EXHIBIT 10.22
AMENDED AND RESTATED CSS INTERIM LICENSE AGREEMENT
This AMENDED AND RESTATED CSS INTERIM LICENSE AGREEMENT, including the related
CSS PROCEDURAL AND AMENDED AND RESTATED TECHNICAL SPECIFICATIONS, (collectively,
this "Agreement"), is made and entered into as of 11/28/99 (the "Effective
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Date") by and between: (i) MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD., a Japanese
corporation having offices located at 1006 Xxxxxx, Xxxxx 000 Xxxxx ("XXX"); and
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(ii) QUADRANT INTERNATIONAL INC., a Pennsylvania corporation having offices
located at Malvern, PA USA ("Licensee"). This Agreement shall be effective as
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of the Effective Date provided that it is executed by the parties hereto.
RECITALS
A. MEI and Toshiba (as defined below) have developed a Contents Scramble
System as defined below) to provide reasonable security to the contents of
DVD Discs and thereby provide protection for copyrighted content against
unauthorized consumer copying, and have filed patent applications with
respect to the Content Scramble System.
X. XXX and Toshiba intend to license the Contents Scramble System to a new
independent entity which will administer such system.
C. The independent entity is expected to be established by MEI, Toshiba and
others in the DVD industry within several months.
D. During the period from the Effective Date until the establishment and
operation of the entity, Toshiba has granted to MEI a license to Toshiba's
rights to the Contents Scramble System, and MEI will serve as the licensing
agent for the Contents Scramble System to grant licenses to third parties
which desire to implement such system in DVD products.
E. This Agreement: (i) is intended to be an interim agreement that is
effective until the entity is established and makes available its standard
license agreement; and (ii) sets forth the terms and conditions under which
MEI will grant Licensee the right to implement the security system on its
DVD products.
AGREEMENT
1. DEFINITIONS. In addition to the other capitalized terms used in this
Agreement and in addition to the terms defined in the CSS Procedural
Specifications (which terms shall have the meanings set forth in the
Procedural Specifications), the following terms shall have the following
meanings:
1.1 "Absolutely Necessary Claim" shall mean any claim(s) of patent(s) or patent
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application(s) which are infringed by the manufacture, import, use or sale
of CSS Compliant Products because: (i) the CSS Specifications pertaining to
CSS are read on by such claim(s); or (ii) products that, solely because of
the requirement to implement the CSS Specifications pertaining to CSS,
cannot be manufactured, used, distributed, offered to be sold, sold,
imported, or otherwise transferred without infringing such claim(s).
1.2 "Associate Licensee" shall mean any third party that enters into an
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agreement, containing substantially the same terms as those set out in
Attachment E ("Associate License").
1.3 "Associate Licensee Reseller" shall mean an Associate Licensee entering an
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Associate License for the purpose of being authorized to purchase and
resell Schedule 1 and Schedule 2 Products, subject to the redistribution
requirements of the Associate License.
1.4 "Confidential Information" shall mean Proprietary Information that is
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either marked "confidential" or "proprietary" when disclosed in written
form or indicated as "confidential" or "proprietary" when disclosed orally
and confirmed in writing within thirty (30) days after such disclosure.
1.5 "Controlled Company" shall mean (i) any Majority-Owned Affiliate, and (ii)
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any other entity that controls, is controlled by, or is under common
control with another entity. For purposes of this Section, "control" means
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of an entity with respect to the
matters set out in this Agreement, whether through the possession of voting
power or by contract encompassing such matters. In determining whether an
entity is covered by (ii) above, where a Licensee's control does not extend
to directing the commencement or termination of legal actions as described
herein, "control" is not deemed to be present.
1.6 "CSS" or "Contents Scramble System" shall mean the Contents Scramble System
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developed by MEI and Toshiba and designed to provide reasonable protection
for the contents of DVD Discs, as more fully described in the CSS
Specifications, excluding any unrelated or independent technology
incidentally referenced by or used with the CSS Specifications such as MPEG
technology and DVD technology.
1.7 "CSS Complaint Products" shall mean DVD Products which are compliant with
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the CSS Specifications.
1.8 "CSS Licensee" shall mean any third party that enters into an agreement
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with MEI where such agreement contains substantially the same terms as
those set forth in this Agreement and is valid and in effect. CSS Licensees
shall include MEI and Toshiba in each of their respective capacities in
manufacturing, using,
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distributing, offering for sale, selling, importing or otherwise
transferring DVD Products.
1.9 "CSS Specifications" shall mean the documentation relating to CSS entitled
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"CSS Specifications" (including the Procedural Specifications and the
Technical Specifications) that MEI makes available to Licensee pursuant to
the Membership Categories selected by Licensee, as such documentation may
be revised from time to time consistent with Sections 4.2 and 10.7 hereof.
1.10 "Disc IP" shall mean any copyright, trade secret, or other intellectual
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property inherent in the CSS Specifications pertaining to CSS or any
patent claim(s) (including but not limited to any Absolutely Necessary
Claims or Relatively Necessary Claims) relating to implementation of CSS
in any DVD Disc.
1.11 "DVD Products" shall mean the following products if they incorporate any
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portion of CSS: DVD Players, DVD-ROM Drives, Descramblers, Authenticators,
DVD Decoders (implemented in hardware as DVD Decoder Cards and/or in
software as DVD Decoder Software), DVD Disc Formatters, DVD Discs and
Integrated Products.
1.12 "Entity" shall mean the organization to administer CSS to be established
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by MEI, Toshiba, and other DVD industry members.
1.13 "Highly Confidential Information" shall mean Proprietary Information that
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is either marked "Highly Confidential Information" when disclosed in
written form or indicated as "Highly Confidential Information" when
disclosed orally and confirmed in writing within thirty (30) days after
such disclosure. Such information shall be limited to information
constituting or disclosing: (i) the algorithms used for scrambling,
descrambling, authentication and key recovery; (ii) master, disc, title or
authentication keys; and (iii) information for testing product compliance
with CSS where such information makes use of or reveals information
described in (i) or (ii).
1.14 "Integrated Product" shall mean a combination of any one or more of a DVD
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Player, DVD-ROM Drive, Descrambler, Authenticator, or DVD Decoder with any
other product, device or component into a single integrated unit that
permits, or that is designed for further integration into a product that
permits, the transmission of unscrambled content in digital or analog
format to any internal or external output or connection, provided that use
of the term "Integrated Product" does not affect the obligations or
provisions pertaining to any separately defined DVD Product. Integrated
Products may include by way of example and not of limitation: (i)
integration of DVD-ROM Drives or DVD Decoder Cards with or into computer
systems; and (ii) integration of DVD-ROM Drives or DVD Players with or
into television receivers and videocassette recorders. The term
"Integrated Product" shall include a combination of products linked
together through a form of common operation that controls the transfer of
CSS Data among the products.
