PATENT LICENSE AGREEMENT
Exhibit 10.1
This
Agreement by and between Laser Design International, LLC (“LDI”) and Crystal
Magic, Inc (“Crystal Magic” or “Licensee”) is entered into as of May 6, 2007
(hereinafter the “Effective date”).
WHEREAS
LDI is the assignee and patentholder of U.S. Patent No. 5,206,496 and the
reexamination certificate 5,206,496 C1, pursuant to an agreement with Diageo
Scotland Ltd dated February 20, 2003; and
WHEREAS
Crystal Magic desires to obtain a non-exclusive license under the Licensed
Patents (defined below) and LDI desires to grant to Crystal Magic a
non-exclusive license to these patents according to the terms and conditions set
forth below:
NOW
THEREFORE, in view of the above premises and the following mutual covenants and
promises, the parties hereto agree as follows:
Incorporation
of Recitals. The recitals set forth above are hereby incorporated as a part of
this Agreement.
ARTICLE
I
DEFINITIONS
1.1. The
“496 patent” shall mean United States Patent No, 5,206,496 to Xxxxxxx et al.
issued on or about April 27, 1993, Reexamination Certificate No. 5,206,496 C1,
and any foreign counterparts thereto. The ‘496 patent is
sometimes referred to herein as the “Licensed Patents”
1.2. “Net
Sates” shall mean the proceeds actually received by Licensee or its affiliates
from the sale, lease, or other disposition of Laser Subsurface Engraving
Product, as hereinafter defined, as delivered to the purchaser by Licensee and
its Affiliates, before sales tax and excepting added items not described by the
Licensed Patents sold as accessories for payment actually received by Licensee
(such as display bases and presentation boxes), reduced by any units of such
products returned to and accepted by Licensee or its Affiliates to the extent
that the purchase price of such units has been refunded. For sales of licensed
products to an Affiliate, sister company, parent company, controlling company,
subsidiary, or entity otherwise related to the Licensee (hereinafter “Related
Company), the higher of the Related Company’s purchase or sale price for each
item will be included in Net Sales; provided however that the Net Sales to such
Related Company shall not be recognized for royalty calculations until sold by
the Related Company to a non-Related Company and shall then be recognized as a
sale at the higher of the Related Company’s purchase or sale price.
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1.3. “Laser
Subsurface Engraving Machine” shall mean any laser marking device whose
construction or method of operation falls within the claims of the Licensed
Patents.
1.4. “Laser
Subsurface Engraving Product” shall mean objects that contain internal
decorative or indicative images that have been created inside a transparent
medium with a Laser Subsurface Engraving Machine, as described in the claims of
the Licensed Patents.
1.5. “Affiliates”
shall mean, respectively, a corporation or other entity that controls or is
controlled by LDI or Licensee.
1.6. “Improvement”
shall mean any modification of or improvement to a Laser Subsurface Engraving
Machine which enhances its operability, effectiveness, capability, or efficiency
in making Laser Subsurface Engraving Products under the claims of the Licensed
Patents.
ARTICLE
II
LICENSE
GRANT AND RELEASE
2.1. License
of the Licensed Patents. Subject to Licensee’s compliance with all material
terms of this Agreement LDI grants to Licensee under the Licensed Patents a
non-exclusive, non-transferable, royalty-bearing license to make, use, offer for
sale, sell, lease, or, otherwise dispose of Laser Subsurface Engraving Product,
For the purpose of this Agreement, all terms are deemed material with the
exception of the terms governed by the following sections; 8.3, 8.4, 8.5, and
8.6. Compliance with non-material terms may be enforced (subject to the notice
and cure requirements of section 6.2) through binding arbitration, with the
prevailing party recovering its costs and attorneys fees. The license granted
hereunder does not extend to providing manfacturing, etching or engraving
services to third parties on a fees for service basis unless said third party is
itself licensed.
2.2, Xxxxxxx
Consent, LDI represents that Xxxxxxx Operating Company has reconveyed any
exclusive rights it once held in the ‘496 patent to LDI and that LDI is able to
grant the licenses granted hereunder without the consent of any third
party.
2.3, Covenant
Not to Xxx. Subject to Licensee’s compliance with the terms of this Agreement,
LDI shal not assert any claim or action against Licensee, its distributors,
or direct or indirect customers for practicing any method or process within the
scope of the Licensed Patents, in making, using, or selling any Laser Subsurface
Engraving Product for which all applicable royalties have been paid to LDI under
this Agreement
2.4. No
Implied Licenses. Except as expressly stated in this Article II, no other rights
or licenses are granted to Licensee or any other entity, express or implied, by
virtue of this Agreement.
