Common use of Reduction of Royalties Clause in Contracts

Reduction of Royalties. (a) If it is "necessary" (as defined below) for PathoGenesis, any Affiliate of PathoGenesis or any sublicensee of PathoGenesis in any country within the Territory to obtain a license and pay a royalty under such license to either (i) a third party other than an "Excepted Party" or (ii) a third party who is an Excepted Party (as defined below), under any patent or other proprietary interest of such third party in order to use, import, export, offer for sale or sell the Inhaler Product in that country, PathoGenesis' obligations to pay royalties to AeroGen on Net Sales in that country shall be reduced by (A) one-half of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to a party other than an Excepted Party; or (b) all of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to an Excepted Party; provided that in no event shall AeroGen's royalties be reduced under this Section 9.5(a) below fifty percent (50%) of the applicable rate set forth in Section 9.1. It shall be considered "necessary" to obtain a license if so ordered by a court of competent jurisdiction in such country or if PathoGenesis, any Affiliate of PathoGenesis or any sublicensee obtains a written opinion from an independent qualified patent counsel or agent in such country, reasonably acceptable to AeroGen, that the use or sale of the Inhaler Product in the Field infringes upon such third party's patent rights or other proprietary interests. As used in this Section 9.5(a), an "Excepted Party" means [*]. (b) In the event: (i) AeroGen does not obtain within four years from the Effective Date a Valid Claim on the Inhaler or there is no Valid Claim of a patent included in AeroGen's Inhalation Intellectual Property that claims the Product sold by PathoGenesis, its Affiliates or sublicensees; or (ii) a third party obtains, by order, decree or grant from a court or other regulatory authority of competent jurisdiction in any country in the Territory, a compulsory license under AeroGen's Inhalation Intellectual Property authorizing such third party to make, have made, use, import, export, offer for sale or sell the Product in such country, AeroGen shall give prompt written notice to PathoGenesis. In either such event [*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 16. PathoGenesis' obligations to pay royalties with respect to Net Sales of the Product in such country under this Agreement shall be reduced by fifty percent (50%).

Reduction of Royalties. (a) If it is "necessary" (as defined below) for PathoGenesis, any Affiliate of PathoGenesis or any sublicensee of PathoGenesis in any country within the Territory to obtain a license and pay a royalty under such license to either (i) a third party other than an "Excepted Party" [*] or (ii) a third party who is an Excepted Party (as defined below)[*], under any patent or other proprietary interest of such third party in order to use, import, export, offer for sale or sell the Inhaler Product in that country, PathoGenesis' obligations to pay royalties to AeroGen on Net Sales in that country shall be reduced by (A) one-half of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to a party other than an Excepted Party[*]; or (b) all of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to an Excepted Party[*]; provided that in no event shall AeroGen's royalties be reduced under this Section 9.5(a) below fifty percent (50%) [*] of the applicable rate set forth in Section 9.1. It shall be considered "necessary" to obtain a license if so ordered by a court of competent jurisdiction in such country or if PathoGenesis, any Affiliate of PathoGenesis or any sublicensee obtains a written opinion from an independent qualified patent counsel or agent in such country, reasonably acceptable to AeroGen, that the use or sale of the Inhaler Product in the Field infringes upon such third party's patent rights or other proprietary interests[*]. As used in this Section 9.5(a), an "Excepted Party" means [*]. (b) In the event: (i) AeroGen does not obtain within four years from the Effective Date a Valid Claim on the Inhaler or there is no Valid Claim of a patent included in AeroGen's Inhalation Intellectual Property that claims the Product sold by PathoGenesis, its Affiliates or sublicensees[*]; or (ii) a third party obtains, by order, decree or grant from a court or other regulatory authority of competent jurisdiction in any country in the Territory, a compulsory license under AeroGen's Inhalation Intellectual Property authorizing such third party to make, have made, use, import, export, offer for sale or sell the Product in such country, AeroGen shall give prompt written notice to PathoGenesis. In either such event [*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 16. PathoGenesis' obligations to pay royalties with respect to Net Sales of the Product in such country under this Agreement shall be reduced by fifty percent (50%).

Reduction of Royalties. (a) If it is "necessary" (as defined below) for PathoGenesis, any Affiliate of PathoGenesis or any sublicensee of PathoGenesis in any country within the Territory to obtain a license and pay a royalty under such license to either (i) a third party other than an "Excepted Party" [*] or (ii) a third party who is an Excepted Party (as defined below)[*], under any patent or other proprietary interest of such third party in order to use, import, export, offer for sale or sell the Inhaler Product in that country, PathoGenesis' obligations to pay royalties to AeroGen on Net Sales in that country shall be reduced by (A) one-half of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to a party other than an Excepted Party[*]; or (b) all of the amount of the cost to PathoGenesis, its Affiliates and sublicensees of such royalties paid or payable to an Excepted Party[*]; provided that in no event shall AeroGen's royalties be reduced under this Section 9.5(a) below fifty percent (50%) [*] of the applicable rate set forth in Section 9.1. It shall be considered "necessary" to obtain a license if so ordered by a court of competent jurisdiction in such country or if PathoGenesis, any Affiliate of PathoGenesis or any sublicensee obtains a written opinion from an independent qualified patent counsel or agent in such country, reasonably acceptable to AeroGen, that the use or sale of the Inhaler Product in the Field infringes upon such third party's patent rights or other proprietary interests. As used in this Section 9.5(a), an "Excepted Party" means [*]. (b) In the event: (i) AeroGen does not obtain within four years from the Effective Date a Valid Claim on the Inhaler or there is no Valid Claim of a patent included in AeroGen's Inhalation Intellectual Property that claims the Product sold by PathoGenesis, its Affiliates or sublicensees[*]; or (ii) a third party obtains, by order, decree or grant from a court or other regulatory authority of competent jurisdiction in any country in the Territory, a compulsory license under AeroGen's Inhalation Intellectual Property authorizing such third party to make, have made, use, import, export, offer for sale or sell the Product in such country, AeroGen shall give prompt written notice to PathoGenesis. In either such event [*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED. 16. PathoGenesis' obligations to pay royalties with respect to Net Sales of the Product in such country under this Agreement shall be reduced by fifty percent (50%).