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1.15 "Licensed Rights" shall mean all Absolutely Necessary Claims, copyrights,
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trade secret rights, and other proprietary rights in any jurisdiction, and
all applications and registrations therefor in and to CSS (including the
Proprietary Information), that MEI (during the term of this Agreement)
owns or has the right to grant licenses of the scope granted herein
without the agreement of, or requirement for payment (or provision of
other consideration) to any person or entity.
1.16 "Majority-Owned Affiliate" shall mean any corporation, partnership or
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other entity that, directly or indirectly, owns, is owned by, or is under
common ownership with, Licensee, for so long as such ownership exists. For
purposes of the foregoing, "own," "owned" or "ownership" shall mean
holding ownership, or the right, to more than fifty percent (50%) of the
voting stock or ownership interest entitled to elect a board of directors
or a comparable managing authority.
1.17 "Proprietary Information" shall mean any and all information relating to
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CSS made available to Licensee directly by MEI, by any other CSS Licensee
or pursuant to Section 5.3 prior hereto or during the term of this
Agreement including, without limitation, CSS Specifications, software,
hardware, firmware, documentation, designs, flow charts, technical data,
outlines, blueprints, notes, drawings, prototypes, templates, systems,
manuals, know-how, processes and methods of operation.
1.18 "Protected" shall mean a configuration in which a data stream or signal is
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not output except (i) via encrypted, scrambled, or otherwise secure link
or method authorized hereunder either through a device's or component's
authorized output or to the next component or device which in turn has an
authorized output; or (ii) directly as uncompressed video data to a
graphics subsystem via an internal computer path. For purposes of this
definition, authorized outputs and methods hereunder are those compliant
with requirements contained in Section 6.2 of the CSS Procedural
Specifications, including any upgrades or modifications thereto. By way of
example and not limitation, the following CSS Compliant Products, if so
configured, would be considered to be Protected:
(a) A DVD Decoder Card incorporating MPEG decoding and any or all of the
following outputs:
(i) NTSC with appropriate AGC and Colorstripe;
(ii) Computer Monitor SVGA (or other computer monitor RGB); or
(iii) Uncompressed digital video directed via an internal computer
path to a computer graphic subsystem for display;
(b) DVD Decoder Software incorporating MPEG decoding and supporting the
output described in subsection (a)(iii);
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(c) A DVD Decoder which implements the interrogation or identification
functions referenced in Section 6.2.8.2 of the CSS Procedural
Specifications; and
(d) A DVD Player which meets the requirements of section 6.2.1 of the CSS
Procedural Specifications.
1.19 "Relatively Necessary Claim" shall mean, any claim(s) of patent(s) or
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patent application(s), that: (i) are not Absolutely Necessary Claims; and
(ii) with respect to which the implementation of all or any portions of
the CSS Specifications pertaining to CSS involves a design-around to such
patent claim(s) which would have a commercially significant effect on
performance, manufacturability or manufacturing cost, although the cost of
designing-around itself shall not be taken into account.
1.20 "Reseller" shall mean an entity that purchases Schedule 1 or Schedule 2
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Products from a CSS Licensee for the purpose of reselling such products
without modification and only to another CSS Licensee.
1.21 "Schedule 1 Product" shall mean a CSS Compliant Product licensed hereunder
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which:
(a) is not a Schedule 2 or 3 Product, or
(b) is
(i) an Authenticator, or
(ii) a Descrambler, or
(iii) a CSS Decoder or partial implementation thereof or otherwise
is a device which has an output which is not permitted in a
Schedule 2 or 3 Product, or
(c) is a DVD Disc Formatter.
1.22 "Schedule 2 Product" shall mean a CSS Compliant Product licensed hereunder
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which is not Protected and which outputs descrambled CSS Video Data only
in decompressed form.
1.23 "Schedule 3 Product" shall mean (a) a CSS Compliant Product licensed
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hereunder which outputs CSS Data only in a Protected manner or (b) a DVD
Disc.
1.24 "Toshiba" shall mean Toshiba Corporation and is a registered trademark
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thereof.
2. LICENSES FROM MEI.
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2.1 Nonexclusive License. Subject to the terms and conditions of this
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Agreement, MEI grants Licensee a royalty-free, non-exclusive,
nontransferable right, under the Licensed Rights:
(a) to use and implement CSS to develop, design, manufacture and use CSS
Compliant Products that are in the Membership Categories selected by
Licensee in Exhibit "A", and to practice any methods necessary for the
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manufacture or use of such CSS Compliant Products; and
(b) according to Licensee's membership categories, to purchase,
distribute, offer to sell, sell, import and otherwise transfer CSS
Compliant Products either made or received pursuant to authority
hereunder only as follows:
(i) Schedule 1 Products only to CSS Licensees or to Associate
Licensee Resellers;
(ii) Schedule 2 Products only to CSS Licensees or to Associate
Licensees; or
(iii) Schedule 3 Products to any person or entity.
(c) to provide prototype or sample DVD Products incorporating CSS to
prospective customers or retained test companies, in each case solely
for evaluation in contemplation of purchase of such products or
performance of specified testing of such products, as applicable,
provided that Licensee (i) may not provide such customers or test
companies with any CSS Confidential or Highly Confidential Information
unless such information would be provided to companies subject to
MEI's CSS Non-Disclosure Agreement; and (ii) must have a written
agreement with each such customer and test company that effectively
protects the confidentiality of CSS Confidential and Highly
Confidential Information by providing at least equivalent protections
as are provided in MEI's CSS Non-Disclosure Agreement (Exhibit F).
(d) Licensee agrees not distribute, offer to sell, sell, import, or
otherwise transfer any DVD Products that it makes or receives except
in accordance with Sections 2.1(b) and (c) above.
2.2 Copyright License. Subject to the terms and conditions of this Agreement,
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including without limitation the confidentiality provisions of Section 5.2,
for any copyrightable information included in CSS Specifications, MEI
grants Licensee a royalty-free, non-exclusive, nontransferable copyright
license to use and reproduce CSS Specifications for internal purposes
solely in connection with the implementation of CSS as permitted under
Section 2.1 hereof.
2.3 Right to Have Made. Licensee shall have the right under the licenses
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granted herein to have third parties make CSS Compliant Products or
subparts thereof for
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the sole account of Licensee, but only if said CSS Compliant Products or
subparts thereof
(a) are to be sold, used, leased or otherwise disposed of, by Licensee
under the trademark, tradename, or other commercial indicia
(i) of Licensee or
(ii) of a person or entity to which Licensee is authorized by this
Agreement to sell
(1) the CSS Compliant Product that is the subject of
the "have made" agreement or
(2) an Integrated Product that is a CSS Compliant
Product made using such CSS Compliant Product,
and
(b) are made by such third parties using design specifications
or manufacturing drawings supplied by Licensee.
