EXHIBIT 10.2
Patent License Agreement for the Use of AC-3 Technology in the
Manufacture of DVD-Video Discs dated August 9, 2002, between
Koninklijke Philips Electronics N.V. and Metatec
International, Inc.
This Agreement is entered into this 9th day of August, 2002 by and between
KONINKLIJKE PHILIPS ELECTRONICS N.V., having its registered offices in
Eindhoven, The Netherlands, (hereinafter referred to as "Philips")
and
METATEC INTERNATIONAL, INC., having its registered office in 0000 Xxxxxxx Xxxx.,
Xxxxxx, Xxxx 00000 (hereinafter referred to as "Licensee")
WHEREAS, Licensee is engaged in the manufacture of DVD-Video Discs and, in the
process of such manufacture, is making use of the technology developed by Dolby
Laboratories Inc. and known as AC-3;
WHEREAS, Philips, Institut fur Rundfunk Technik G.m.b.H. of Munchen, Germany,
(IRT) and France Telecom R&D of Issy Les Moulineaux, France (France Telecom) own
certain patents relating to the AC-3 technology, these patents (hereinafter
referred to as "Licensed Patents") are listed in Exhibit I hereto;
WHEREAS, Philips has been authorized by IRT and France Telecom to grant licenses
for the use of the Licensed Patents in connection with the manufacture of
DVD-Video Discs making use of the AC-3 technology, while IRT and France Telecom
each retain the right also to license their respective patents relating to the
AC-3 technology separately so that interested manufacturers may opt to take out
individual licenses under the relevant patents of Philips, IRT and France
Telecom instead of a combined license;
WHEREAS, Licensee has requested from Philips a license under the Licensed
Patents in connection with the manufacture of DVD-Video Discs making use of AC-3
and Philips is willing to grant such license on the conditions set forth herein;
IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE 1 - DEFINITIONS
-----------------------
1.01 "DISC" shall mean a non-recordable reflective disc-shaped information
carrier comprising any kind of information including, but not limited
to, audio, video, text and/or data related information, which is
irreversibly stored in one or more layers during and as an integral
part of the manufacturing process of the disc in a form which is
optically readable by playback devices using a laser-beam.
1.02 "PLAYER" shall mean a playback device for optically reading information
stored on a Disc and converting such information into electrical
signals for reproduction purposes.
1.03 "DVD-VIDEO DISC" shall mean a replicated Disc comprising any kind of
information including, but not limited to, audio, video, text, and/or
data related information, encoded in digital form, which is optically
readable by a DVD-Video Player (as hereinafter defined).
1.04 "DVD-VIDEO PLAYER" shall mean a Player capable of reproducing
information stored on a DVD-Video Disc and converting such information
into electrical signals, in accordance with the DVD-Video and DVD-ROM
Standard Specifications (as hereinafter defined), which electrical
signals are directly capable and intended to be used for visual
reproduction through standard television receivers and/or video
monitors.
1.05 "DVD-VIDEO AND DVD-ROM STANDARD SPECIFICATIONS" shall mean the
specifications for the DVD Systems, as specified in the document "DVD
Specifications for Read-Only Disc, version 1.0 (parts 1, 2 and 3)" of
August 1996, or any updated version thereof, as issued by the DVD
Format/Logo Licensing Corporation.
1.06 "LICENSED PRODUCT(S)" shall mean DVD-Video Discs incorporating the AC-3
technology, manufactured and/or sold in accordance with the provisions
hereof, which have been duly reported and on which the royalties due
hereunder are paid in accordance with the provisions of this Agreement.
1.07 "LICENSED PATENTS" shall mean the patents as listed in Exhibit I
hereto.
The term "ESSENTIAL" as used in relation to patents in this Agreement
shall refer to patents, the use of which is necessary (either directly
or as a practical matter) for the use of the AC-3 technology in
connection with the Licensed Products.
Philips will commission an independent patent expert to review the
European, Japanese and US patents listed as essential in Exhibit I in
order to confirm the essentiality of such patents. In the event that
said independent expert would find that any of the patents would not
qualify as essential as defined in this Agreement, Philips shall delete
such patent (as well as the equivalent national patents) from the
relevant Exhibit and such patent will be put on the relevant Exhibit of
non-essential patents. Any such finding and deletion however, shall not
affect the obligation of Licensee to pay the royalty on each Licensed
Product as specified in Article 3.01, provided that, in the event that
none of the Licensed Patents would be infringed by the manufacture of
Licensed Products within the Territory, Licensee shall have no
obligation to pay royalties in respect of Licensed Products
manufactured within the Territory and which are directly sold for final
use within the Territory or directly exported for final use to a
country in which no Licensed Patents subsist. Notwithstanding such
deletion, Licensee shall retain the right to continue the use of such
deleted patent(s) in accordance with this Agreement, without any
additional payment, unless Licensee explicitly notifies Philips in
writing of its decision to waive such right.
