EXHIBIT 10.51
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND SEPARATELY FILED
WITH THE COMMISSION.
INTERDIGITAL TECHNOLOGY CORPORATION
PATENT LICENSE AGREEMENT
THIS IS A PATENT LICENSE AGREEMENT (the "Agreement"), dated May 8, 1995, (the
"Effective Date") between InterDigital Technology Corporation ("ITC"), a
Delaware corporation with a mailing address of 000 Xxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxxxx, XX 00000, and NEC Corporation ("Licensee"), a Japanese corporation
with a mailing address of [**].
BACKGROUND
ITC owns and has the right to license the Licensed Patents (defined below) and
is willing to grant worldwide, non-exclusive licenses thereunder on the terms
set forth below. Licensee desires to obtain such a license.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound, the parties agree as follows:
1 Definitions. As used herein:
(a) "Affiliate" means IDC, or a corporation or other legal entity fifty percent
(50%) or more of the voting stock or control of which is owned, directly or
indirectly, by Licensee, IDC, or ITC, as the case may be.
(b) "Cellular Unit" means a Covered Subscriber Unit other than a PCS/PHS Unit
or Wireless Local Loop Subscriber Unit.
(c) "Covered Infrastructure Unit" means Infrastructure Equipment that is
designed to operate in accordance with a Covered Standard.
(d) "Covered Standards" mean XX-00, XX-000, XXX, XXX-0000/0000, PDC, PHS and
additional standards for digital wireless communications products as added
pursuant to Xxxxxxxxx 0, xxxxx, and various derivations thereof that do not
fundamentally alter the character thereof, where the use and operation of
products in conformity with such standards is covered by one or more claims
of the Licensed Patents.
(e) "Covered Subscriber Units" means Subscriber Units that are built to operate
in accordance with one or more Covered Standards.
(f) "DCS 1800/1900" means the compatibility standard developed for personal
communications systems based on GSM but intended for use in the 1.8Ghz
and/or 1.9 Ghz frequency bands.
** Material omitted and filed separately with the Commission.
(g) "GSM" means the compatibility standard developed for the 900 MHZ
PanEuropean digital TDMA cellular mobile radio communication system,
promulgated by the European Telecommunication Standards Institute, as
amended from time to time.
(h) "IDC" means InterDigital Communications Corporation. ITC is a wholly owned
subsidiary of InterDigital Patents Corporation which is an Affiliate of
IDC.
(i) "Infrastructure Equipment" means mobile switching centers, base station
controllers, base stations, digital transceivers, and similar telephony
equipment, which are used to interconnect a Covered Subscriber Unit to the
wired telephone network. Switching equipment may be included in the mobile
switching center or the base station controller.
(j) "IS-54" means Cellular Dual Mode Mobile Station - Base Station
Compatibility Standards, promulgated by the Electronics Industry
Association and the Telecommunications Industry Association, as amended
from time to time.
(k) "IS-136" means an improved version of 15-54 which includes, among other
things, a digital control channel.
(l) "Licensed Patents" means every issued patent derived from a patent
application which bears a first effective filing date on or before February
28, 2002 and owned at any time by ITC or its Affiliates or for which ITC
has the right to grant the licenses conveyed hereunder, (including utility
models but excluding design patents and design registrations) in any
country of the world, which covers the manufacture, use, sale or lease of
Subscriber Units and/or Infrastructure Equipment for use in TDMA based
digital wireless telecommunications systems. Licensed Patents shall also
include published patent applications which, but only to the extent that
ITC would have the right, under the laws of the nation in which said
applications are published, to recover damages for infringement of said
application during the period of publication. Licensed Patents shall not
include patents of an entity that acquires IDC. Appendix B contains a
complete listing of the existing patents and patent applications relating
to TDMA based digital wireless telecommunications systems owned by ITC
(including the expiration date of each such patent). ITC shall update such
list annually or as otherwise requested by Licensee during the term of this
Agreement to add newly filed or issued patent applications or patents. The
identity and contents (if provided) of any patents applications shall be
maintained in confidence by Licensee; provided that Licensee shall have no
confidentiality obligation with respect to any information which:
(i) is already publicly available, or becomes publicly available except
by Licensee's breach of the confidentiality obligation herein,
(ii) is already known to Licensee at the time of the disclosure,
(iii) is legitimately obtained by Licensee from a third party without
confidentiality obligation, or
(iv) is independently developed by Licensee at any time.
2
(m) "Licensed PDC Infrastructure Equipment" means PDC Infrastructure Equipment
licensed under this Agreement.
