Common use of Offset for Third-Party Composition Patents Clause in Contracts

Offset for Third-Party Composition Patents. If MorphoSys or its Affiliate(s) or Sublicensee(s) enter into any agreement with a Third Party for a license under an issued Patent which Covers the specific composition of matter of: (i) XmAb5574 due to and because of the sequence of its Fv or of its Fc variants, or of (ii) the Xencor High-ADCC/CDC Fc variants of any other Licensed Antibody which is under development or commercialization by MorphoSys or its Affiliate(s) or Sublicensee(s) due to and because of the sequence of such Xencor High-ADCC/CDC Fc variants (“Issued Specific Composition Patents;” to avoid doubt, an issued Patent will “Cover the specific composition” via a use claim if the scope of the use claims is limited to uses of such specific composition of matter due to and because of the sequence (meaning the Fv or Fc variants in the case of XmAb5574 and the Xencor High-ADCC/CDC Fc variants of such other Licensed Antibody) (and the foregoing specifically excluding Patents that apply due to any chemical modification thereto not present in the form thereof being tested in the Ongoing Phase 1 Trial), then […***…] ([…***…]%) of the net sales royalties actually paid to the Third Party under such license with respect to Net Sales in any given calendar quarter in any given country may be offset against the royalty that would otherwise have been payable to Xencor with respect to such Net Sales in such calendar quarter; provided, however, that the foregoing reduction shall not reduce the royalty owed to Xencor in any given calendar quarter below […***…] ([…***…]%) of Net Sales. In the event MorphoSys enters into a Sublicense, and the Sublicense contains an offset for Issued Specific Composition Patents, MorphoSys shall be able to pass through to Xencor the entire such offset agreed in the Sublicense if such offset is defined as […***…] ([…***…]%) or less of the net sales royalties actually paid to the Third Party by Sublicensee on Issued Specific Composition Patents. In case such offset is more than […***…] ([…***…]%), MorphoSys shall only be able to pass through to Xencor an offset of […***…] ([…***…]%) of such net sales royalties on Issued Specific Composition Patents. As an example, in case the Sublicensee has a royalty burden of […***…] ([…***…]%) of Net Sales to a Third Party as described above, and passes through to MorphoSys a […***…] ([…***…]%) offset of […***…] ([…***…]%) of Net Sales royalties, MorphoSys shall be able to pass through the full offset to Xencor. In case the Sublicensee passes through to MorphoSys an offset of […***…] ([…***…]%) of such […***…]% royalty burden to a Third Party, i.e. […***…] ([…***…]%) of Net Sales royalties, then MorphoSys shall be able to only pass through to Xencor an offset of […***…] ([…***…]%) of such […***…]% royalty burden to a Third Party, i.e. […***…] ([…***…]%) of Net Sales royalties, and has to carry the remaining […***…] ([…***…]%) offset, i.e. […***…] ([…***…]%) of Net Sales royalties itself. To avoid doubt, all of the foregoing examples relate solely to royalties on Issued Specific Composition Patents. (1) Patents Covering production and manufacturing (including expression); (2) Patents Covering CD19; (3)