In the event that Philips or IRT or France Telecom (or any of their
Associated Companies, as hereinafter defined) would have additional
patents (other than patents acquired from third parties after the date
of January 1, 1997) in its patent portfolio which are essential to the
manufacture, sale or other disposal of Licensed Products and which have
a filing date or are entitled to a so-called priority date prior to
January 1, 1997, but which have not been listed as essential patents in
the Exhibit hereto, Philips will notify Licensee accordingly and such
additional patents will be added to the Licensed Patents. Any patents
as may be added as
essential patents to the Exhibit, will similarly be subject to the
review by the independent patent expert in accordance with the
preceding paragraph.
The patent lists provided to Licensee upon execution of the Agreement
are subject to change in accordance with the provisions of this
Agreement. With regard to the rights granted to Licensee hereunder, the
patent lists published by Philips on its website
(xxx.xxxxxxxxx.xxxxxxx.xxx) or otherwise communicated by Philips to
Licensee after the date of execution hereof shall prevail over the
lists provided to Licensee upon execution of this Agreement.
1.08 "Associated Company" shall mean any one or more business entities (1)
owned or controlled by Philips, IRT, France Telecom or Licensee, (2)
owning or controlling Philips, IRT, France Telecom or Licensee, or (3)
owned or controlled by the business entity owning or controlling
Philips, IRT, France Telecom or Licensee at the material time. For the
purposes of this definition a business entity shall be deemed to own
and/or to control another business entity if more than 50% (fifty per
cent) of the voting stock of the latter business entity, ordinarily
entitled to vote in the election of directors, (or, if there is no such
stock, more than 50% (fifty per cent) of the ownership of or control in
the latter business entity) is held by the owning and/or controlling
business entity.
1.09 "Territory" shall mean the geographic area known as the United States
of America, its territories and possessions.
ARTICLE 2 - GRANT OF RIGHTS
---------------------------
2.01 For the term of this Agreement, Philips hereby grants to Licensee a
non-exclusive, non-transferable license under the Licensed Patents to
use the AC-3 technology in the manufacture of Licensed Products within
the Territory and to sell or otherwise dispose of Licensed Products so
manufactured in all countries of the world.
2.02 In consideration of the undertakings set forth in Articles 2.01, 202
and 2.04 and similar undertakings by third party licensees of Philips
and without prejudice of the provisions of Article 5, for a period of
ten years from the Effective Date (as hereinafter defined) Licensee
agrees to grant to Philips, IRT, France Telecom and their respective
Associated Companies in respect of the use of the AC-3 technology in
the manufacture of DVD-Video Discs, non-exclusive, non-transferable
licenses, on reasonable, non-discriminatory conditions comparable to
those set forth herein, to use the AC-3 technology in the manufacture
of DVD-Video Discs and to sell or otherwise dispose of DVD-Video Discs,
under any and all present and future patents, for which Licensee or its
Associated Companies have or may hereafter acquire the right to grant
licenses and which are essential to the use of AC-3 technology in the
manufacture of DVD-Video Discs and the subsequent sale or other
disposal thereof, and which patents were first filed in any country of
the world prior to the date of termination of this Agreement.
2.03 Philips undertakes that it will offer, at the request of any of
Licensee's Associated Companies, which has concluded a DVD Video Disc
and DVD ROM Disc Patent License Agreement, to any such Associated
Company, a non-exclusive and non- transferable license under the
Licensed Patents to use the AC-3 technology in the manufacture of
DVD-Video Discs on reasonable and non-discriminatory conditions
comparable to those set forth herein, to manufacture, sell or otherwise
dispose of DVD-Video Discs incorporating the
AC-3 technology.