(n) "Licensee" means the company identified as "Licensee" on page 1 of this
Agreement, and its Affiliates.
(o) "Manufacturer's Average Selling Price" means the average price at which a
Covered Subscriber Unit is sold by the manufacturer in an arms' length
transaction after deducting the following items to the extent actually
paid: (i) usual trade discounts, (ii) packing costs, (iii) costs of
insurance and transportation, and (iv) import, export, excise, sales and
value added taxes and custom duties. The determination of the
Manufacturer's Average Selling Price shall be made once each calendar year
and shall be based on sales of the applicable model of Covered Subscriber
Unit in the immediately preceding calendar quarter.
(p) "Net Selling Price" means the amount actually invoiced to the customer for
a Covered Infrastructure Unit less packing, insurance and shipping costs,
applicable import, export and excise duties, returns, trade discounts
given, insurance and installation costs, to the extent included in the Net
Selling Price, [**]. If base stations or other Infrastructure Equipment
contain integrated switching equipment, royalties shall be payable with
respect to the entire cost of such base stations or other Infrastructure
Equipment, provided, however, [**].
(q) "PCS Unit" means a Covered Subscriber Unit that (i) complies with DCS
1800/1900 and (ii) whose Manufacturer's Average Selling Price is fifty
percent (50%) or less of the Manufacturer's Average Selling Price of a
typical GSM Subscriber Unit in the country in which such Subscriber Unit is
sold. Any DCS 1800/1900 Subscriber Unit that does not satisfy both of the
foregoing conditions shall be treated as a Cellular Unit for purposes of
this Agreement.
(r) "PCS/PHS Unit" means a (i) Subscriber Unit that complies with PHS, or (ii)
a PCS Unit.
(s) "PDC" means the RCR STD 27 compatibility standard developed in Japan known
as PDC or Personal Digital Cellular or PanAsian Digital Cellular for TDMA
______________
** Material has been omitted and filed separately with the Commission.
3
digital wireless mobile radio communication systems, as amended from time
to time.
(t) "PHS" means the RCR STD 28 compatibility standard developed in Japan and
known as the Personal Handyphone Standard, as amended from time to time.
(u) "PDC Infrastructure Equipment" means Infrastructure Equipment designed for
use in conjunction with PDC Subscriber Units.
(v) "PDC Infrastructure Unit" means a PDC base station which is used as the
method of tracking the royalties payable for PDC Infrastructure Equipment.
(w) "Subscriber Unit" means a radiotelephone, whether fixed, mobile,
transportable, vehicular, portable or hand-held, adapted for use by a
single person. A Subscriber Unit may be a Wireless Local Loop Subscriber
Unit.
(x) [**]
(y) TDMA" means time division multiple access.
(z) "Unlicensed Subscriber Unit" means a Subscriber Unit built in accordance
with a Covered Standard by a third party that is not licensed under the
Licensed Patents for the manufacture, use and sale of such Subscriber Unit.
(aa) "Wireless Local Loop Subscriber Unit" means a Subscriber Unit, other than a
PHS Subscriber Unit, used in a digital wireless communication system that
is specifically designed for the purpose of providing fixed wireless
telephone service.
2 License Grant. ITC hereby grants to Licensee a non-exclusive, worldwide,
royalty bearing license under the Licensed Patents to make, have made,
import, use, sell, lease and/or otherwise distribute Covered Subscriber
Units and Covered Infrastructure Units.
3 Limitations on License Grant.
(a) Third party purchasers of Covered Subscriber Units or Covered
Infrastructure Units purchased directly or indirectly from Licensee shall
have the right to use and sell such purchased products for their normal or
expected uses without obligation under patents to ITC or its Affiliates.
(b) Notwithstanding the terms of subparagraph (a), no license is granted by
estoppel or implication to any third party customer of Covered Subscriber
Units to make, use or sell Infrastructure Equipment, and no license is
granted by estoppel or implication to any third party customer of Covered
Infrastructure Units to make, use or sell Subscriber Units, and any claims
that ITC may have against a third party manufacturer of Unlicensed
Subscriber Units that the use of such Unlicensed Subscriber Units with
Infrastructure Equipment licensed hereunder
____________
** Material has been omitted and filed separately with the Commission.
4
contributorily infringe or induce the infringement of any claims of any of
the Licensed Patents are expressly reserved by ITC hereunder.
(c) Notwithstanding the terms of subparagraph (b), in no event shall Licensee
be held liable for contributory infringement or inducing infringement (or
under any similar theory of liability), based on the uses made of Covered
Subscriber Units or Covered Infrastructure Units by direct or indirect
purchasers, regardless of the manner in which such Covered Subscriber Units
or Covered Infrastructure Units are sold, marketed or promoted by Licensee.
