AMENDMENT NO. 2 TO PATENT LICENSE AND ASSIGNMENT AGREEMENT
Exhibit 10.1
This Amendment No. 2 to Patent License and Assignment Agreement (“Amendment No. 2”) is entered
into as of March 12, 2008 (the “Second Amendment Effective Date”) by and between Science
Applications International Corporation (“SAIC”), a Delaware corporation, and VirnetX Inc.
(“VirnetX”), a Delaware corporation, herein individually referred to as a “Party” and collectively
referred to as the “Parties.”
RECITALS
WHEREAS, the Parties entered into a Patent License and Assignment Agreement dated as of August
12, 2005 (“Original Agreement”);
WHEREAS, the Parties entered into an Amendment No. 1 to Patent License and Assignment
Agreement dated as of November 2, 2006 (“Amendment No. 1”);
WHEREAS, by operation of Amendment No. 1, SAIC conveyed all right, title, and interest in the
SAIC Patents Rights (defined in Section 1.36 and Recital No. 1 of the Original Agreement) to
VirnetX;
WHEREAS, by operation of Amendment No. 1 and Section 4.2 of the Original Agreement, VirnetX
conveyed back to SAIC an exclusive, royalty free, fully paid, perpetual, worldwide, irrevocable,
sublicensable and transferable right and license under the SAIC Patent Rights outside the Field of
Use (defined in Section 1.10 of the Original Agreement);
WHEREAS, subsequent to the Original Agreement and Amendment No. 1, VirnetX has sued Microsoft
Corporation (“Microsoft”) alleging infringement of three patents included within the SAIC Patent
Rights;
WHEREAS, Microsoft has indicated that it intends to argue that SAIC is an indispensable party
to VirnetX’s lawsuit against Microsoft;
WHEREAS, the law governing indispensable parties in patent infringement actions has continued
to develop and has been clarified since the Parties’ entered the Original Agreement and Amendment
No. 1;
WHEREAS, the Parties believed as of November 2, 2006 that together the Original Agreement and
Amendment No. 1 conveyed all substantial rights in the SAIC Patent Rights to VirnetX and continue
to so believe;
WHEREAS, the Parties wish to avoid time consuming, expensive and unnecessary litigation
regarding VirnetX’s standing to xxx Microsoft for infringement of the three asserted patents;
WHEREAS, SAIC is willing for good and valuable consideration to relinquish its exclusive
license to practice the SAIC Patent Rights outside the Field of Use;
WHEREAS, VirnetX is willing to convey to SAIC a non-exclusive, royalty free, fully paid,
perpetual, worldwide, irrevocable, sublicensable and transferable license under the SAIC Patent
Rights outside the Field of Use; and
WHEREAS, the Parties wish to enter this Amendment No. 2 in order to amend certain provisions
of the Original Agreement and of Amendment No. 1 to facilitate VirnetX’s enforcement of the SAIC
Patent Rights against Microsoft.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and
valuable consideration the receipt and sufficiency of which is hereby acknowledged, the Parties
agree to amend the Original Agreement and Amendment No. 1 as follows:
1. Definitions. Unless otherwise defined herein, terms used in this Amendment No. 2
shall have the meanings given them in the Original Agreement and Amendment No. 1. Terms not
defined by the Parties in the Original Agreement, Amendment No. 1 or in this Amendment No. 2, shall
have their plain and ordinary meaning.
2. SAIC Relinquishment Of Its Exclusive License To Practice The SAIC Patent Rights Outside
The Field Of Use. Effective upon the execution of Amendment No. 2 by the Parties, SAIC hereby
relinquishes the exclusive grant back license provided to it by VirnetX pursuant to Section 4.2 of
the Original Agreement and Section 2 of Amendment No. 1, as well as any right to obtain such
exclusive license in the future. In addition, SAIC confirms that VirnetX has the sole and
exclusive right to enforce the SAIC Patent Rights outside the Field of Use for past, present and
future infringement, including, without limitation, the right to xxx for injunction, damages and
otherwise, and the right to collect damages and fees.