Such third parties shall be required to be either CSS Licensees
or subject to an applicable MEI CSS Non-Disclosure Agreement with
MEI (Exhibit F) if such manufacture requires disclosure to such
third parties of (1) Confidential Information or Highly
Confidential Information; or (2) other information or materials
from which Confidential Information or Highly Confidential
Information could reasonably be derived. Licensee shall remain
liable for such third parties' compliance with Sections 2.5, 4.2,
5.3, 5.4, 6.2, and 6.3 under this Agreement and with the Non-
Disclosure Agreement, if applicable, where such third parties are
not CSS Licensees. Such third parties shall receive no license,
sublicense, or implied license.
2.4 Sublicenses to Majority-Owned Affiliates. Subject to the requirements of
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the following subsections (a) and (b), Licensee shall have the right to
sublicense to any of its Majority-Owned Affiliates, and such sublicensed
Majority-Owned Affiliates shall be referred to elsewhere in this Agreement
as "Permitted Sublicensees."
(a) Licensee shall have the right to sublicense to any of its
Majority-Owned Affiliates owned directly by Licensee ("Majority-Owned
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Subsidiaries"), at Licensee's sole discretion, any of Licensee's
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rights under Sections 2.1, 2.2 and 2.3 provided that: (i) Licensee
notifies MEI of the identity of each Majority-Owned Subsidiary
receiving a sublicense and the type of Confidential Information or
Highly Confidential Information provided to such Majority-Owned
Subsidiary; (ii) each such Majority-Owned Subsidiary receiving a
sublicense shall abide by the terms of this Agreement with the same
rights (without the right to grant any sublicense) and the same
obligations as Licensee, including without limitation, the
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covenant not to xxx and patent license offer provisions of
Section 5.1 hereof; (iii) such sublicense coterminates with this
Agreement and/or terminates at any time such Majority-Owned
Subsidiary ceases to qualify as a " Majority-Owned Subsidiary";
and (iv) Licensee may sublicense only those rights for the
Membership Categories to which Licensee currently belongs.
(b) Licensee shall further have the right to sublicense to any of its
Majority Owned Affiliates (other than Majority-Owned
Subsidiaries) any of Licensee's rights under Sections 2.1, 2.2
and 2.3 provided that: (i) each such Majority-Owned Affiliate
receiving a sublicense shall execute and deliver to MEI a written
acknowledgment and agreement that such Majority-Owned Affiliate
has read and agrees to abide by the terms of this Agreement which
acknowledgment and agreement shall be in the form attached hereto
as Exhibit "B"; and (ii) Licensee may sublicense only those
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rights for the Membership Categories to which Licensee currently
belongs.
(c) Licensee shall be responsible and liable jointly and severally
for its Permitted Sublicensees' compliance with the terms and
conditions of this Agreement.
2.5 No Sublicense or Implied Licenses. Except as set forth in Section 2.4,
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Licensee's licenses hereunder include no right to sublicense any
rights hereunder. No products or services provided by Licensee give
rise to any implied licenses to third parties. Licensee acknowledges
and agrees that the licenses granted herein are the only licenses
granted to Licensee, and that no other licenses are granted,
expressly, by implication or estoppel, now or in the future. All
rights not expressly granted to Licensee under this Agreement in and
to CSS and the Proprietary Information are reserved and retained by
MEI.
3. MEMBERSHIP CATEGORIES AND ADMINISTRATION FEE.
3.1 Selection of Membership Categories. Upon the execution of this
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Agreement, Licensee shall select one or more membership categories set
forth in Exhibit "A" (the "Membership Categories"). Licensee may from
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time to time add or delete Membership Categories upon providing MEI
prior written notice and payment of the Administration Fee (as defined
below) for each additional Membership Category in accordance with
Section 3.2 hereof.
3.2 Administration Fee. Concurrent with Licensee's selection of the
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Membership Categories pursuant to Section 3.1, Licensee shall pay MEI
a nonrefundable sum of 1,000,000 Japanese Yen for each Membership
Category selected by Licensee (the "Administration Fee"), which fee
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shall be used to offset the costs associated with MEI's administration
of CSS. Licensee shall not be entitled to any refund in connection
with any deletion of Membership Categories. As of June 1, 1997, MEI
shall have the right to assess from time to time reasonable and
nondiscriminatory
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increases to the Administration Fee as necessary to offset the costs
associated with MEI's administration of CSS; provided that such
increases shall not in the aggregate in any calendar year exceed three
hundred percent of the Administration Fee. Unless Licensee shall have
exercised its right to terminate this Agreement pursuant to Section
6.1(d) hereof, Licensee shall pay such assessments.
4. CSS SPECIFICATIONS.
4.1 Delivery of CSS Specifications. Upon Licensee's selection of one or
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more Membership Categories in accordance with Article 3, payment of
appropriate Administration Fee(s) and after the appropriate approval
by the Japanese Government, MEI shall distribute to Licensee the
portions of Proprietary Information and/or CSS Specifications
appropriate to its Membership Category or Categories. In the event
Licensee deletes any Membership Categories, Licensee shall within ten
(10) days thereafter return such portions of Proprietary Information
and/or CSS Specifications relevant to such deleted Membership
Categories.
4.2 Compliance with CSS Specifications. Licensee shall comply with the CSS
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Specifications as may be amended by MEI from time to time. Each DVD
Product shall comply with the version of the CSS Specifications which
is in effect at the time such DVD Product is manufactured. With
respect to any changes to the CSS Specifications made after the date
on which this Agreement is entered into the following rules shall
apply. All changes shall be notified to all CSS Licensees and shall
provide Licensee with sufficient information to incorporate the
changes in its design and manufacture of CSS Compliant Products. All
changes shall be applied on a non-discriminatory basis among all CSS
Licensees. MEI may make changes to clarify or amplify elements of the
CSS Specifications in order to preserve essential functions of the CSS
Specifications ("Emergency Changes"). Licensee shall implement an
Emergency Change as soon as reasonably possible, taking into account
the danger to Content Providers being addressed by the Emergency
Change. It shall be presumed that Licensee shall implement an
Emergency Change not later than 60 days from receipt of notice of the
Emergency Change if it does not require a material change in product
design or manufacturing processes. Licensee shall implement all other
changes to the CSS Specifications not later than eighteen (18) months
from the date MEI notifies Licensee of a change in the CSS
Specifications. MEI may request that the eighteen-month time period
be shortened with respect to a specific change in the CSS
Specifications, and Licensee agrees not to unreasonably withhold its
consent to such request. Licensee may request that such time period
be extended with respect to a specific change in the CSS
Specifications, and MEI agrees not to unreasonably withhold its
consent to such request, provided that any such consent will not be
effective without the further consent of all other CSS Licensees where
the request is subject to the provisions of Section 10.7. The
foregoing time periods for implementation of changes in the CSS
Specifications shall not be interpreted or applied so as to alter any
time limitations set forth in the CSS Procedural Specifications.
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5. ADDITIONAL LICENSEE OBLIGATIONS.