In consideration of Philips' undertaking as set out in the preceding
paragraph, Licensee undertakes that all of its Associated Companies
which have or may hereafter acquire patents essential to the
manufacture, sale or other disposal of DVD-Video Discs incorporating
the AC-3 technology and which patents were first filed in any country
of the world prior to the date of termination of this Agreement, shall
make available licenses under such patents, on reasonable,
non-discriminatory conditions comparable to those set forth herein to
Philips, any of Philips' Associated Companies and to other third
parties who have entered or will enter into a license agreement with
Philips or an Associated Company of Philips in respect of DVD-Video
Discs incorporating the AC-3 technology.
ARTICLE 3 - ROYALTIES, REPORTS AND PAYMENTS
-------------------------------------------
3.01 In consideration of the rights granted hereunder by Philips to
Licensee, Licensee agrees to pay to Philips a royalty of US$ 0.003
(three tenths of a US dollar cent) on each Licensed Product sold by
Licensee, in which any one or more of the Licensed Patent(s) is (are)
used, irrespective of whether such Licensed Patent(s) is (are) used in
the country of manufacture, sale or other disposal.
A Licensed Product shall be considered sold when invoiced or, if not
invoiced, when delivered to a party other than Licensee.
For the avoidance of doubt, in the event the manufacture by Licensee of
Licensed Products within the Territory would not infringe any of the
Licensed Patents, Licensee shall have no obligation to pay the
royalties due on the basis of this Agreement in respect of Licensed
Products manufactured within the Territory and which are directly sold
for final use within the Territory or directly exported for final use
to a country in which no Licensed Patents subsist.
3.02 Within 30 days following 31 March, 30 June, 30 September and 31
December of each year during the term of this Agreement, Licensee shall
submit to Philips (even in the event that no sales have been made) a
written statement, signed by a duly authorized officer on behalf of
Licensee, setting forth with respect to the preceding quarterly period:
(1) the quantities of DVD-Video Discs incorporating the AC-3
technology manufactured by Licensee;
(2) a computation of the royalties due under this Agreement.
Licensee shall pay the royalties due to Philips within 30 days after
the end of each quarterly period, in US Dollars.
Licensee shall submit to Philips, once per calendar year, an audit
statement by its external auditors, who shall be public certified
auditors, confirming that the quarterly royalty statements as submitted
by Licensee to Philips for the last four quarterly periods, are true,
complete and accurate in every respect. Such statement shall be
submitted within 90 days following the end of Licensee's financial
year.
3.03 Within 30 days following the expiration or termination of this
Agreement, Licensee shall submit to Philips a certified report on the
number of Licensed Products in stock at the time of
expiration or termination of this Agreement. Royalties, calculated in
accordance with Article 3.01, shall be due and payable on all Licensed
Products manufactured prior to, but remaining in stock with Licensee on
the date of expiration or termination of this Agreement. For the
avoidance of doubt, this Article 3.03 shall be without prejudice to the
provisions of Article 5.06.
3.04 Any payment under this Agreement which is not made on the date(s)
specified herein, shall accrue interest at the rate of 2% (two per
cent) per month (or part thereof) or the maximum amount permitted by
law, whichever is lower.
3.05 All payments to Philips under this Agreement shall be made by transfer
in such currency, convertible in the sense of Articles VIII and XIX of
the Articles of Agreement of the International Monetary Fund, as
designated by Philips. The rate of exchange for converting the currency
of the Territory shall be the telegraphic transfer selling rate of the
designated currency as officially quoted in the Territory by the
officially authorized foreign exchange bank for payment of currency
transactions on the day that the amount is due and payable.
3.06 All costs, stamp duties, taxes and other similar levies arising from or
in connection with the conclusion of this Agreement shall be borne by
Licensee. However, in the event that the government of a country
imposes any income taxes on payments made by Licensee to Philips
hereunder and requires Licensee to withhold such tax from such
payments, Licensee may deduct such tax from such payments. In such
event, Licensee shall promptly provide Philips with tax receipts issued
by the relevant tax authorities so as to enable Philips to support a
claim for credit against income taxes which may be payable by Philips
and/or its Associated Companies in The Netherlands and to enable
Philips to document, if necessary, its compliance with tax obligations
in any jurisdiction outside The Netherlands.
3.07 In order that the royalty statements provided for in this Article 3 may
be verified, Licensee shall keep complete and accurate books and
records and shall keep the books and records available for a period of
5 years following the manufacture, sale or other disposal of each
Licensed Product.