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2.5. Improvements, Licensee shall
promptly inform LDI of any Improvements. LDI shall have a right of first refusal
to obtain a non-exclusive royalty” free license from Licensee for any accepted
Improvement. If LDI fails to either refuse or accept any Improvement within
ninety (90) days after being informed by Licensee of the Improvement, then LDI
shall be deemed to have rejected the offer of the license.
Should
LDI acquire additional patent rights which would be infringed by practicing
under the Licensed Patents, LDI will offer to Licensee a license of such rights
at no additional cost.
2.6. Insurance. Licensee will
throughout the term of this Agreement maintain product liability insurance of
such nature and such amount as LDI shall reasonably consider appropriate and
shall so state to Licensee. Licensee shall further produce copies of all
insurance certificates and renewal certificates to LDI within thirty days of
receipt of the same.
ARTICLE
III
CONSIDERATION
3.1. License Transfer Fee. The
Parties agree that Licensee has already paid a license transfer fee as part of
the litigation settlement associated with this license agreement
3.2. Royalty Payments and
Statements Licensee is obligated to pay royalties (in United States
dollars), as follows.
a) a
minimum royalty of $25,000 per year; plus
b) in
any year in which the sum of (i) 2.75% of Net Sales from locutions or through
channels other than Disney or Universal Studios locations plus (ii) 0.4% of Net
Sales from locations on Disney or Universal Studios properties, exceeds $25,000,
the amount of such excess to a maximum of $35,000.
Such
royalties, including payments required in order to meet minimum royalty
requirements, will be calculated and paid on a calendar quarterly basis, within
30 days of the end of the quarter. In the event that Licensee ceases
distribution of Laser Subsurface Engraving Product, the minimum royalty
obligation set forth herein shall terminate pro rated as of the point in time
when distribution ceased.
For all
sales by Licensee not in United States dollars, the total of Net Sales shall be
converted into United States dollars using the currency conversion rates listed
in the Wall Street Journal published on the last day of the calendar quarter or
the day closest to the end of the calendar quarter for which royalty payments
are calculated.
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33. Records;
Audits.
a) Within
thirty (30) days after the end of each calendar quarter. Licensee will provide
LDI with a written report in spreadsheet format containing the data used by
Licensee to determine its royalty payment to LDI for such quarter, including,
without limitation, the quantity, price, product number, and product description
of all royalty-bearing produce and any other information that may be reasonably
requested by LDI from time to time for Licensor to determine whether Licensor is
paying the correct amount of royalties. Such a report shall be provided even if
Licensee pays only the minimum royalty required under this Agreement, Licensee
shall maintain the records from which such reports were created and any
additional records required in order to verify the accuracy of any such reports
for a period of three years following the termination of this
License.
b) LDI
will have the right, during normal business hours and upon at least fifteen (15)
days prior notice, to inspect Licensee’s facilities and audit Licensee’s records
relating to Licensee’s activities pursuant to this Agreement in order to verify
that Licensee has paid to LDI the correct amounts owed under this Agreement and
has otherwise complied with the terms of this Agreement. The audit will be
conducted at LDI’s expense, unless the audit reveals that Licensee has underpaid
the amounts owed to LDI by 10 percent (10%) or more in any quarter, in
which case Licensee will reimburse LDI for all costs and expenses incurred by
LDI in connection with such audit Such audits will be conducted no more than
once in any calendar year and may cover any period of time for which royalties
may have been due under this License. If Licensee fails to pay LDI any amounts
shown by any such audit to be owing within ten (10) days after notice thereof,
then LDI may immediately terminate Licensees rights under his
License.
3.4. Late Payments; Attorneys’
Fees. Licensee agrees to pay LDI a late charge of five percent (5%) of
any amounts not paid by Licensee when due, including of any sums identified in
an audit pursuant to section 3.3. In addition, interest xxxx be due and payable
on past due amounts at the rate of one percent (1%) per month. Licensee agrees
to pay attorneys fees in the event of any successful court action undertaken for
collection.