3. VirnetX Grant Of A Non-Exclusive License To SAIC To Practice The SAIC Patent Rights
Outside The Field Of Use. Effective upon the execution of Amendment No. 2 by the Parties, in
consideration of the additional exclusive rights obtained by VirnetX from SAIC to practice and
license the SAIC Patent Rights outside the Field of Use, VirnetX hereby grants SAIC a nonexclusive,
royalty free, fully paid, perpetual, worldwide, irrevocable, sublicensable and transferable right
and license under the SAIC Patent Rights outside the Field of Use permitting SAIC and its assignees
to make, have made, import, use, offer for sale, and sell products and services covered by, and to
make improvements to, the SAIC Patent Rights outside the Field of Use.
4. Further Consideration For SAIC’s Transfer Of License Rights Outside The Field Of
Use. In further consideration of the additional rights obtained by VirnetX from SAIC to
practice and license the SAIC Patent Rights outside the Field of Use, subject to Section 6 below,
Section 7.1 of the Original Agreement is hereby amended and restated as follows:
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VirnetX shall pay
SAIC royalties in the amount of (i) fifteen percent (15%) of all non-license Revenues (as defined
in the Original Agreement, but as used throughout this Amendment No. 2, such term shall expressly
not include any M&A Entities Recovery, Other Entities Recovery or Acquisition Proceeds (each as
defined in Amendment No. 1)) generated by VirnetX in practicing the SAIC Patent Rights in the Field
of Use, (ii) fifteen percent (15%) of all license Revenues received by VirnetX pursuant to a
license that VirnetX grants in the Field of Use, (iii) fifteen percent (15%) of all non-license
Revenues generated by VirnetX in practicing the SAIC Patent Rights outside the Field of Use, and
(iv) fifty percent (50%) of all license Revenues received by VirnetX pursuant to a license that
VirnetX grants outside the Field of Use. For clarity, in the case of a license that grants rights
both inside and outside the Field of Use, VirnetX shall make a good faith apportionment of the
license Revenues between payments received for activities within the Field of Use and activities
outside the Field of Use and pay the applicable royalty rate on such apportioned Revenues. In
addition, in the case of bundled fees received by VirnetX allocable to both non-license Revenues
generated by VirnetX in practicing the SAIC Patent Rights and license Revenues received by VirnetX
pursuant to a license that VirnetX grants, VirnetX shall make a good faith apportionment of the
non-license and license Revenues and pay the applicable royalty with respect to such apportioned
Revenues. Notwithstanding the foregoing, VirnetX shall not be obligated to pay any additional
amounts pursuant to clauses (i) or (ii) above once the aggregate payments by VirnetX to SAIC are
equal to the Maximum Amount (as defined in the Original Agreement); provided that royalty payments
due SAIC pursuant to clauses (iii) and (iv) above shall not be included for purposes of determining
whether the Minimum Royalty of Section 7.2 of the Original Agreement or whether the Maximum Amount
of Section 7.3 of the Original Agreement have been satisfied, and shall not be subject to any
minimum or maximum payments, but shall be subject to the payment, reporting and audit requirements
of Sections 7.4, 7.5 and 7.6 of the Original Agreement.
5. Enforcement Of The SAIC Patent Rights. Notwithstanding anything else in the
Original Agreement or Amendment No. 1 to the contrary, from and after the Second Amendment
Effective Date, VirnetX shall have the sole right to enforce the SAIC Patent Rights both inside and
outside the Field of Use. VirnetX shall take commercially reasonable steps to enforce the SAIC
Patent Rights and to protect SAIC’s interest in receiving the bargained-for consideration. VirnetX
shall have no obligation to practice the SAIC Patent Rights outside the Field of Use or to seek
licensees of the SAIC Patent Rights outside the Field of Use, but VirnetX shall be obligated to use
commercially reasonable efforts to prevent infringement of the SAIC Patent Rights outside the Field
of Use.
6. Allocation Of Certain Proceeds. Notwithstanding anything else herein to the
contrary, allocation between VirnetX and SAIC of any M&A Entities Recovery, any Other Entities
Recovery and any Acquisition Proceeds shall be governed exclusively by Sections 4, 5, 6 and 7 of
Amendment No. 1.
7. Arbitration Of Disputes Regarding VirnetX’s Payment Obligations. Any disputes
between VirnetX and SAIC regarding any claim, controversy or dispute arising under or related to
this Amendment No. 2 shall be addressed and resolved in accordance with Section 13 of the Original
Agreement. VirnetX and SAIC agree that Section 13 of the Original Agreement
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may be used to seek
specific performance of VirnetX’s obligation to use commercially reasonable effort to prevent
infringement of the SAIC Patent Rights outside the Field of Use.