In order to verify the correctness of the aforementioned royalty
statements, Philips shall have the right to inspect the books and
records of Licensee from time to time. Any such inspection shall take
place no more than once per calendar year and shall be conducted by a
public certified auditor appointed by Philips. Philips shall give
Licensee written notice of such inspection at least 7 days prior to the
inspection. Licensee shall willingly co-operate and provide all such
assistance in connection with such inspection as Philips and/or the
auditor may require. The inspection shall be conducted at Philips' own
expense, provided that in the event that Licensee has failed to submit
royalty statements and/or yearly written statement(s) by its external
auditors, as provided for in Article 3.02, in respect of the period to
which the inspection relates or in the event that any discrepancy or
error exceeding 3% (three per cent) of the monies actually due is
established, the cost of the inspection shall be borne by Licensee,
without prejudice to any other claim or remedy as Philips may have
under this Agreement or under applicable law.
Philips' right of inspection as set out in this Article 3.07 shall
survive termination or expiration of this Agreement.
3.08 Without prejudice to the provisions of Article 3.07, Licensee shall
provide all relevant additional information as Philips may reasonably
request from time to time, so as to enable
Philips to ascertain which products manufactured, sold or otherwise
disposed of by Licensee are subject to the payment of royalties to
Philips hereunder, the patents which have been used in connection with
such products, and the amount of royalties payable.
3.09 As a condition precedent to the entry into force of this Agreement,
Licensee shall submit to Philips a royalty statement in respect of
DVD-Video Discs incorporating the AC-3 technology manufactured and sold
or otherwise disposed of by Licensee before the Effective Date of this
Agreement in accordance with the provisions of Article 3.02. Within 7
days following the execution of this Agreement, Licensee shall pay to
Philips the royalties on such DVD-Video Discs incorporating the AC-3
technology, calculated by applying the royalty rate of US$ 0.003 for
each such DVD-Video Disc incorporating the AC-3 technology. The royalty
statement shall similarly be subject to Philips' right of audit as set
out in Article 3.07. Within 45 days following the execution of this
Agreement, Licensee shall submit to Philips an audit statement by its
external auditors, who shall be public certified auditors, confirming
that this royalty statement is true, complete and accurate in every
respect.
ARTICLE 4 - NO WARRANTY AND INDEMNIFICATION
-------------------------------------------
4.01 It is acknowledged by Licensee that third parties may own industrial
and/or intellectual property rights in the field of the AC-3
technology. Licensee acknowledges and agrees that Philips, IRT and
France Telecom and their respective Associated Companies make no
warranty whatsoever that the use of the AC-3 technology or the
manufacture, sale or other disposal of any Licensed Product does not
infringe or will not cause infringement of any industrial and/or
intellectual property rights other than the Licensed Patents.
ARTICLE 5 - TERM AND TERMINATION
--------------------------------
5.01 This Agreement shall enter into force on the "Effective Date", being
the date first written above. In the event that validation of this
Agreement is required by the competent governmental authorities, the
Effective Date shall be the date of such validation. This Agreement
shall remain in force for a period of 10 years from the Effective Date,
unless terminated earlier in accordance with the provisions of this
Article 5.
5.02 Without prejudice to the provisions of Article 5.03 through 5.06, each
party may terminate this Agreement at any time by means of written
notice to the other party in the event that the other party fails to
perform any obligation under this Agreement and such failure is not
remedied within 30 days after receipt of a notice specifying the nature
of such failure and requiring it to be remedied. Such right of
termination shall not be exclusive of any other remedies or means of
redress to which the non-defaulting party may be lawfully entitled and
all such remedies shall be cumulative. Any such termination shall not
affect any royalties or other payment obligations under this Agreement
accrued prior to such termination.
5.03 Philips may terminate this Agreement forthwith by means of notice in
writing to Licensee in the event that a creditor or other claimant
takes possession of, or a receiver, administrator or similar officer is
appointed over any of the assets of Licensee or in the event that
Licensee makes any voluntary arrangement with its creditors or becomes
subject to any court or administration order pursuant to any bankruptcy
or insolvency law.
5.04 Additionally, insofar as legally permitted, Philips may terminate this
Agreement at any time by means of written notice to Licensee in case
Licensee or an Associated Company of Licensee has
been found liable by a competent court or administrative authority to
have committed a serious act of piracy with respect to copyrights of
third parties.
5.05 Philips shall have the right to terminate this Agreement forthwith or
to revoke the license granted under any of Philips', IRT's or France
Telecom's respective patents in the event that Licensee or any of its
Associated Companies brings a claim for infringement of any of its
patents essential for the use of the AC-3 technology in the manufacture
of DVD-Video Discs and/or the sale or other disposal thereof against
Philips, IRT or France Telecom and/or any of their respective
Associated Companies and Licensee refuses to license such patents on
fair and reasonable conditions to Philips, IRT and France Telecom
respectively.
