EXHIBIT 10.52
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND SEPARATELY FILED
WITH THE COMMISSION.
AMENDMENT TO PATENT LICENSE AGREEMENT
THIS AMENDMENT TO THE PATENT LICENSE AGREEMENT dated May 8, 1995, is entered
into this 15th day of January 2002 ("Effective Date") between InterDigital
Technology Corporation ("ITC"), a Delaware corporation with a mailing address of
000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000, and NEC Corporation
("Licensee"), a company organized and existing under the laws of Japan, with a
mailing address of 7-1, Xxxxx 0-xxxxx, Xxxxxx-Xx, Xxxxx 000-0000, Xxxxx.
PREAMBLE
WHEREAS, ITC and Licensee are parties to an existing Patent License Agreement,
dated May 8, 1995, covering certain TDMA-based products manufactured and sold by
Licensee (the "Prior Agreement");
WHEREAS, a substantial dispute (the "Dispute") has arisen between Licensee and
ITC as to whether royalties are owed by Licensee for its sale in Japan of
Covered Infrastructure Equipment/1/ and Covered Subscriber Units compliant with
PHS and PDC Covered Standards;
WHEREAS, the parties have engaged in both a mediation and an arbitration dispute
resolution process pursuant to the Prior Agreement with respect to such dispute,
and are desirous of settling the dispute amicably;
WHEREAS, the parties have agreed upon a settlement of the dispute, wherein the
settlement provides:(i) for certain amendments to the Prior Agreement, the
principal amendment providing for certain payments to ITC in lump sum amounts in
exchange for a paid-up license for Covered Subscriber Units and Covered
Infrastructure Equipment compliant with PHS and PDC Covered Standards, and (ii)
for a new license agreement
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/1/ Capitalized terms undefined herein shall have the meaning ascribed to them
in the Prior Agreement.
involving Covered Subscriber Units and Covered Infrastructure Equipment
compliant with Narrowband CDMA and Third Generation (as defined in such new
agreement) ("3G Agreement"); and
WHEREAS, the lump sum amounts provided for under the settlement referenced
herein are based upon the existing rights and obligations of the parties under
the Prior Agreement, including without limitation the [**] provision of Section
7(g) of the Prior Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound, the parties agree as follows:
1. Paid Up License for PHS and PDC. Licensee irrevocably and
unconditionally agrees to pay to ITC the non-refundable lump sum
amount of $53,000,000. Payment of such amount shall be made on the
following installment basis by wire transfer to ITC's bank account to
be designated by ITC in advance:
. On or before April 10, 2002: $US 13,250,000
. On or before December 31, 2002 $US 13,250,000
. On or before April 10, 2003 $US 13,250,000
. On or before December 31, 2003 US$ 13,250,000
In consideration of such payment and in recognition of the fact that
the $26,939,280 was previously paid under the Prior Agreement, the
license granted under Section 2 of the Prior Agreement, with respect
to Covered Subscriber Units and Covered Infrastructure Equipment
compliant with PHS and/or PDC Covered Standards ("Covered PHS/PDC
Products"), shall be considered fully paid up and irrevocable and
shall survive any termination of the Prior Agreement; provided,
however, that the royalty obligation as regards
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any Covered PHS/PDC Products also compliant with Third Generation or
Narrowband CDMA (each as defined in the 3G Agreement) shall be
determined in accordance with the terms of the 3G Agreement. In
addition, with respect to any other Covered Subscriber Unit or Covered
Infrastructure Equipment also compliant with Third Generation or
Narrowband CDMA (e.g., GSM/FDD Covered Subscriber Unit), no royalty
shall be payable under the Prior Agreement for such other product, so
long as Licensee has paid, or is to pay, a royalty in accordance with
the terms of the 3G Agreement with respect to such other Covered
Subscriber Unit or Covered Infrastructure Equipment. Licensee may
deduct applicable Japanese source withholding taxes from the payments
hereunder, it being understood that both parties agree that the entire
amount of US$53,000,000 is subject to the Japanese source withholding
taxes. Licensee shall furnish ITC with the evidence that any such
withholding tax has been paid.
It is understood that if the Prior Agreement is substituted at
Licensee's election by another patent license agreement as a result of
the operation of the most favored licensee rights provisions of the
Prior Agreement, any royalty obligation under such substitute
agreement relating to Covered Subscriber Units and Covered
Infrastructure Equipment compliant with only PHS and PDC shall not
apply.
