Azul Systems and Sun Microsystems have settled a patent infringement suit Sun filed.

The suit had been pending in a California court since May 2006, said Scott Sellers, chief operating office and co-founder of Azul.

Sun alleged that Azul violated trade secrets and patent laws.

Azul, founded in 2002, makes high capacity computing appliances. The company had hired some former Sun employees, including Stephen DeWitt, its CEO.

"We're very pleased to disclose this [settlement]. This has been in the works for some time. Both sides realise they're spending a lot of money and this would have taken another year," said Sellers.

Judge Charles Breyer, presiding over the case, had made some pretrial rulings on motions that were adverse to Sun, which prompted the company to agree to settlement talks, Sellers said.

Sun tells a different story.

In a statement, Sun spokeswoman Kristi Rawlinson said Azul agreed to settle because Sun was building a stronger case against Azul as the lawsuit went on.

"The patent infringement and trade secret claims against Azul grew larger during the pendency of the case," Rawlinson stated. "Azul came to the realisation it would be better to return to negotiations and settle the claims, rather than continue with the lawsuit they initiated."

The case relates to technology for improving the performance of microprocessors through the use of chip multi-threading, which Azul is now using in its products. Sun claims Azul infringed patents related to Sun's prior research in the field, and that it abused trade secrets by poaching about a dozen Sun employees familiar with the technology.

In a blog posting, Michael Dillon, Sun's chief legal counsel, declined to discuss terms of the settlement, as did Azul's Sellers.