5.1 Access to Intellectual Property.
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(a) Absolutely Necessary Claim. Licensee shall not, and shall cause
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each of its Controlled Companies not to, assert any Absolutely
Necessary Claim(s) allegedly contained in the portions of the CSS
Specifications pertaining to CSS, against MEI or any CSS Licensee
(including its Permitted Sublicensees) or vendor, distributor,
purchaser or other person in the chain of distribution for the
manufacture, use, distribution, offer to sell, sale, import, or
other transfer of a CSS Compliant Product which was made under
license from MEI, provided that this Section 5.1(a) only applies
to those aspects of such CSS Compliant Product which are required
for compliance with CSS Specifications and which cannot be
implemented without infringing (but for this covenant) the
Absolutely Necessary Claim(s) and further provided that this
Covenant shall not apply with respect to an entity which is
asserting an Absolutely Necessary Claim against Licensee.
(b) Disc Immunity. Licensee shall not, and shall cause each of its
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Controlled Companies not to, assert any claim(s) based on Disc IP
against any CSS Licensee who is a Content Provider, Authoring
Studio, or DVD Disc Replicator or vendor, distributor, purchaser
or other person in the chain of distribution for the manufacture,
use, distribution, offer to sell, sale, import, or other transfer
of DVD Disc that: (i) is a CSS Compliant Product; and (ii) was
made under license from MEI, provided that (1) this paragraph
only applies to those aspects of such DVD Discs which are present
for the purpose of complying with the portions of the CSS
Specifications pertaining to CSS; and (2) this section shall only
apply to DVD Discs themselves, and shall not apply to any
apparatus for the manufacture thereof.
(c) Termination of Suits.
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(i) If Licensee or any of its Controlled Companies asserts any
Absolutely Necessary Claim(s) or Disc IP claim(s) in
violation of the above provisions, Licensee shall terminate
or cause to be terminated such assertion of claim.
(ii) In the case of an entity which is not a Controlled Company
but in which Licensee or any of its Controlled Companies
holds any voting security or any other ownership interest (a
"Partially Owned Company"), Licensee shall not knowingly
vote, and shall cause each Controlled Company not to vote,
any voting security or ownership interest in any such
Partially Owned Company in favor of asserting any claim
which Licensee would be prohibited from asserting
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hereunder. Licensee agrees to use reasonable efforts to
vote, and use reasonable efforts to cause each Controlled
Company to vote, all voting securities and ownership
interests in each Partially Owned Company to terminate any
such claim(s). The termination of any such claim(s) under
Absolutely Necessary Claim(s) or Disc IP claim(s), as the
case may be, shall relieve Licensee of all liability for
voting in favor of such claim without knowledge that such
claim(s) was under any Absolutely Necessary Claim(s) or Disc
IP claim(s), as applicable.
(d) Patent License Offer. Licensee shall offer, and shall cause its
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Controlled Companies to offer, a patent license for any of
its/their claims for which Relatively Necessary Claim(s) exist,
provided that such license may be limited to Relatively Necessary
Claim(s) that are within the scope of the other CSS Licensee's
license from MEI. Such license shall be made available on
reasonable and non-discriminatory terms to any CSS Licensee in
good standing and/or its Permitted Sublicensees. To the extent
that a Relatively Necessary Claim that would otherwise be
governed by this paragraph is subject to the Disc Immunity
governed by Section 5.1(b), such Relatively Necessary Claim shall
be governed by Section 5.1(b) rather than this paragraph.
(e) Applicability.
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(1) The provisions of this Section 5.1 related to Absolutely
Necessary Claims and Relatively Necessary Claims shall apply
with respect to the CSS Specifications in effect on the date
on which this Agreement is entered and to any subsequent
revision to CSS Specifications where Licensee has
specifically agreed in writing to apply Section 5.1 to such
revisions.
(2) Subject to the terms of Section 6.2 hereof, the covenant
shall remain in effect for the life of any patent issued
throughout the world with a first priority date prior to or
during the term of the license granted to Licensee under
Article 2.
(3) Any executed patent license entered into pursuant to Section
5.1(d) shall survive the termination of this Agreement in
accordance with its terms.
(4) Notwithstanding the termination of this Agreement, the
obligation to offer a patent license under Section 5.1(d)
shall continue after such termination with respect to CSS
Compliant Products that were made prior to, or are in
production as of, the date of such termination for a license
period ending concurrently with the
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applicable permitted period of distribution set forth in
Sections 6.2(a), (b), or (c) as the case may be.
5.2 Confidentiality.
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(a) Permitted Use. Licensee and its Permitted Sublicensees shall use
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Proprietary Information, Confidential Information and/or Highly
Confidential Information (and tangible embodiments of any of the
foregoing) solely for purposes of its own implementation of CSS
in accordance with the terms of this Agreement and the CSS
Specifications, and shall not use any mentally-retained
recollections thereof to circumvent or copy the methods disclosed
in Proprietary Information or Confidential Information or to
circumvent any obligations under this Agreement.
(b) Highly Confidential Information. Licensee and its Permitted
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Sublicensees shall maintain the confidentiality of Highly
Confidential Information in the following manner:
(i) Licensee and its Permitted Sublicensees shall employ
procedures for safeguarding Highly Confidential Information
at least as rigorous as Licensee and/or its Permitted
Sublicensees would employ for its own most highly
confidential information, such procedures to include, at a
minimum: (1) maintaining on Licensee's and/or Permitted
Sublicensees' premises a secure location in which any and
all Highly Confidential Information shall be stored; (2)
such secure location shall be accessible only by Authorized
Employees (as defined below); (3) Authorized Employees shall
sign in and out each time such employees visit such secure
location; and (4) when Highly Confidential Information is
not in use, such information shall be stored in a locked
safe at such secure location.
(ii) Licensee may disseminate Highly Confidential Information
only to the strictest minimum possible number of full-time
employees of Licensee or its Permitted Sublicensees: (1) who
have an absolute need to know such Highly Confidential
Information in order to enable Licensee or its Permitted
Sublicensees to implement CSS in compliance with the CSS
Specifications; (2) who are bound in writing by obligations
of confidentiality sufficient to protect the Highly
Confidential Information in accordance with the terms of
this Agreement; (3) who, prior to the disclosure of such
Highly Confidential Information, have: (x) been identified
in writing by Licensee to MEI; and (y) read and executed the
acknowledgment attached as Exhibit "C" hereto (a copy of
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such executed acknowledgment to be sent
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to MEI) ("Authorized Employee"). Licensee and its Permitted
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Sublicensees shall at all times cause Authorized Employees
to strictly abide by their obligations hereunder and shall
use the same efforts to enforce the confidentiality
obligations of each Authorized Employee after the
termination of his/her employment as Licensee uses to
enforce with respect to Licensee's own similarly
confidential information provided that Licensee shall not
use less than reasonable efforts in such enforcement.