2. (Reserved).
3. Infrastructure. With regard to Infrastructure Equipment compliant with
GSM and IS-54/136, Licensee agrees to pay ITC a royalty of [**]% of
the Net Selling Price of each such sale, if any, of said
Infrastructure Equipment from May 8, 1995 through December 31, 2006.
Such royalty payments shall be made on each such sale, if any, by
Licensee or its Affiliates anywhere in the
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world, without regard to the provisions of Section 5(c) or Section 7
(other than Section 7(e)(iv)) of the Prior Agreement. Thereafter, any
royalty obligations with regard to such Infrastructure Equipment shall
be governed by the terms of the Prior Agreement.
4. Meaning of Paragraphs 5(c)(ii) and (iii) of Prior Agreement. The
parties agree that, as used in Paragraphs 5(c) (ii) and (iii) of the
Prior Agreement, the clause "but only if said counterpart contains
claims which do not differ materially from those of the [**] Patent"
shall in each occurrence, for the purpose of settlement, be hereafter
deemed to refer to substantial differences between the issued non-U.S.
patent claim(s), which issue from non-U.S. [**] patent applications
that share a common specification with the U.S. patent, and Licensee's
products compliant with a Covered Standard, such that infringement of
such non-U.S. claims cannot be found. The parties further agree that,
based on the audit conducted as part of the Dispute, Licensee has
correctly accounted for use of the pre-paid units, including the
application of credits under the [**] clause of the Prior Agreement,
and that such credits shall continue to be available to Licensee with
regard to its royalty obligations under the Prior Agreement.
5. Adjustment.
(1) If, after the Effective Date of this Amendment Agreement,
Licensee or its Affiliates acquires any entity which, prior to
such acquisition, sold PDC or PHS Covered Subscriber Units or
Covered Infrastructure Equipment without a license from ITC for
the Licensed Patents, then Licensee shall pay ITC royalties of
(i) $[**] for each PDC Covered Subscriber Unit and PHS Covered
Subscriber Unit, and (ii) [**]% of the Net Selling Price of PDC
or PHS Covered Infrastructure Equipment sold by such entity prior
to such acquisition by Licensee; provided, however, that if such
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acquisition occurs later than twelve (12) months after the
Effective Date of this Amendment, Licensee shall have the option,
to be exercised via written notice to ITC within sixty (60) days
of the completion date of such acquisition, to have such sales be
construed as unlicensed. In such situation, ITC shall have
recourse to seek damages and/or royalties from any entity,
including Licensee or its Affiliates, against whom legal action
may be brought. In addition, provided such entity, at the time of
being acquired by Licensee, had annual sales of PDC and/or PHS
Covered Subscriber Units in excess of [**] units, in the
aggregate, or had annual sales of PDC or PHS Covered
Infrastructure Equipment of [**] U.S Dollars ($US [**]), the
parties shall negotiate in good faith an equitable adjustment to
the lump sum amount provided in Article 1 herein for sales after
the date of the acquisition, provided that in lieu of adjustment
to the lump sum amount provided in Article 1 herein, Licensee
shall have the option to pay royalties to ITC at the royalty rates
provided for in (i) and (ii) above with respect to PDC or PHS
Covered Subscriber Units or Covered Infrastructure Equipment sold
by, or ascribed to, the acquired entity after the date of the
acquisition. Such negotiated adjustment amount will be based upon
the ratio of Licensee and its Affiliates' total sales of the PDC
and PHS Covered Subscriber Units and Covered Infrastructure
Equipment from the period January 1, 1995 through December 31,
2001 and the acquired entities sales of the PDC and PHS Covered
Subscriber Units and Covered Infrastructure Equipment over the
same period, less any royalties, if any, paid by Licensee for
sales by the acquired entity prior to the date of acquisition
pursuant to the first sentence of this Article 5. Any dispute as
to the adjustment amount owed shall be made subject to resolution
under the Dispute Resolution Procedures of the Prior Agreement.
