Microsoft and Sun today announced that they have entered into a broad technology collaboration arrangement to enable their products to work better together and to settle all pending litigation between the two companies. The companies have also entered into agreements on patents and other issues.

The agreements involve payments of $700 million to Sun by Microsoft to resolve pending antitrust issues and $900 million to resolve patent issues. In addition, Sun and Microsoft have agreed to pay royalties for use of each other’s technology, with Microsoft making an up-front payment of $350 million and Sun making payments when this technology is incorporated into its server products.