Licensee and its Permitted Sublicensees shall make all
reasonable efforts to assist MEI in relation to any claim,
action, suit, proceeding, or litigation with respect to the
acts of any of its former employees. Notwithstanding any
contrary provision, Licensee shall under no circumstances
disseminate any DVD Keys (as defined in the CSS
Specifications) to more than three (3) Authorized Employees
for each Membership Category to which Licensee is licensed
and is entitled to disclosure of DVD Keys from MEI ("Key
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Employees"). Licensee may only substitute a Key Employee in
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the event of the death, permanent or long-term disability or
resignation or termination of an existing Key Employee or
reassignment of an existing Key Employee to a substantially
different department, section, division or other type of
business unit that is not involved in the development,
manufacture or sale of CSS Compliant Product. Licensee shall
inform MEI in writing prior to the substitution of any Key
Employee.
(iii) Licensee shall not make any copies of any document
containing Highly Confidential Information. Licensee may
request MEI to provide Licensee with additional copies of
such documents. MEI may, in its sole discretion, fulfill any
such request, provided that MEI shall not unreasonably
refuse to provide requested additional copies.
(c) Confidential Information. Licensee may disclose Confidential
------------------------
Information only to full-time employees of Licensee and/or its
Permitted Sublicensees who have a reasonable need-to-know and are
bound in writing by obligations of confidentiality sufficient to
protect the Confidential Information in accordance with the terms
of this Agreement. Licensee and/or its Permitted Sublicensees shall
use the same degree of care, but no less than a reasonable degree
of care, to avoid unauthorized disclosure or use of Confidential
Information as such party employs with respect to its comparably
important confidential information. Licensee may discuss or
disclose Confidential Information with other CSS Licensees,
provided such CSS Licensees are licensed to receive the same type
of Confidential Information and are obligated in writing to treat
the
13
Confidential Information as if received directly from MEI.
Furthermore, Licensee may disclose to potential customers or
suppliers the fact that Licensee has obtained a license to CSS
from MEI, and show a certificate to such effect provided by MEI
to Licensee. Upon Licensee's written request to MEI, MEI shall
maintain the fact that such Licensee is a CSS Licensee
confidential during the period prior to Licensee's public
announcement of its DVD Product intentions or its actual
marketing of a DVD Product, whichever is earlier. Except as
provided in the immediately preceding sentence, MEI shall have
the right to disclose to third parties the fact that Licensee has
a license to CSS and the membership categories to which such
license is applicable.
(d) Contact Person and Provision of CSS Information. Licensee shall
-----------------------------------------------
designate a single Authorized Employee who shall receive all
Confidential Information and Highly Confidential Information (the
"Licensee Contact") disclosed by MEI. The initial Licensee
----------------
Contact shall be the individual designated on Exhibit "C" hereto.
------- -
Prior to the provision of any Highly Confidential Information to
the Licensee Contact, such Licensee Contact shall have complied
with all of his/her obligations under Section 5.2(b) hereof.
Furthermore, prior to providing any Highly Confidential
Information to the Licensee Contact, MEI shall provide the
Licensee Contact a brief non-confidential description of the
generic nature of such Highly Confidential Information. Within
five (5) days after such notice, Licensee shall notify MEI in
writing whether it desires to receive or decline to receive such
Highly Confidential Information, provided that any decision to
decline shall have no effect on any of Licensee's obligations
under this Agreement and Licensee shall have no right or license
whatsoever with respect to the declined portions of the Highly
Confidential Information. Notwithstanding the foregoing, Licensee
may waive its rights to receive MEI's prior notice of the generic
nature of Highly Confidential Information set forth above by
notifying MEI of such waiver in writing.
(e) No Publication. Except as otherwise expressly provided in
--------------
Sections 2.2 and 5.2, Licensee shall not publish, disseminate or
otherwise disclose or make available Proprietary Information
received hereunder to any person, firm or corporation without
prior written consent of MEI.
(f) Notification of Unauthorized Use or Disclosure. Licensee shall
----------------------------------------------
notify MEI in writing immediately upon discovery of any
unauthorized use or disclosure of Proprietary Information, and
will cooperate with MEI in every reasonable way to regain
possession of Proprietary Information and prevent its further
unauthorized use or disclosure.
(g) Disclosure Required by Law. In the event Licensee is required by
--------------------------
law, regulation or order of a court or other authority of
competent jurisdiction to disclose Confidential Information or
Highly Confidential Information,
14
Licensee shall notify MEI as promptly as possible, and shall,
upon such MEI request, reasonably cooperate in challenging or
restricting the scope of such required disclosure.
(h) Confidentiality Exceptions. The confidentiality restrictions
--------------------------
contained in Sections 5.2(a), (b) and (c) herein shall not apply
to information that Licensee can demonstrate: (i) is either
Confidential or Highly Confidential Information which is or
becomes generally known to the public through no breach of
Licensee's obligations owed to MEI hereunder and which MEI failed
to remove from public availability or to enjoin such public
disclosure within ninety (90) days after the date such
information is or becomes generally known as set forth above; or
(ii) is or has been developed by Licensee's employees (whether
independently or jointly with others) without having access
(whether directly or through any intermediaries) to any such
Confidential Information or Highly Confidential Information (or
any translation, derivation or abstractions of Confidential
Information or Highly Confidential Information) and without any
breach of Licensee's obligations to MEI, provided that the
confidentiality restrictions shall continue to apply to DVD Keys
provided to Licensee.
(i) Prior Agreements. The obligations of this Section 5.2 shall
----------------
apply to any and all disclosures of Proprietary Information to
Licensee prior to the execution of this Agreement. This
Agreement shall supersede any inconsistent provisions contained
in any confidentiality agreement relating to CSS between the
parties hereto including that certain Confidential Disclosure
Agreement dated as of November 25, 1996.
5.3 Reverse Engineering. Licensee shall under no circumstances reverse
-------------------
engineer, decompile, disassemble or otherwise determine the operation
of CSS Specifications, including, without limitation, any
encryption/decryption or scrambling/descrambling algorithm or logic of
CSS, except that Licensee may, to the minimum extent necessary for the
purposes of testing, debugging, integration or tuning of Licensee's
own CSS Compliant Product to ensure that it works in its intended
operational environment with other CSS Compliant Products (the
"Analysis Purpose") conduct performance or electrical analyses with
respect to the operation of other CSS Compliant Products that form
part of such intended operational environment ("Analysis"), subject to
the following conditions:
(a) Licensee shall not perform any Analysis, in whole or in part, for
the purpose of deriving or discovering CSS Specifications that
have not been made available and licensed by MEI to Licensee
hereunder (the "Derived Information").
-------------------
(b) To the extent Licensee obtains Derived Information, inadvertently
or otherwise, Licensee shall immediately notify MEI, and upon the
instruction of MEI, Licensee shall within ten (10) days
thereafter return or
15
destroy any portion of Derived Information that is not solely
necessary for the Analysis Purpose and cease any use of the same
for any purpose.
(c) Subject to Section 5.3(b) above, the Derived Information: (i)
shall only be used for the Analysis Purpose and for no other
purposes; and (ii) shall be treated as confidential in the manner
corresponding to the same type of information as specified in
Section 5.2.
(d) Nothing herein shall be construed as an inducement for Licensee
to reverse engineer any products of any CSS Licensee or third
party.