The parties shall also negotiate such an adjustment amount if
Licensee acquires, over time, a number of
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entities, such that, in the aggregate, there existed annual sales
of at least [**] Covered Subscriber Units or [**] U.S Dollars
($[**] US) of Covered Infrastructure revenue at the time of being
acquired by Licensee. Sales by the acquired entities of non-PDC
and non-PHS Covered Subscriber Units and Covered Infrastructure
Equipment after the time of being acquired by Licensee, shall be
controlled by the Prior Agreement. For sales by the acquired
entities of non-PDC and non-PHS Covered Subscriber Units and
Covered Infrastructure Equipment prior to the time of being
acquired by Licensee, then Licensee shall pay ITC royalties of (i)
$[**]US for each non-PDC Covered Subscriber Unit and non-PHS
Covered Subscriber Unit, and (ii) [**]% of the Net Selling Price
of non-PDC or non-PHS Covered Infrastructure Equipment; provided,
however, that if such acquisition occurs later than twelve (12)
months after the Effective Date of this Amendment, Licensee shall
have the option, to be exercised via written notice sent to ITC
within sixty (60) days of the conclusion date of such acquisition,
to have such sales be construed as unlicensed.
(2) To the extent Licensee or its Affiliates acquires an entity
already licensed by ITC to the Licensed Patents, for the first
twelve (12) months after the acquisition, the royalty obligation
of such entity for royalty obligated sales volumes related to such
entity shall be defined in such other license agreement with ITC.
After the 12 month period, royalty obligations for all PDC and PHS
Covered Subscriber Units and Covered Infrastructure Equipment
sales made by, or ascribed to, the previously licensed acquired
entity shall be determined as set forth in paragraph (1) above (as
for unlicensed entities, either as an adjustment to the lump sum
or running royalties, at Licensee's option); and royalty
obligations for all non-PDC and non-PHS Covered Subscriber Units
and Covered Infrastructure Equipment sales made by, or ascribed
to, the previously licensed acquired
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entity after such acquisition shall be controlled by the terms of
the Prior Agreement.
(3) The above paragraphs (1) and (2) shall not apply in cases Licensee
or its Affiliates acquires Licensee or any entity which is already
Licensee's Affiliates at the time immediately prior to the
acquisition.
6. Confidentiality/Press Release. Unless otherwise required by law,
government regulations, stock exchange listing rules or court order,
the parties shall maintain as strictly confidential the royalty terms
of this Amendment Agreement and any proprietary information disclosed
under, or as a result of the negotiation of, this Amendment Agreement,
provided that each party may disclose in confidence the royalty terms
to (i) its outside counsel or accountant, or (ii) its financial
advisors or prospective acquiring or acquired entity in connection
with its prospective M&A transactions. Further, ITC and/or IDC may
issue a press release having the content shown in Exhibit 1, attached
hereto. Licensee may also issue a press release regarding the fact of
the execution of this Amendment Agreement and the settlement of the
arbitration. To the extent ITC and/or IDC desires to modify an agreed
upon press release, or Licensee desires to issue a press release, such
desiring party shall provide the other party with an advance copy of
its respective proposed press release for review, consent and comment;
whereby consent by the other party shall not be unreasonably withheld
or delayed.
7. Prior Agreement. Except as provided herein, all other terms and
conditions of the Prior Agreement remain unaltered and in full force
and effect.
Signatures on following page.
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IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives.
INTERDIGITAL TECHNOLOGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Dated: January 14, 2002
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NEC CORPORATION
By: /s/ Xxxxx Xxxxxxxx
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Dated: January 15, 2002
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Index of Exhibits
EXHIBIT 1: PRESS RELEASE
1
PRESS RELEASE ATTACHED TO AGREEMENT
EXHIBIT I
Media Contact:
Xxxxx Xxxxxx
e-mail: xxxxx.xxxxxx@xxxxxxxxxxxx.xxx
Investor Contact:
Xxxxx Point
e-mail: xxxxx.xxxxx@xxxxxxxxxxxx.xxx
(000) 000-0000
FOR IMMEDIATE RELEASE
January 15, 2002
INTERDIGITAL AND NEC SIGN GLOBAL 3G PATENT LICENSE AGREEMENT
AND SETTLE OUTSTANDING 2G PATENT LICENSING DISPUTE
King of Prussia, PA, January 15, 2002 . . . InterDigital Communications
Corporation (NASDAQ: IDCC), a leading developer and enabler of advanced wireless
technologies and product platforms, today announced that its subsidiary,
InterDigital Technology Corporation (ITC), has entered into a royalty bearing
license agreement with NEC Corporation of Japan for sales of wireless products
compliant with all Third Generation (3G) and narrowband CDMA standards. The
Company concurrently reached an amicable settlement of its 2G patent licensing
dispute with NEC in connection with a 1995 license agreement.