8. SAIC Review Rights. Notwithstanding anything else in the Original Agreement or
Amendment No. 1 to the contrary, VirnetX shall give SAIC reasonable notice in accordance with
Section 16.1 of the Original Agreement of any proposed license or assignment of the SAIC Patent
Rights (other than to a VirnetX subsidiary as provided in Section 14.3 of the Original Agreement)
and any proposed settlement of an action to enforce the SAIC Patent Rights. SAIC may object to the
proposed license, assignment or settlement solely on the ground that it unreasonably diminishes the
bargained-for consideration agreed by the parties, and SAIC may so object within three business
days of receiving notice in accordance with Section 16.1 of the Original Agreement. VirnetX may
request SAIC’s consent to any proposed license, assignment or settlement and such consent shall not
be unreasonably withheld.
9. Modification Of Sections 1.31 And 12 Of The Original Agreement. VirnetX and SAIC
agree to the following modifications of the Original Agreement.
| a. | Subsection (iii) of Section 1.31 is deleted. | ||
| b. | Section 12.2.1 is deleted. | ||
| c. | Section 12.2.2 is deleted. | ||
| d. | Section 12.2.5 is deleted. | ||
| e. | Section 12.2.6 is deleted. | ||
| f. | Section 12.2.8 is deleted. | ||
| g. | Section 12.2.9 is deleted. |
10. SAIC Security Interest In The SAIC Patent Rights. The Security Agreement dated
August 12, 2005 between VirnetX and SAIC remains in effect and continues to apply with full force
and effect to the SAIC Patent Rights.
11. No Other Changes. Except as expressly modified hereby, the Original Agreement and
Amendment No. 1 remain in full force and effect.
12. Miscellaneous Provisions.
(a) Entire Agreement. This Amendment No. 2 constitutes the Parties’ entire agreement
and understanding with respect to modification of the Original Agreement and
Amendment No. 1, supersedes and replaces any and all prior or contemporaneous proposals,
agreements, understandings, commitments or representations of any kind, whether written or oral,
relating to the Parties’ modification of the Original Agreement and Amendment No. 1.
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(b) Conflicting Provisions. This Amendment Xx. 0, Xxxxxxxxx Xx. 0 and the Original
Agreement are intended to be read and construed in harmony with each other except as expressly
provided. In the event that any provision of the Original Agreement or Amendment No. 1 conflicts
with this Amendment No. 2, then this Amendment No. 2 shall be deemed to control, and such
conflicting provision, to the extent it conflicts, shall be deemed removed and replaced with the
governing provision herein.
(c) Multiple Copies Or Counterparts Of This Agreement. This Amendment No. 2 may be
executed in one or more counterparts, each of which will be deemed an original, but all of which
together constitute one and the same instrument and is binding upon the Parties. This Amendment
No. 2 shall not be effective until the execution and delivery between the Parties of at least one
complete set of the counterparts.
(d) Governing Law. This Amendment No. 2 shall be governed by and construed in
accordance with the laws of the State of California in all respects without giving effect to the
principles of conflicts of law thereof.
(e) Remaining Miscellaneous Provisions and Disputes. The Parties agree that the
remaining Miscellaneous Provisions of the Original Agreement shall be applicable to this Amendment
No. 2 and are hereby incorporated by reference herein as if restated in their entirety herein with
references to the “Agreement” amended to mean this Amendment No. 2. The Parties further agree, to
the extent necessary, Section 13 (Disputes) of the Original Agreement shall be applicable to this
Amendment No. 2 and is hereby incorporated by reference herein as if restated in its entirety
herein with references to the “Agreement” amended to mean this Amendment No. 2.
IN WITNESS WHEREOF, the Parties have executed this Amendment No. 2 as of the Second Amendment
Effective Date.
| VIRNETX INC. |
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| By: | /s/ Xxxxxxx Xxxxxx | |||
| Name: | Xxxxxxx Xxxxxx | |||
| Title: | President & CEO | |||
| SCIENCE APPLICATIONS INTERNATIONAL CORPORATION |
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| By: | /s/ Xxxxxx X. Xxxxxx | |||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Technology Commercialization | |||
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