3.5 Most Favored Royalty. In the
event that LDI later executes a new license of the Licensed Patents to any other
person, granting substantially the same rights on substantially the same terms
where Licensee concurrently has rights under this Agreement, and said license
contains more favorable royalty terms than those enjoyed by Licensee, LDI shall
promptly notify Licensee and the royalty rate provided in paragraph 3.2 shall be
reduced by fifty (50) percent of the difference effective as of the date the
more favored license is granted.
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ARTICLE
IV
LIMITED
WARRANTY AND INDEMNITY
4.1 EXCEPT
AS EXPRESSLY STATED IN THIS ARTICLE IV, NO OTHER WARRANTIES OR REPRESENTATIONS
ARE GIVEN BY LDI UNDER THIS AGREEMENT, including but not limited to, any
warranty or representation: (a) as to the validity of the Licensed Patents; (b)
that any manufacture, importation, sale, lease, use, or other disposition of
Laser Subsurface Engraving Product will be free from infringement of another
party’s intellectual property rights; (c) that LDI will enforce any intellectual
property rights it may have in the Licensed Patents against third parties, or
(d) as to the quality of merchantability, or fitness for a particular purpose of
any Laser Subsurface Engraving Product
LDI will
keep Licensee reasonably informed as to any final rulings in legal or government
proceedings which affect the claims of the Licensed Patents.
4.2 Licensee
shall defend, indemnify, and hold harmless LDI and its directors, officers,
employees, and Affiliates, from and against any claims, liabilities, actions,
costs or damages (including fees of attorneys and other professionals) arising
from product liability claims related to Licensee’s manufacture) use, sale or
distribution of Laser Subsurface Engraving Produce provided LDI gives Licensee
notice of such claim, provides reasonable cooperation and assistance in
connection with such claim, and does not agree to any settlement without
Licensee’s consent.
4.3 Licensee
will provide reasonable cooperation and assistance to LDI in connection with any
litigation concerning the Licensed Patents brought by or against a third party,
including but not limited to any action or claim involving alleged infringement
of the Licensed Patents. Said cooperation shall include but not be limited to a)
joining as a named party, if necessary; and b) furnishing relevant evidence and
testimony, all at the expense of LDI or other party initiating the action. Any
monetary award or damages resulting from such action shall be accorded to the
party bringing the action unless otherwise agreed by the parties.
4.4. LDI
represents and warrants that LDI has sufficient ownership interest in the
Licensed Patents to grant the licenses that are granted under this
Agreement
ARTICLE
V
PATENT
NOTICES
Licensee
will xxxx each Laser Subsurface Engraving Product or its packaging as well as
sales brochures with a notice of U.S. Patent No. 5,206,496 or the numbers of
other of The Licensed Patents as applicable.
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ARTICLE
VI
TERM
AND TERMINATION
6.1. Term.
In exchange for LDI’s covenant not xxx contained in paragraph 2.3, the
obligation to pay royalties under the terms of this Agreement shall continue
until the earliest of (l) the expiration of the terms of all the Licensed
Patents, (2) after all possibility of appeal has been exhausted for any final
judgment or judgments which collectively declare all claims of the Licensed
Patents invalid, or (3) termination in accordance with paragraph 6.2,
below.
6.2. Termination.
a) If
there should occur a material breach, default or noncompliance by one party (the
“Defaulting Party”) of or with any term or condition hereof followed by written
notice from the other party (the “Non-Defaulting Party”) of such breach, default
or noncompliance and the failure of the Defaulting Party to remedy or correct
such breach, default or noncompliance within sixty (60) days after receipt, of
such notice, then in addition to any other remedy available at law or in equity
or under this Agreement, the Non-Defaulting Party may, at its election,
terminate this Agreement.
b) LDI
may, at its election, terminate this Agreement upon Licensee’s bankruptcy or
reorganization for the benefit of creditors.
c) Licensee
may terminate this Agreement by notifying LDI in writing that Licensee and all
of its affiliates are no longer conducting sales or manufacturing activities
which fall within the claims of the Licensed Patents,
6.3. In
the event that this Agreement is terminated in accordance with this Article VI,
then the license rights granted to Licensee by this Agreement shall immediately
terminate, except that Licensee shall have the right to sell any completed units
of in existence as of the date of termination, subject to, and provided Licensee
has at all times complied with, its obligations to pay royalties and submit to
audit in accordance with this Agreement. The provisions of Articles 1, 3, 4, 5,
7, and 8 and Sections 2.2 and 2.5 and any liability arising from breach of this
Agreement will survive termination of this Agreement except that if Licensee
terminates the agreement pursuant to Section 6.2(c) then Licensee shall no
longer be obligated to submit Statements under Section 3.2 as long as it does
not conduct manufacturing or sales activities which would otherwise trigger an
obligation to pay royalties under Section 3.2.