Under the 3G Agreement, ITC will receive a royalty on each licensed
product sold by NEC. The licensed products include infrastructure, terminal
units, communication cards and other mobile devices compliant with Third
Generation and narrowband CDMA standards. NEC will pay ITC an advance royalty of
$19.5 million. Once that advance is exhausted, NEC will be obligated to pay
additional recurring royalties to ITC as it sells licensed products. In
addition, NEC and ITC agreed to settle the outstanding 1995 2G TDMA license
agreement dispute with a payment by NEC of $53 million to ITC. The $53 million
payment is in addition to the royalty advance previously paid by NEC under the
1995 agreement. In exchange for those payments, NEC's royalty obligations for
PHS and PDC products under the 1995 Agreement will be considered paid up.
Otherwise, the 1995 Agreement will remain materially unaltered by the
settlement. Currently, NEC has no further royalty payment obligations under that
agreement based on existing pre-paid units and certain other unique provisions
included in the 1995 Agreement.
"We are very pleased to welcome NEC as an ITC 3G patent licensee, while
also reaching an amicable resolution of the outstanding patent dispute between
us," said Xxxxxx Xxxxxxxx, President and Chief Executive Officer of
InterDigital. "NEC is a key global supplier of telecommunications equipment
worldwide, and the number one supplier of 3G telecommunications products in
Japan, the country which is leading the world in 3G rollout. This licensing
agreement with NEC, combined with our previous 3G agreements with Sharp and
Matsushita, demonstrates the strength of ITC's expanding 3G patent portfolio.
Our broad
portfolio of essential patents, along with InterDigital's 3G products and
technology, will serve to fuel the Company's revenue growth as the 3G market
emerges."
"The 3G patent licensing program at ITC continues to gain momentum,"
added Xxxxxxx X. Xxxxxxx, President of ITC. "We have executed several 3G license
agreements in the last ten months, including agreements with the top two
manufacturers in Japan. We anticipate continued success in 2002, as additional
companies come to recognize the breadth and scope of ITC's 3G related inventions
realized over 15 years of research and development. We are well positioned to
leverage these key 3G license agreements as other global markets emerge."
InterDigital will recognize royalty revenue associated with the cash
received consistent with the Company's standard accounting practices.
ABOUT NEC CORPORATION
NEC Corporation (NASDAQ: NIPNY) (FTSE: 6701q.l) is a leading provider
of Internet solutions, dedicated to meeting the specialized needs of its
customers in the key computer, network and electron device fields through its
three market-focused in-house companies: NEC Solutions, NEC Networks and NEC
Electron Devices. NEC Corporation, with its in-house companies, employs more
than 150,000 people worldwide and saw net sales of 5,409 billion Yen (approx.
US$43 billion) in fiscal year 2000-2001. For further information, please visit
the NEC home page at: xxxx://xxx.xxx.xxx.
NEC is a trademark of NEC Corporation.
ABOUT INTERDIGITAL COMMUNICATIONS CORPORATION
InterDigital develops advanced wireless technologies and products that
drive voice and data communications. The Company offers technology and product
solutions for mainstream wireless applications that deliver cost and
time-to-market advantages for its customers. InterDigital has a strong portfolio
of patented TDMA, GSM/GPRS and CDMA inventions, which it licenses worldwide. For
more information, please visit InterDigital's web site: xxx.xxxxxxxxxxxx.xxx.
InterDigital is a trademark of InterDigital Communications Corporation.
###
This press release contains forward looking statements regarding, among other
things, the continued success in our patent licensing program, our ability to
leverage existing agreements, and the growth in ITC's 3G related patent license
revenue. Such statements are subject to risks and uncertainties. Actual outcomes
could materially differ from those expressed in any such forward-looking
statements due to a variety of factors. These factors include, but are not
limited to ITC's ability to obtain and maintain key patents worldwide, inability
to conclude licensing agreements upon mutually acceptable terms, failure of
licensees to meet sales expectations, and the failure of the 3G market to
materialize at all or at the rate or pace that we expect, as well as other
factors listed in the Company's most recent filed 10-k Annual Report.
InterDigital
undertakes no duty to publicly update any forward-looking statements, whether as
a result of new information, future events or otherwise.