4 Additional Covered Standards.
(a) ITC and Licensee shall each have the right to designate additional
standards (including, without limitation, Licensee product architectures,
even if such architectures are not the subject of an industry standard) as
candidates for adoption as Covered Standards, by giving written notice to
the other. Any such designation shall include a full description of the
standard, and a list of those patent claims which are deemed to cover the
use and operation of Licensee's products in conformity with that standard.
(b) If candidates for adoption as additional Covered Standards are designated
by ITC, Licensee shall retain the right to object to such designation on
the ground that such candidate is not a Covered Standard. If the parties
are unable to reach agreement on this issue, this dispute will be resolved
under the dispute resolution provisions of Paragraph 18.
(c) If a candidate for adoption as an additional Covered Standard is adopted as
such, either by agreement of the parties or through the Paragraph 18
dispute resolution process, the parties shall enter into good faith
negotiations to determine an appropriate royalty applicable to Covered
Subscriber Units or Covered Infrastructure Units which comply with such
additional Covered Standard. Such negotiations shall take into
consideration the Manufacturer's Average Selling Price of such product, the
Licensed Patents covering such product and the royalty rates and terms
contained herein.
(d) In the event that an additional Covered Standard is adopted prior to the
exhaustion of prepaid royalties, Licensee shall have the option to apply
prepaid royalties towards products compliant with such additional Covered
Standard. Such prepaid royalties will be applied at a rate consistent with
the ratio between the royalty rate applicable to already covered products
and the royalty rate applicable to newly covered products. For example, if
a 1995 royalty rate of $[**] per unit were applied to a Subscriber Unit
covered by an additional Covered Standard, sales of such Subscriber Unit
would be applied against the prepaid royalty credit at a rate of two such
Subscriber Units for every PCS/PHS unit which would otherwise be applicable
against the royalty credit, reflecting the ratio between $[**] and $[**].
(e) In no event shall the adoption of additional Covered Standards increase the
royalty payable on any Covered Infrastructure Unit or Covered Subscriber
Unit
____________
** Material has been omitted and filed separately with the Commission.
5
which is or would be already subject to payment of royalties hereunder,
or affect the allocation of the prepaid royalties to such a product.
Thus, if a particular Licensee product is already subject to royalty
payments based on the compliance of that product with an existing
Covered Standard, the royalty payable on current and future sales of
such product will not be affected by the adoption of an additional
Covered Standard with which that product is compliant. In addition, if
Licensee introduces a product in the future, and if that product is
compliant with a Covered Standard listed in the originally executed
version of this Agreement, the adoption of an additional Covered
Standard with which that product is compliant will not increase the
royalties otherwise payable on that product.
5 Payment of License Fees.
(a) Advance Payment.
(i) Licensee shall pay ITC Twenty Three Million, Five Hundred and Thirty
One Thousand, Two Hundred and Sixty Six U.S. Dollars ($23,531,266) as
the unconditional irrevocable payment in full for the license granted
under Paragraph 2 hereof on the sale of the first [**] Cellular Units,
net of credits and returns.
(ii) Licensee shall pay ITC Three Million, Four Hundred Eight Thousand
Fourteen U.S. Dollars ($3,408,014) as the unconditional irrevocable
payment in full for the license granted under Paragraph 2 hereof on the
anticipated revenue associated with the sale of Covered Infrastructure
Units listed in Appendix A, net of credits and returns.
(iii) Five Million U.S. Dollars ($5,000,000) of the advance payment specified
in subparagraphs (i) and (ii) has already been paid by Licensee. The
remaining amount of the advance payment specified in subparagraphs (i)
and (ii), less any Japanese withholding taxes required to be withheld,
will be paid by wire transfer on or before May 25, 1995.
(iv) At Licensee's option, advance payments may be applied to any product
licensed hereunder.[**] Thus, Licensee shall have the right to apply
payments made under subparagraph (i) to Covered Infrastructure Units,
and the right to apply payments made under subparagraph (ii) to
Cellular Units.
(v) The amount of the prepayment made under this subparagraph 5(a) has been
determined on the basis of the sales projections set forth on the
spreadsheet attached hereto as Appendix A, using the royalty rates set
forth in paragraph 5(b) with an interest rate of [**] percent [**]%
used to compute present value and with a discount of [**] percent [**]%
for economic uncertainty and as consideration for prepayment of
royalties. Licensee represents that its sales projections are fair and
reasonable, and represent its best current estimates of its sales of
Covered Subscriber Units and Covered Infrastructure Units. In the event
that the actual number of Covered Subscriber Units or Covered
Infrastructure Units sold by Licensee in a given year are more than 25%
greater or less than the estimate set out in the Appendix A hereto, the
number of such units covered by such prepaid
____________
** Material has been omitted and filed separately with the Commission.
6
royalties shall be recalculated to take into account the shorter or
longer time for which the [**]% interest rate is being applied. Any
dispute regarding any such adjustment shall be resolved under the terms
of Paragraph 18.