(e) For purposes of this Section 5.3: (i) "testing" shall mean a
process of evaluating Licensee's CSS Compliant Product to ensure
proper operation; (ii) "debugging" shall mean a process of
finding the cause of an error in a Licensee's or other's CSS
Compliant Product, but not analysis for the purpose of exposing
possible design features; (iii) "integration" shall mean a
process of evaluating the performance of Licensee's CSS Compliant
Product in combination with other CSS Compliant Products to
ensure that they properly operate together; and (iv) "tuning"
shall mean a process of evaluating and improving Licensee's CSS
Compliant Products to work more efficiently with other CSS
Compliant Products.
5.4 Export. Licensee will comply with all applicable rules and regulations
------
of the United States, Japan and other countries and jurisdictions
relating to the export or re-export of commodities, software and
technical data insofar as they relate to the activities under this
Agreement, and shall obtain an approval required under such rules and
regulations whenever it is necessary for such export or re-export.
Licensee agrees that commodities, software and technical data provided
under this Agreement are subject to restrictions under the export
control laws and regulations of the United States, Japan and other
countries and jurisdictions, as applicable, including but not limited
to the U.S. Export Administration Act and the U.S. Export
Administration Regulations and the Japanese Foreign Exchange and
Foreign Trade Control Law, and shall obtain any approval required
under such laws and regulations whenever it is necessary for such
export or re-export.
6. TERM/TERMINATION.
6.1 Termination. This Agreement shall be effective upon the Effective Date
-----------
and shall continue until earlier terminated in accordance with any of
the following events:
(a) Breach. If a party hereto defaults on any of its obligations
------
under this Agreement (the "Defaulting Party"), the other party
----------------
hereto (the "Non-Defaulting Party") shall have the right to
--------------------
terminate this Agreement by written notice describing the nature
of the default, wherein such notice shall automatically result in
termination unless within thirty (30) calendar days of receiving
such written notice of such default, the Defaulting Party
Cure Period is not intended to imply that an acceptable remedy of
remedies the default (the "Cure Period"). The provision of a
-----------
Cure Period
16
is not intended to imply that an acceptable remedy of a default
is limited in any particular case to prospective activities.
Notwithstanding the foregoing, the Non-defaulting Party shall
have the right to immediately terminate the Defaulting Party upon
notice without any Cure Period in the event of the Defaulting
Party's material breach of Section 5.2 hereof. Notwithstanding
the foregoing, (i) Eligible Licensees shall be entitled to
equitable remedies as provided in Sections 9.2 and 9.4 without
regard to the foregoing Cure Period; and (ii) the foregoing Cure
Period shall not be interpreted or applied so as to extend any
time limitations set forth in the CSS Procedural Specifications.
(b) Failure to Manufacture and Distribute CSS Compliant. If Licensee
---------------------------------------------------
has failed to exercise the rights granted under Article 2 to
manufacture and commercially distribute CSS Compliant Products:
(i) within the first twelve (12) month period commencing upon the
execution of this Agreement, provided that such period shall be
eighteen (18) months if Licensee is a DVD Disc Formatter, or (ii)
during any consecutive twelve (12) month period thereafter during
the term of this Agreement, then MEI may terminate this Agreement
upon thirty (30) days prior written notice to Licensee if
Licensee continues to manufacture and commercially distribute CSS
Compliant Products during such thirty (30) day period. For these
purposes, Licensee shall be deemed to have failed to exercise the
rights granted under Article 2 to manufacture and commercially
distribute CSS Compliant Products only if neither Licensee, nor
any other CSS Licensee for which Licensee has designed or
manufactured to CSS Compliant Product, shall have manufactured
and commercially distributed a CSS Compliant Product.
(c) Upon Establishment of the Entity. In the event the Entity is
--------------------------------
formed, MEI's interests in this Agreement shall be automatically
assigned to the Entity effective ten (10) days after the Entity
first commences operations, and this Agreement shall thereafter
continue in full force and effect (subject to Sections 6.1(a) and
(b)) until the earlier of: (i) the effective date of a new
agreement between Licensee and the Entity; (ii) the effective
date of the termination of this Agreement pursuant to written
notice provided by Licensee; or (iii) ninety (90) days after the
effective date of MEI's assignment of this Agreement to the
Entity, unless this time period has been extended by the Entity,
in which case this clause (iii) shall be deemed to be
automatically and without any further action by any party be
amended to the date established in the extension; and/or
(d) Failure to Establish the Entity. In the event the Entity is not
-------------------------------
formed and operating as of October 1, 1997 ("Preliminary Target
Date") or an applicable Extended Date as set forth below, MEI or
Licensee may thereafter terminate this Agreement by sending the
other party ninety (90) days prior written notice, in which case
the provisions of Section 6.2(c) shall apply. Prior to the
Preliminary Target Date, if reasonable terms to
17
establish the Entity as soon as possible are being negotiated in
good faith, then the date in this provision shall automatically
be extended for a period of two months ("Extended Date") so that
the right to terminate for failure to establish the Entity does
not come into being. Prior to the Extended Date, if the Entity is
not yet formed and operating but if reasonable terms to establish
the Entity as soon as possible are being negotiated in good
faith, said Extended Date shall be automatically extended for a
further period of two months so that the right to terminate for
failure to establish the Entity will not come into being. Such
extensions will continue to be made in the same manner until the
Entity is formed, provided that reasonable terms to establish the
Entity as soon as possible are being negotiated in good faith.
For purposes of the foregoing, automatic extension as aforesaid
shall be deemed to occur, unless MEI gives written notice to the
contrary not later that two (2) weeks prior to the Preliminary
Target Date or Extended Date (as applicable). For purposes of the
foregoing, the fact that any party to the negotiations takes a
position with respect to one or more issues during the course of
the negotiations or fails to reach an agreement with respect to
one or more issues during the course of negotiations shall not
constitute failure to negotiate in good faith on reasonable
terms. If MEI gives Licensee notice that it is terminating this
Agreement, MEI agrees that a similar notice will be provided to
all CSS Licensees within a reasonable period of time before or
after MEI provides such notice to Licensee.
6.2 Effect of Termination.
---------------------
(a) Material Breach or Failure to Manufacture or Distribute CSS
-----------------------------------------------------------
Compliant Products. If MEI terminates this Agreement pursuant to
------------------
Section 6.1(a) or 6.1(b), all licenses granted by MEI to Licensee
shall terminate. If Licensee terminates this Agreement pursuant
to Section 6.1(a), the covenant not to xxx granted by Licensee
under Section 5.1(a) shall terminate, provided, however, Licensee
agrees that MEI and the CSS Licensees, and their Permitted
Sublicensees, for a period of ninety (90) days after termination,
shall have the right, subject to the conditions of Section
2.1(d), to distribute all CSS Compliant Products that have been
produced or are in production as of the date of Licensee's
termination notice. If MEI terminates this Agreement pursuant to
Section 6.1 (a) or 6.1(b), the covenant not to xxx granted by
Licensee under Section 5.1 shall terminate, provided, however,
that MEI and the CSS Licensees, and their Permitted Sublicensees,
for a period of one (1) year after termination, shall have the
right subject to the conditions of Section 2.1(d), to distribute
all CSS Compliant Products that have been produced or are in
production as of the date of MEI's termination notice.
