoft has not Broken the Peace prior to such date and Microsoft has paid all
of the Annual Extension Fees, each Party and its Affiliates shall automatically
(i) grant to the other Party and its Affiliates a worldwide, irrevocable,
non-exclusive, perpetual, and non-transferable license to make, have made, use,
lease, license (in the case of software), import, offer for sale, sell or
otherwise transfer, and promote the commercialization of the other Party and its
Affiliates then-shipping products of the applicable Party and

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[**] = information redacted pursuant to a confidential treatment request. Such
omitted information has been filed separately with the Securities and Exchange
Commission.

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Sun and Microsoft Confidential

 

its Affiliates on the License Date and their successor products thereto, under
any and all of the Party’s and its Affiliates’ Licensed Patents, and (ii)
covenant for a period of ten years not to bring or prosecute any judicial,
administrative or other proceeding of any kind against the other Party (but not
against the other Party’s Authorized Licensees or other third parties) for or
based on patent infringement on account of the making, use, sale, offer for
sale, importation, export or other disposition or promotion of any of Open
Office. “Licensed Patents” shall mean all utility patents, utility models and
equivalent rights worldwide issued or issuing on patent applications entitled to
an effective filing date prior to and including March 31, 2014, under which
patents, patent applications, or inventions, either Sun or any of its present or
future Affiliates now has, or hereafter obtains, the ability or right to license
or grant freedom from suit.

 

VII. WARRANTIES AND ONGOING COVENANTS

 

1. Copies from Master Copies. Each Party represents and warrants that it has
authorized its Affiliates and Authorized Licensees, as applicable, to make
copies of products and Open Office, as applicable, from a Master Copy
distributed prior to the Effective Date only in accordance with the normal
course of business and in accordance with past practice.

 

2. Affiliates Bound. Each of Sun and Microsoft agrees to cause each of its
Affiliates to be bound by the terms of this Agreement.

 

3. No Third Party Enforcement. If, prior to the Effective Date, a Party has
granted a third party the right to enforce any patent it owns or controls, such
Party agrees to cause such third party to also abide by the terms and conditions
of this Agreement with respect to any such patent.

 

4. No Warranties or Indemnities for Open Office. Sun represents and warrants
that neither it nor its Affiliates has provided or will provide to any third
party, or is or will be under any legal obligation under any applicable law to
provide, (i) any warranty or representation of non-infringement with respect to
Open Office; and (ii) any indemnity related to any damages or causes of action
based on allegations of infringement by Open Office.

 

5. Sun may, for tax reporting purposes, treat that portion of each Annual
Extension Fee corresponding to Microsoft’s ratio of foreign subsidiary revenue
to worldwide revenue for the prior fiscal period as income from sources outside
the United States, and neither Party shall take any position inconsistent
therewith.

 

VIII. PAYMENT

 

Not later than the five business day following the Effective Date, Microsoft
will pay to Sun the amount of nine hundred million US Dollars ($900,000,000.) by
wire transfer pursuant to instructions to be provided by Sun.

 

IX. NO LICENSES GRANTED

 

Except with respect to Section VI.2, nothing in this Agreement grants any
express or implied license under any intellectual property right to either
Party, its Authorized Licensees, or to any third party. Except as set forth in
Section III, nothing in this Agreement is intended to inhibit or prevent a Party
from bringing an action for injunctive or other equitable relief against the
other Party or Affiliates or Authorized Licensees of the other Party with
respect to products distributed or deployed by a User after the Effective Date
of this Agreement.

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Sun and Microsoft Confidential

 

X. MISCELLANEOUS

 

1. This Agreement can be executed in counterparts that, taken together, will be
effective as if they were a single document.

 

2. This Agreement is governed by the law of the State of New York, excluding
choice of law principles.

 

3. Any dispute, disagreement or claim arising out of or relating in any way to
this Agreement or the Parties’ obligations under this Agreement shall be
resolved exclusively by binding confidential arbitration conducted in New York
City in accordance with the CPR Rules for Non-Administered Arbitration in effect
on the date of this Agreement, as well as the Federal Rules of Civil Procedure
and Evidence, before a retired Federal judge agreed upon by the parties and if
no agreement can be reached then as designated by the Chief Judge of the United
States District Court for the Southern District of New York from among no more
than two candidates proposed by each party. The parties shall keep confidential
to the extent permitted by law the arbitration and its outcome.

 

4. Each Signatory warrants and represents that the individual signing this
Agreement has the full authority and is duly authorized and empowered to execute
this Agreement on behalf of the Signatory for which he signs.

 

5. The Parties agree to keep the terms and provisions of this Agreement
confidential. Nothing in this provision, however, shall prohibit disclosure of
this Agreement to the Parties’ attorneys or accountants or prohibit such
disclosure as may be required by law or by regulatory inquiry, judicial process
or order.

 

6. The section headings used in this Agreement are intended for reference
purposes only and shall not affect the interpretation of this Agreement. Nothing
in this Agreement shall be deemed to amend, supplement or otherwise modify the
Settlement Agreement being executed by the Signatories concurrently with this
Agreement (“Settlement Agreement”). The Settlement Agreement will remain in
effect independently from and solely in accordance with its terms
notwithstanding any modification, extension or termination of this Agreement.

 

7. If any provision of this Agreement shall be held by a court of competent
jurisdiction to be illegal, invalid or unenforceable (other than any provision
in Section II or Section VI, Section VII.2, VII.3 or VII.4), this Agreement will
be enforced to the maximum extent possible to reflect the intent of the Parties.
If any material provision of Section II or Section VI, or if Section VII.2,
VII.3 or VII.4 is held by a court to be illegal, invalid or unenforceable, this
Agreement will be amended by mutual agreement of the Parties to render it valid
and enforceable. This Agreement has been negotiated by the Parties and their
respective counsel and shall be interpreted fairly in accordance with its terms
and without any strict construction in favor of or against either Party.

 

8. The Parties agree that this Agreement constitutes the sole agreement between
the Parties with respect to the subject matter hereof and merges all prior and
contemporaneous communications as to such subject matter. This Agreement will
not be modified except by a written agreement dated subsequent hereto signed on
behalf of the Signatories by their duly authorized representatives. Except in
connection with a Change of Control, neither Party may assign or transfer this
Agreement in whole or in part. Neither this Agreement nor any written or oral
statements related hereto constitute an offer by either Party, and this
Agreement is not legally binding until executed by both Signatories hereto.

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Sun and Microsoft Confidential

 

IN WITNESS WHEREOF, the Signatories have executed this Agreement as of the
Effective Date.

 

MICROSOFT CORPORATION   SUN MICROSYSTEMS, INC.

/s/ STEVEN A. BALLMER

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/s/ MARK E. TOLLIVER

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By

  By

Steven A. Ballmer

  Mark E. Tolliver

Name (print)

  Name (print)

Chief Executive Officer

  Executive Vice President

Title

  Title

April 1, 2004

  April 1, 2004

Date

  Date

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Sun and Microsoft Confidential

 

Exhibit A

 

Annual Extension Fee Schedule

 

Date

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Fee

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[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

[**]

   [**]

Total

   [**]

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[**] = information redacted pursuant to a confidential treatment request. Such
omitted information has been filed separately with the Securities and Exchange
Commission.