(b) Running Royalties.
(i) Royalty rate. After exhaustion of the payment under subparagraph 5(a),
Licensee shall pay royalties to ITC on each sale (exclusive of returns
and credits) of a Covered Subscriber Unit or a Covered Infrastructure
Unit as follows:
Cellular Units: Sold Prior to December 31, 1995 - $[**]
Sold Prior to December 31, 1996 - $[**]
Sold thereafter - $[**]
PCS/PHS Units: Sold Prior to December 31, 1995 - $[**]
Sold Prior to December 31, 1996 - $[**]
Sold thereafter - $[**]
Covered Infrastructure
Units: [**]% of the Net Selling Price of Covered
Infrastructure Equipment
(ii) Cap on royalties.
(1) The royalty rates set forth in subparagraph (i) above for
Cellular Units and PCS/PHS Units are not intended to exceed
[**]% of the Manufacturer's Average Selling Price for the
applicable type of Covered Subscriber Units. Accordingly,
once the advance payment is exhausted, Licensee shall have
the option of providing ITC with information sufficient to
determine the Manufacturer's Average Selling Price for each
model of Covered Subscriber Unit. If the royalty provided
for hereunder exceeds [**]% of the Manufacturer's Average
Selling Price for a model of Covered Subscriber Unit, the
royalty associated with such model of Covered Subscriber
Units shall thereafter be reduced to [**]% of the
Manufacturer's Average Selling Price for such Covered
Subscriber Units. In each succeeding year, Licensee shall
provide ITC with sufficient information to determine the
Manufacturer's Average Selling Price of any Covered
Subscriber Units for which the royalty has been reduced as
described in this subparagraph, and the royalty for such
Covered Subscriber Units shall be adjusted to take into
account any subsequent price changes, with such royalty
always to be maintained at the lower of (1) the rate
specified in subparagraph (i), above, or (2) [**]%.
(2) If required for purposes of subparagraph (ii)(1), above,
Licensee shall make sufficient information available to ITC
to enable it to independently verify the Manufacturer's
Average Selling Price. If such information is not available,
the parties shall jointly determine
____________
** Material has been omitted and filed separately with the Commission.
7
a temporary Manufacturer's Average Selling Price to be used
for one calendar quarter until an actual average
Manufacturer's Average Selling Price can be determined as
provided for in this Paragraph. ITC shall hold in confidence
all Manufacturer's Average Selling Price supporting
information provided hereunder.
(c) For purposes of this Agreement, the manufacture, sale, lease and/or use
of a Covered Subscriber Unit or Covered Infrastructure Equipment shall
apply against the applicable prepaid royalty credit of Paragraph 5(a)
or the applicable running royalties of Paragraph 5(b), as the case may
be, if manufactured, used, sold or leased in (i) the United States,
(ii) any country where a valid foreign counterpart of U.S. Patent No.
[**] has issued or been published for opposition at the time in
question, but only if said counterpart contains claims which do not
differ materially from those of the [**] Patent, or (iii) any country
where a foreign counterpart application to U.S. Patent No. [**] has
been published if, under the law of the applicable country, ITC is or
shall be entitled to recover damages based on such publication, but
only if said counterpart contains claims which do not differ materially
from those of the [**] Patent. At the adjustment meetings provided for
in Paragraph 7 hereof, if requested by Licensee, the parties shall
consider whether and which Covered Subscriber Units or Covered
Infrastructure Equipment of Licensee are within the scope of the issued
claims of any non-U.S. patent of the type referred to in subparagraph
5(c)(ii) or (iii), above. Nothing herein shall be construed as
affecting in any manner the territorial scope of the license set forth
in Paragraph 2, above.
(d) Neither ITC nor its Affiliates currently have any issued Japanese
patents or published Japanese patent applications for opposition which
relate to TDMA digital wireless communications systems. Nothing herein
contained shall be deemed to require that royalties be paid on, or a
portion of the prepayment be allocated to, Licensee products
manufactured, used and sold in Japan which are compliant with PHS, PCS
or PDC, until and unless ITC acquires one or more Licensed Patents in
Japan covering these standards.