Notwithstanding any of the foregoing, the covenant not to xxx
granted in Sections 5.1(b) and Section 5.1(c) with respect to
Disc IP shall not terminate in any event.
18
(b) Upon Establishment of Entity. If this Agreement is terminated
----------------------------
pursuant to Section 6.1(c): (i) all licenses granted by MEI to
Licensee shall terminate, provided, however, that Licensee, for a
period of ninety (90) days after termination, shall have the
right, subject to the conditions contained in Section 2.1(d), to
distribute all CSS Compliant Products that have been produced or
are in production as of the date of MEI's termination notice; and
(ii) the covenant not to xxx granted by Licensee under Section
5.1 (a) shall terminate, provided, however, that MEI and the CSS
Licensees, and their Permitted Sublicensees, for a period of
ninety (90) days after termination, shall have the right, subject
to the conditions of Section 2.1(d), to distribute all CSS
Compliant Products that have been produced or are in production
as of the effective date of termination. Notwithstanding any of
the foregoing, the covenant not to xxx granted in Sections 5.1(b)
and Section 5.1(c) with respect to Disc IP shall not terminate in
any event.
(c) Upon Failure to Establish the Entity. If this Agreement is
------------------------------------
terminated pursuant to Section 6.1(d): (i) all licenses granted
by MEI to Licensee shall terminate, provided, however, that
Licensee, for a period of eighteen (18) months after termination,
shall have the right, subject to the conditions of Section
2.1(d), to distribute all CSS Compliant Products that have been
produced or are in production as of the date of MEI's termination
notice; and (ii) the covenant not to xxx granted by Licensee
under Section 5.1(a) shall terminate, provided, however, that MEI
and the CSS Licensees, and their Permitted Sublicensees, for a
period of eighteen (18) months after termination, shall have the
right, subject to the conditions of Section 2.1(d), to distribute
all CSS Compliant Products that have been produced or are in
production as of the date of termination. MEI agrees that, after
such notices have been provided to CSS Licensees, it will not
itself engage in any act that would have been permitted pursuant
to this Agreement but would be prohibited to a Licensee whose
license has been terminated pursuant to Section 6.1(d).
Notwithstanding any of the foregoing, the covenant not to xxx
granted in Sections 5.1(b) and Section 5.1(c) with respect to
Disc IP shall not terminate in any event.
6.3 Return of Materials. Within thirty (30) days after termination of this
-------------------
Agreement, Licensee shall either: (i) return all Proprietary
Information to MEI; or (ii) destroy all Proprietary Information in its
possession and certify such destruction in writing to MEI, unless: (a)
Licensee has then executed a license agreement for CSS with the
Entity; and (b) Licensee sends written notice to MEI certifying that
Licensee has entered into such agreement.
6.4 Survival. The terms of Sections 1, 5.1 (subject to Sections 6.2(a)-
--------
(c)), 5.2, 5.3, 5.4, 6.2 and 6.3 and Articles 7, 8, 9 and 10 shall
survive the termination of this Agreement.
19
7. OWNERSHIP. All Proprietary Information and media containing Proprietary
Information as provided by MEI to Licensee shall remain the property of MEI or
its licensors. Except as provided in Article 2, this Agreement does not give
Licensee any license or other right to the Proprietary Information.
8. DISCLAIMER AND LIMITATION OF LIABILITY.
8.1 Disclaimer. ALL PROPRIETARY INFORMATION IS PROVIDED "AS IS." MEI MAKES
----------
NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, AND EXPRESSLY DISCLAIMS IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY
EQUIVALENTS UNDER THE LAWS OF ANY JURISDICTION THAT MIGHT ARISE FROM
THE PROPRIETARY INFORMATION OR LICENSEE'S IMPLEMENTATION OR ATTEMPTED
IMPLEMENTATION OF SUCH INFORMATION OR CSS. MEI FURTHER DISCLAIMS ANY
WARRANTY THAT CSS AND/OR THE CONTENTS OF THE PROPRIETARY INFORMATION,
OR ANY PRODUCT IMPLEMENTING CSS OR SUCH PROPRIETARY INFORMATION, IN
WHOLE OR IN PART, WILL BE FREE FROM INFRINGEMENT OF ANY THIRD PARTY
INTELLECTUAL PROPERTY OR PROPRIETARY RIGHTS.
8.2 Limitation of Liability. SUBJECT TO SECTION 10.8, MEI OR TOSHIBA, OR
-----------------------
THEIR RESPECTIVE DIRECTORS, OFFICERS, OR EMPLOYEES (COLLECTIVELY, THE
"AFFECTED PARTIES") SHALL NOT BE LIABLE TO LICENSEE FOR ANY DIRECT,
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES
ARISING OUT OF ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT, OR
BASED ON MAKING, USING, SELLING OR IMPORTING ANY PRODUCTS OF LICENSEE
THAT IMPLEMENT PROPRIETARY INFORMATION OR CSS, WHETHER UNDER THEORY OF
CONTRACT, TORT, INDEMNITY, PRODUCT LIABILITY OR OTHERWISE. TO THE
EXTENT THAT ANY COURT OF COMPETENT JURISDICTION RENDERS JUDGMENT
AGAINST MEI NOTWITHSTANDING THE ABOVE LIMITATION, MEI'S TOTAL
LIABILITY TO LICENSEE IN CONNECTION WITH THIS AGREEMENT OR CSS SHALL
IN NO EVENT EXCEED THE AMOUNTS OF MONEY RECEIVED BY MEI FROM LICENSEE
UNDER THIS AGREEMENT. THIS LIMITATION OF LIABILITY SHALL NOT BE
CONSTRUED TO LIMIT OR RELIEVE MEI OR TOSHIBA, RESPECTIVELY, FOR ANY
BREACH OF ITS OBLIGATIONS IN ITS CAPACITY AS A CSS LICENSEE.
9. REMEDIES.
9.1 Indemnification. Licensee shall indemnify and hold, in their roles as
---------------
developers and licensors of CSS, MEI, Toshiba and their respective
Controlled Companies, each of their respective officers, directors and
employees, harmless from and against any and all any claims, actions,
suits, proceedings or litigation and any
20
losses, deficiencies, damages, liabilities, costs and expenses
including without limitation, reasonable attorneys' fees and all
related costs and expenses, to be paid or otherwise incurred in
connection with the defense of any claim, action, suit, proceeding or
litigation ("Claims") which result from: (i) any breach of any
------
covenant, agreement, representation and warranties herein by Licensee,
its employees, former employees who had access to Confidential
Information or Highly Confidential Information pursuant to this
Agreement, provided that Licensee's indemnity with respect to acts of
former employees shall be limited to circumstances in which Licensee
has failed to comply with its obligations as to former employees
pursuant to Section 5.2(b)(ii) hereof, (ii) Licensee's manufacture,
sale or use of any DVD Products, provided, that such indemnity shall
not extend to: (a) any Claim that the CSS Specifications infringe the
intellectual property rights of any third parties, or (b) any Claim or
any portions thereof that is independently attributable to the terms
of the CSS Specifications themselves; and/or (iii) Licensee's
activities under Section 5.3.