5.06 Upon the termination of this Agreement by Philips for any reason
pursuant to Article 5.02 through 5.05, Licensee shall immediately cease
the manufacture, sale or other disposal of DVD-Video Discs
incorporating the AC-3 technology in which any one or more of the
Licensed Patents are used. Further, upon such termination, any and all
amounts outstanding hereunder shall become immediately due and payable.
5.07 All provisions of this Agreement which are intended to survive (whether
express or implied) the expiry or termination of this Agreement, shall
so survive.
ARTICLE 6 - MISCELLANEOUS
-------------------------
6.01 Any notice required under this Agreement to be sent by either party
shall be given in writing by means of a letter or facsimile directed:
in respect of Licensee, to:
Metatec International, Inc.
0000 Xxxxxxx Xxxx.,
Xxxxxx, Xxxx 00000
Fax: (000) 000-0000
in respect of Philips, to:
Koninklijke Philips Electronics N.V.
c/o Philips International B.V.
Intellectual Property & Standards - Legal Department
P.O. Box 80002, Building SFF-8
5600 JB Eindhoven
The Netherlands
Fax. x00 00 0000000
with a copy to:
U.S. Philips Corporation
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
or to such other address as may have been previously specified in
writing by either party to the other.
6.02 This Agreement sets forth the entire understanding and agreement
between the parties as to the subject matter hereof and supersedes and
replaces all prior arrangements, discussions and understandings between
the parties relating thereto. Neither party shall be bound by any
obligation, warranty, waiver, release or representation, except as
expressly provided herein, or as may subsequently be agreed in writing
between the parties.
6.03 Nothing contained in this Agreement shall be construed:
(a) as imposing on either party any obligation to instigate any
suit or action for infringement of any of the patents licensed
hereunder or to defend any suit or action brought by a third
party which challenges or relates to the validity of any of
such patents. Licensee shall have no right to instigate any
such suit or action for infringement of any of the patents
licensed by Philips hereunder, nor the right to defend any
such suit or action which challenges or relates to the
validity of any such patent licensed by Philips hereunder;
(b) as imposing any obligation to file any patent application or
to secure any patent or to maintain any patent in force;
(c) as conferring any license or right to copy or imitate the
appearance and/or design of any product of Philips, IRT,
France Telecom or any of their Associated Companies;
(d) as conferring any license to manufacture, use, sell or
otherwise dispose of any product or device other than a
Licensed Product.
6.04 Neither the failure nor the delay of either party to enforce any
provisions of this Agreement shall constitute a waiver of such
provision or of the right of either party to enforce each and every
provision of this Agreement.
6.05 Should any provision of this Agreement be finally determined void or
unenforceable in any judicial proceeding, such determination shall not
affect the operation of the remaining provisions hereof, provided that,
in such event, Philips shall have the right to terminate this Agreement
by written notice to Licensee.
6.06 This Agreement shall be governed by and construed in accordance with
the laws of The State of New York.
Any dispute between the parties hereto in connection with this
Agreement (including any question regarding its existence, validity or
termination) shall be submitted to any state or federal courts in The
State of New York, provided always that, in case Philips is the
plaintiff, Philips may at its sole discretion submit any such dispute
to either the state or federal courts in the venue of Licensee's
registered office, or to any of the state or federal courts in the
Territory having jurisdiction. Licensee hereby irrevocably waives any
objection to the jurisdiction, process and venue of any such court and
to the effectiveness, execution and enforcement of any order or
judgment (including, but not limited to, a default judgment) of any
such court in relation to this Agreement, to the maximum extent
permitted by the law of
any jurisdiction, the laws of which might be claimed to be applicable
regarding the effectiveness, enforcement or execution of such order or
judgment.
AS WITNESS, the parties hereto have caused this Agreement to be signed on the
date first written above.
KONINKLIJKE PHILIPS ELECTRONICS METATEC INTERNATIONAL, INC.
N.V.
/s/ B. Mache /s/ Xxxx X. Xxxxxxxx
------------------------------- -----------------------------
Name: Bernd Mache Name: Xxxx X. Xxxxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
------------------------- -----------------------
Date: August 13, 2002 Date: August 9, 2002
-------------------------- ------------------------