(e) Only one royalty shall be payable by Licensee to ITC under this
Agreement based on any Covered Subscriber Unit or Covered
Infrastructure Unit. If Licensee incorporates into a Covered Subscriber
Unit or a Covered Infrastructure Unit apparatus obtained from a third
party, for which a license under the Licensed Patents already exist,
the value of such apparatus shall be excluded from the royalty base for
such product. In the event the relevant product is a Covered Subscriber
Unit, such exclusion shall take the form of reducing the unit royalty
payment required for such Covered Subscriber Unit.
(f) Any royalties payable on a published application shall be paid, or
amounts subtracted from the prepayment, upon the issuance of the patent
corresponding to said application, subject to the provisions of
Paragraphs 5(c)(iii) and 7(e)(iii).
6 Wireless Local Loop Subscriber Units.
(a) If Licensee makes, uses or sells Covered Subscriber Units which are
Wireless
____________
** Material has been omitted and filed separately with the Commission.
8
Local Loop Subscriber Units, ITC shall have the option of (1) treating
such Wireless Local Loop Subscriber Units the same as other Covered
Subscriber Units for royalty purposes or (2) imposing a royalty on such
Wireless Local Loop Subscriber Units of [**] of the Manufacturer's
Average Selling Price for each model of Wireless Local Loop Subscriber
Unit.
(b) In the event that ITC elects to impose a royalty on Wireless Local Loop
Subscriber Units which is greater than the royalty which would
otherwise be payable on such units as Covered Subscriber Units,
Licensee shall have the option of terminating the royalty-free license
which is granted pursuant to Paragraph 13 hereof. In such an event, the
parties shall negotiate a cross-license, with or without royalties, as
appropriate, for Wireless Local Loop Subscriber Units and UltraPhone
products. Such cross-license may include a modification of the royalty
rate which would be otherwise payable by Licensee on Wireless Local
Loop Subscriber Units, and may include the payment of royalties by IDC
or its Affiliates on UltraPhone sales. In the event the parties are
unable to agree on the terms of such a cross-license, the dispute will
be submitted to the dispute resolution process of Paragraph 18.
7 Adjustments to Royalties.
(a) If requested by either party, the parties shall meet not more than
annually during the term of this Agreement to discuss possible downward
adjustments to royalties payable hereunder or other adjustments which
may be required hereunder. Such adjustments may take the form of
credits for additional units under the prepayment, or an adjustment of
the running royalty rate, or both.
(b) Adjustment meetings shall take place during the first calendar quarter
of each year and shall alternate between Wilmington, DE and Tokyo,
Japan. In the event the parties are unable to agree on adjustments, the
dispute shall be submitted to the dispute resolution procedures of
Paragraph 18 hereof.
(c) Any adjustment pursuant to this Paragraph shall be effective on the
date of the event giving rise to the right to have such an adjustment.
(d) If Licensee is entitled to an adjustment of royalties as a result of
the operation of this Paragraph, and Licensee has at the time of such
entitlement not utilized all of the prepayment, Licensee shall receive
a credit of additional Cellular Units and/or Covered Infrastructure
Units which shall be determined pursuant to good faith negotiations
between the parties, or pursuant to Paragraph 18 if such good faith
negotiations are not successful. A credit under the prepayment will not
preclude an additional adjustment of the running royalty rate. A credit
under the prepayment will take into account a reasonable interest rate
under the circumstances used for purposes of computing present value.
(e) [**]
[**]
____________
** Material has been omitted and filed separately with the Commission.
9
(ii) The expiration of any Licensed Patent.
(iii) The failure of any published application which constitutes a Licensed
Patent to issue within two (2) years of ITC's identification of such
application as a Licensed Patent, or the issuance of a patent from such
application with claims materially different from those present in the
application as published.
(iv) The entry of any agreement, judgment, litigation settlement,
arbitration award or the like, pursuant to which a third party
obtains the right to a prospectively lower royalty payment under
Licensed Patents for the manufacture, use or sale of Covered
Subscriber Units or Covered Infrastructure Equipment. In such an
event, the royalty rates under this Agreement shall be reduced
by[**]. In evaluating whether Licensee is entitled to any
reduction in royalty fees under these provisions for most favored
licensee treatment, the economic values of all relevant factors
(including but not limited to acquisitions of products by or from
IDC, joint development projects with IDC, joint venture
relationships with IDC, royalty advances, and royalty guarantees)
will be taken into account. For purposes of this subparagraph,
Covered Subscriber Units shall be deemed to be equivalent to
products manufactured by third parties which are designed to
operate in accordance with the same Covered Standards as
particular Covered Subscriber Units. This subparagraph shall not
apply to license agreements executed prior to the Effective Date.