ARTICLE
VII
LIMITATION
OF LIABILITY
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IN NO
EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY OR
ANY OTHER PERSON FOR ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR
CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS
OR DAMAGES TO THE OTHER PARTY’S BUSINESS REPUTATION HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY, WHETHER IN AN ACTION FOR CONTRACT, STRICT LIABILITY OR TORT
(INCLUDING NEGLIGENCE) OR OTHERWISE, WHETHER OR NOT THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE AND NOTWITHSTANDING THE FAILURE OF
ESSENTIAL PURPOSE OF ANY REMEDY.
ARTICLE
VIII
GENERAL
8.1. No waiver. No waiver by LDI,
express or implied, of any breach of any term condition, or obligation of this
Agreement by Licensee shall be construed as a waiver of any subsequent breach of
that term, condition or obligation, or of any other term, condition, or
obligation of this Agreement of the same or different nature.
8.2. No Assignment or Sublicensing; No
Transfer of Machines Without Permission. Licensee shall not assign or
otherwise transfer, by contract, operation of law, or otherwise, without the
specific written consent of LDI, this Agreement or any license light granted
hereunder or any interest herein, or grant any sublicense for any purpose under
this Agreement, and any such assignment, transfer or sublicense shall be null
and void. Said written consent of LDI shall not be unreasonably withheld or
denied.
Licensee
shall not sell, transfer, lease, franchise, or otherwise dispose of any Laser
Subsurface Engraving Machine which it may own or operate, however acquired, to
any other entity without prior specific written permission from LDI, said
permission not to be unreasonably withheld or denied. LDI may refuse permission
for any such transfer to an entity which does not have proper rights to practice
under the Licensed Patents.
8.3. Governing Law. This Agreement
shall be construed under the laws of the State of California and the United
States of America as though entered into between two parties residing in
California to be performed wholly within California. All parties to this
Agreement specifically consent to the jurisdiction of the courts of the U.S.
District Court, Northern District of California, and the courts of Santa Xxxxx
County, California for purposes of enforcing this Agreement
8.4. Complete Agreement. This
Agreement sets forth the entire understanding between the parties and supersedes
all prior discussions, representations, and agreements between them as to me
subject matter of this Agreement. This Agreement cannot be modified or amended
except in a writing signed by duly authorized representatives of Licensee and
LDI.
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8.5 Export Control. Licensee shall
be responsible for ensuring it complies with all laws and regulations of the
country in which it operates, imports from, or to which it exports
products.
8.6 Notices. A notice, request, or
statement hereunder shall be deemed to be sufficiently given or rendered when
sent by certified mail and addressed to such address as may be specified by
written notice.
8.7. Taxes, Licensee shall pay all taxes and other
charges that may be Imposed by any Governmental unit as a result of the
performance of this Agreement, including but not limited to capital, property,
turnover excise use, sales, and income taxes or other charges imposed by such
Governmental unit, other than income taxes levied against LDI.
8.8. Resolution of Disputes. Except
as provided below, any dispute between the parties which arises from this
Agreement and cannot be resolved informally between the parties shall be
referred to the Northern District of California court wherein the original
litigation which gave rise to this License was inducted unless otherwise agreed
by all of the parties. In the event that this Agreement is terminated pursuit to
Article VI, LDI may undertake any and all legal actions to collect any royalties
or other monies owed to them under this Agreement and LDI shall be free to
undertake any and all legal actions for patent infringement including but not
limited to actions to prevent Licensee, its affiliates, or distributors from
unlicensed manufacture, distribution, or sale activities that would otherwise
infringe any claim of the Licensed Patents and to recoup damages for such
activities. LDI shall at all times be free to undertake my and all legal actions
to prevent or stop infringement by Licensee, its affiliates, or distributors of
any rights in the Licensed Patents not granted to Licensee.
IN
WITNESS THEREOF, the parties haves executed this Agreement.
FOR
LDI:
LASERDESIGN INTERNATIONAL,
LLC
By: XXXXX D: LIDICOAT
Its: President
Date: October 14, 2007
FOR
XXXXXXX XXXXX, INC:
Crystal Magic, Inc.
/s/ Xxxxxx X. Xxxxxx
Its: Presidcent
Date: October 14, 2007
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