Any adjustment under this subparagraph will take into account the
royalty rates applicable to the third party, determined, if
relevant,[**] and the rate of sale of Cellular Units and/or
Covered Infrastructure Units compared to the applicable rate set
forth in Appendix A.
(f) ITC shall be required to promptly inform Licensee of any event which
might give rise to an adjustment under this Paragraph. In the event of
an agreement, judgment, litigation settlement, arbitration award or the
like, ITC shall promptly provide Licensee (or its independent outside
counsel, if disclosure of the applicable document to Licensee is
prohibited) with a copy of the relevant sections of the applicable
documents.
(g) [**]
[**]
[**]
[**]
8 Payments. All running royalties payable shall be paid to ITC in U.S.
Dollars on a quarterly basis, within forty-five (45) days after the end
of each calendar quarter on products sold by Licensee during such
calendar quarter. All applicable taxes which are required by law to be
deducted from amounts payable to ITC (including deductions for Japanese
withholding tax) shall be deducted from the royalties payable hereunder
and paid to the relevant government authority by
____________
** Material has been omitted and filed separately with the Commission.
10
Licensee on ITC's behalf. If any such deduction is required by the elevant
government, Licensee will furnish ITC with appropriate documentation
evidencing the payment of such tax as issued by the appropriate authority
of such government.
9 Japanese Withholding Tax Provision.
(a) For purposes of the applicability of Japanese withholding tax on the
royalty advance, at Licensee's option, Licensee may either (i) pay on
behalf of ITC the withholding tax on up to [**] of the advance royalties
paid pursuant to Paragraph 5(a) hereof, or (ii) declare that at least [**]%
of the anticipated manufacturing and sales plans of Licensee shall be
allocated to non-Japanese source income, with the balance being allocated
to Japanese source income.
(b) With respect to any additional royalties which may be payable in the future
to ITC by Licensee, if, and to the extent, permitted by Japanese tax law,
no withholding shall be made with respect to Covered Subscriber Units or
Covered Infrastructure Units manufactured outside of Japan, or manufactured
in Japan but intended for sale outside of Japan, provided, however that ITC
shall indemnify Licensee against underpayment of withholding.
10 Reports.
(a) Until the exhaustion of the prepayment made hereunder, Licensee will
provide to ITC an annual written report, setting forth the quantity of
sales of each type of Covered Subscriber Unit and the number of Covered
Infrastructure Units sold during such year, to the extent reasonably
necessary for calculation of the amount of the prepayment applied to
royalties hereunder.
(b) Following the exhaustion of the prepayment, Licensee shall accompany each
payment with a written report setting forth the quantity of each type of
Covered Subscriber Unit and Covered Infrastructure Unit sold during the
prior calendar quarter, to the extent reasonably necessary for calculation
of royalties payable hereunder, and, if applicable, additional information
sufficient to determine the royalties payable for units which are subject
to royalty percentages.
(c) All reports required under this paragraph will be certified to be complete
and accurate by an officer of Licensee.
(d) All information contained in any reports furnished under this paragraph
shall be held in confidence by ITC.
11 Audits.
(a) Licensee shall keep books and records adequate to accurately determine the
payments due under this Agreement. The books and records must be retained
for five (5) years after the delivery of the royalty report to which they
relate. ITC shall have the right, no more than once per calendar year, to
have an independent certified public accountant, who shall enter into an
appropriate
____________
** Material has been omitted and filed separately with the Commission.
11
nondisclosure agreement with Licensee, inspect all relevant books and
records of Licensee on seven (7) business days notice and during regular
business hours to verify the reports and payments required to be made
hereunder. The auditor shall disclose to ITC no more information than is
reasonably necessary to determine any royalties owed hereunder. Should an
underpayment in excess of [**] percent ([**]%) be discovered, Licensee
shall pay the cost of the audit. In any event, Licensee shall promptly pay
any underpayment together with interest at the annual rate of [**] percent
([**]%). All information obtained through such audit shall be held in
confidence by ITC.
(b) Licensee shall have the right, no more than once per calendar year, to have
a mutually acceptable independent certified public account, who shall enter
into an appropriate nondisclosure agreement with ITC, inspect all relevant
agreements, books and records, agreements, judgements, litigation
settlements, arbitration awards and the like, relating to the Licensed
Patents on seven (7) business days notice and during regular-business hours
to verify the most favored licensee status of Licensee, taking into account
the economic value of all relevant factors. The auditor shall disclose to
Licensee no more information than is reasonably necessary for Licensee to
verify its most-favored licensee status, and except in those extraordinary
circumstances where the identity of a third party to an agreement or
adjudication with ITC is essential information for the purposes of
evaluating such agreement or adjudication, the auditor shall not disclose
the identity of any such third party to Licensee. All information obtained
through such audit shall be held in confidence by Licensee.
12 No Set Off. Licensee agrees and acknowledges that it has no right to, and
shall not, attempt to set off amounts claimed to be owed based on any claim
that it has or may have in the future against IDC or its Affiliates other
than ITC, against amounts owed hereunder.
13 License Grant to IDC. Licensee hereby grants to IDC a worldwide, royalty
free, paid-up, perpetual license under patents owned by it and its
Affiliates, such license authorizing ITC and IDC to manufacture, use or
sell any digital wireless telecommunications products based on the existing
UltraPhone product line (including improvements thereof) manufactured and
designed by or for IDC which are first offered for sale prior to one year
from the Effective Date.
14 Additional Patent Licenses. With respect to any patents relating to digital
wireless telephone systems owned by either party, or either party's
Affiliates, which patents are not otherwise licensed hereunder, the owning
party agrees to negotiate a reasonable license to make, have made, use,
sell, lease and/or otherwise distribute Subscriber Units and Infrastructure
Equipment on reasonable terms and conditions, taking into consideration the
nature of the patent and the overall importance of the patent to the
product. If no agreement can be reached on the nature of such terms, any
dispute will be resolved under the dispute resolution procedures of this
Agreement.
15 License Term. The term of this Agreement shall commence on the Effective
Date and terminate upon the last-to-expire of the Licensed Patents
applicable to
____________
** Material has been omitted and filed separately with the Commission.
12
any Covered Standard, unless sooner terminated as provided herein.
16 Patent Marking. All Licensee Covered Subscriber Units intended for sale
within the United States shall include a statement that they are licensed
under U.S. Patents, including up to five patent numbers to be provided by
ITC; provided that ITC shall represent and warrant that such patents cover
such products and that all of its other licensees in the United States are
also required to xxxx their corresponding products with such patent
numbers.
17 Termination.
(a) This Agreement may be canceled by either party, upon forty-five (45) days'
prior written notice, if the other party is in breach of any of its
material obligations hereunder and the breach is not remedied within the
notice period. In the event that the other party submits the underlying
dispute to the dispute resolution procedures of this Agreement, the
termination shall be held in abeyance until such procedures are completed,
and shall only take effect if said procedures result in a determination
that the other party is in material breach. In such event, the other party
shall be given forty-five (45) days after such determination to remedy such
breach, with the termination to take effect only if the breach has not been
remedied during said period.
(b) This Agreement may be terminated without cause by Licensee upon written
notice to ITC on thirty (30) days prior written notice, or at any time
after the expiration, unenforceability, or invalidation of all of the
Licensed Patents; provided, however, upon such termination, ITC shall have
the right to take any action that it deems appropriate to collect royalties
on products manufactured by Licensee after the termination and/or
manufactured by Licensee before termination, but for which royalties due
hereunder were not paid, which it believes are covered by the Licensed
Patents.
18 Dispute Resolution.
(a) Negotiation of Disputes. In the event of any dispute arising under this
Agreement (including, without limitation, failure of the parties to agree
on royalty rates, number of Licensee's products covered by the prepaid
royalties, royalty reductions for patent invalidity, non-coverage,
unenforceability or expiration or most favored license provisions, or other
matters concerning royalty rates), senior executives of the parties with
decision making authority will meet in Wilmington, DE, Tokyo, Japan or such
other city as may be agreeable to the parties as soon as reasonably
possible (but no later than sixty (60) days after notice) and will enter
into good faith negotiations aimed at resolving the dispute. If they are
unable to resolve the dispute in a mutually satisfactory manner within an
additional sixty (60) days, the matter may be submitted to mediation and
arbitration as provided for below.
(b) Mediation of Disputes. The parties agree to submit any unresolved dispute
to a sole mediator selected by the parties as soon as reasonably possible
but no later than sixty (60) days after notice). Any such mediation shall
be non-binding. If not thus resolved, the parties will proceed as specified
in subparagraph (c).
(c) Arbitration. Any disputes arising under this Agreement which are not
resolved as
13
provide for in subparagraphs 18(a) and (b) shall be submitted to an
arbitration proceeding which shall take place in Washington, D.C. The
proceeding shall be conducted under the then prevailing rules for
commercial arbitration (or, if the matter involves issues of patent
validity, infringement or enforceability, the patent arbitration rules) of
the American Arbitration Association, by a panel of three (3) arbitrators
reasonably acceptable to both of the parties, one of whom must have
substantial experience in the field of telecommunications. The arbitrators
shall have the authority to permit limited discovery to the extent required
by a party in order to establish its position. The decision of the
arbitrators shall be final and binding and may be entered and enforced in
any court of competent jurisdiction. Any monetary award shall be payable in
U.S. dollars, free of any tax, offset or other deduction. Any determination
of the arbitration shall be confidential to the parties hereto and binding
solely on the parties hereto. The parties, their counsel, and the
arbitrators shall take all reasonable steps to conclude the arbitration
within six (6) months after it is instituted.
19 Miscellaneous.
(a) Notices. All notices or other communications required or permitted under
this Agreement shall be in writing and shall be delivered by personal
delivery, registered mail, return receipt requested, or a qualified "Next
Day Air" delivery service addressed as follows:
If to ITC: InterDigital Technology Corporation
[**]
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: President
If to Licensee: NEC Corporation
[**] Japan
Attention: [**]
(b) ITC warrants that it owns the patents and patent applications identified in
Appendix B hereto and that such patent and applications include all those
of ITC and its Affiliates concerning Covered Subscriber Units or Covered
Infrastructure Units, that by Agreement with IDC, ITC will own all patents
and patent application filed on or before February 28, 2002 for inventions
made by IDC and its Affiliates and that it has the right to grant this
license to the Licensed Patents. IDC shall confirm to Licensee in writing
its agreement to assign all such patents and patent application to ITC.
(c) Nothing in this Agreement shall be construed as:
(i) Requiring the maintenance of the Licensed Patents;
(ii) A warranty as to the validity or scope of the Licensed Patents;
(iii) A warranty or representation that any product will be free from
infringement of patents of third parties;
____________
** Material has been omitted and filed separately with the Commission.
14
(iv) An agreement to bring or prosecute actions against third party
infringers of the Licensed Patents;
(v) Conferring any license or right under any patent other than the
Licensed Patents; or
(vi) Conferring any right to use the Licensed Patents outside the field
of use defined by the license grant of Paragraph 2.
(d) This Agreement is personal to Licensee and may not be assigned or
transferred, nor may any license granted hereunder be assigned or
transferred, whether by operation of law or otherwise, and any attempt to
make any such assignment or transfer shall be null and void; provided,
however, this Agreement may be transferred in connection with the sale of
all or substantially all of the business or assets of Licensee to which
this Agreement relates. The license granted hereunder to Licensee shall
survive any transfer by operation of law or otherwise of the Licensed
Patents or otherwise of the Licensed Patents or this Agreement by ITC.
(e) Licensee and ITC agree to hold in confidence and not to disclose, except
under a requirement of confidentiality or an appropriate protective order,
any of the terms of this Agreement, except as required by law or government
regulation, or except to the party's outside counsel. The press release
attached as Appendix C shall be issued by ITC on or after the Effective
Date, but not before the ratification of this Agreement by Licensee's Board
of Directors; provided that ITC shall first provide to Licensee an opinion
of counsel that disclosure of the amount of the prepaid royalty under
Paragraph 5 is required by U.S. securities laws. The per-unit royalties
pursuant to Paragraph 5 will not be disclosed. Such press release, when and
if issued, and shall be the basis for any further disclosures concerning
this Agreement by IDC.
(f) The validity and interpretation of this Agreement shall be governed by
Delaware law, without regard to conflict of laws principles and the parties
submit to the jurisdiction of the state and federal courts of the State of
Delaware solely for the purpose of enforcing the dispute resolution clause
set forth in Paragraph 18. Process may be served on either party by U.S.
Mail, postage prepaid, or by a recognized "Next Day Air" service.
(g) This Agreement contains the complete and final agreement between the
parties, and supersedes all previous understandings relating to the subject
matter hereof whether oral or written. This Agreement may only be modified
by a written agreement signed by duly authorized representatives of the
parties.
15
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives.
INTERDIGITAL TECHNOLOGY NEC CORPORATION
CORPORATION
By: By: /s/[**]
------------------------------
General Manager
Title: Title: Mobile Communications Division
------------------------------
Dated: 5/2/95 Dated: 5/8/95
------------------------- ------------------------------
ATTEST:
By: /s/ [**]
------------------------------
[**]
Mobile Communications
Title: Systems Division
------------------------------
Dated: 5/8/95
------------------------------
____________
** Material has been omitted and filed separately with the Commission.
16
Index of Appendices
Appendix A - NEC Corporate Sales Projections
Appendix B - ITC Patents
17