9.2 Equitable Relief. Licensee and MEI recognize and agree that due to the
----------------
unique nature of certain provisions hereof and the lasting effect of
and harm from a breach of such provisions, including making available
the means for widespread unauthorized copying of copyrighted content
intended to be protected using CSS, in the event that Licensee
breaches its obligations under Section 2.1, 2.3, 2.5, 4.2, 5, or 10
hereof, money damages alone will not adequately compensate an injured
party, including an injured Eligible Licensee pursuant to Section 9.4,
and that injury to such party will be irreparable. Licensee and MEI
therefore agree that, in addition to all other remedies available to
the injured party at law, in equity, by agreement or otherwise, the
injured party, including an Eligible Licensee pursuant to Section 9.4,
upon showing to the relevant court's satisfaction that applicable
factors other than the fact that harm will be irreparable and that
monetary damages are not sufficient to remedy the injury have been
fulfilled, shall be entitled to specific performance or other
temporary, preliminary, or permanent injunctive or equitable relief
including corrective actions appropriate to the circumstances for the
enforcement of any such obligation (whether or not there have been
commercial sales of products subject to the requested relief).
9.3 Specific Remedies. Licensee acknowledges that due to the critical
-----------------
importance of maintaining the integrity of CSS and the inability to
calculate the damage to CSS users in the event of any material breach
of Section 5.2, MEI, in addition to any other remedies in equity, but
in lieu of any and all other claims for monetary damages, may recover
liquidated damages for each material breach from Licensee in the
amount of one million U.S. dollars ($1,000,000), provided that the
parties agree that Licensee may request and the court may grant such
request that this amount be reduced to take account of the fact that
Licensee brought the breach to MEI's attention in a timely and
reasonable manner. For purposes of this Section 9.3, a series of
substantially related events shall constitute a single material
breach. For purposes of this Section 9.3, the following is a non-
exclusive list of circumstances in which there is no material breach
of Section 5.2: (1) if no Confidential Information or Highly
Confidential Information was released to a
21
third party not permitted hereunder to have such information or could
reasonably have been expected to have been released to such third
party as a result of the breach; (2) if Licensee maintains an internal
program to assure compliance with Section 5.2 (including a program to
assure maintenance of confidentiality of information for purposes in
addition to compliance with this Agreement), the breach was
inadvertent or otherwise unintentional, and the breach did not have a
material adverse effect on the integrity or security of CSS; or (3) if
Licensee brought the breach to MEI's attention in a timely manner as
required by this Agreement and such breach did not have a material
adverse effect on the integrity or security of CSS.
9.4 Third Party Beneficiary Rights. The parties hereto acknowledge and
------------------------------
agree that the compliance of Licensee, other CSS Licensees, and
Associate Licensees with the terms of the licenses granted by this
Agreement or the Associate License, as applicable, is essential to
maintain the integrity and security of the Contents Scramble System in
order to protect prerecorded motion pictures contained on DVD Discs.
As part of the consideration of the licenses granted herein, Licensee,
for itself and its Permitted Sublicensees, hereby confers a third-
party beneficiary right upon certain CSS Licensees ("Eligible
--------
Licensees") that fall into one of two classes: (i) Content Providers
---------
("Eligible Content Providers") or (ii) manufacturers of CSS Compliant
--------------------------
Products other than DVD Discs ("Eligible Implementers"), in order to
---------------------
enforce certain of Licensee's obligations, subject to the following
conditions:
(a) Either an Eligible Content Provider who has commercially released
one or more prerecorded motion pictures on DVD Disc or an
Eligible Implementer who has commercially released one or more
CSS Compliant Products other than DVD Discs shall be entitled to
initiate or institute a claim or action ("Beneficiary Claim") to
-----------------
enforce only those obligations of Licensee specified as follows
(collectively, the "Eligible Obligations"): (i) for any
--------------------
Beneficiary Claim initiated by Eligible Content Providers,
Licensee's obligations under Section 2.1 [Nonexclusive License],
2.3 [Right to Have Made], 2.4 [Sublicenses], 2.5 [No Sublicense
or Implied Licenses], 4.2 [Compliance with Specifications], 5.1
[Access to Intellectual Property], 5.2 [Confidentiality], 5.3
[Reverse Engineering], 9.2 [Equitable Relief], 9.4(d) [Settlement
Restrictions] and Section 10 [Miscellaneous] and including any
equivalent provisions contained in any Associate License (Exhibit
E) and (ii) for any Beneficiary Claim initiated by Eligible
Implementers, Licensee's obligations under Section 4.2
[Compliance with Specifications] solely as such obligations
pertain to Section 5.4 [Non-alteration of the Secured Disc Key
Set] and Section 6.3 [Motion Picture Scrambling] of the CSS
Procedural Specifications, Section 5.1 [Access to Intellectual
Property] and Section 9.4(d) [Settlement Restrictions]. Each
Eligible Licensee who has not initiated the Beneficiary Claim but
falls into the same class of Eligible Licensee as the initiating
Eligible Licensee pursuant to this Section 9.4, shall be eligible
to join such Beneficiary Claim. The remedies for any Beneficiary
22
Claim shall be limited to equitable relief provided under Section
9.2, subject to Section 9.5.
(b) Prior to initiating or instituting any Beneficiary Claim against
Licensee ("Defendant Licensee"), an Eligible Licensee ("Plaintiff
------------------ ---------
Licensee") shall provide MEI notice and consultation reasonable
--------
under the circumstances regarding a proposed Beneficiary Claim;
provided that such consultation with MEI shall not affect an
Eligible Licensee's complete discretion in initiating such a
Beneficiary Claim. Such Eligible Licensee shall further provide
MEI with notice of actual filing of a Beneficiary Claim and upon
MEI's request, any copies of material documents to be filed in
Plaintiff Licensee's initiation or pursuit of such Beneficiary
Claim. MEI shall cooperate reasonably with such Eligible
Licensee in providing appropriate and necessary information in
connection with the Beneficiary Claim to the extent that such
cooperation is consistent with the preservation of the integrity
and security of CSS. Documents provided to MEI under this
Section 9.4(b) shall not include any documents filed or to be
filed under seal in connection with such Beneficiary Claim.
(c) MEI shall provide all Eligible Content Providers or Eligible
Implementers, as the case may be, with prompt notice of Plaintiff
Licensee's Beneficiary Claim against Defendant Licensee (a "Claim
-----
Notice") in accordance with Section 10.6. Within sixty (60) days
------
of the date of mailing of a Claim Notice, all such Eligible
Licensees shall elect whether to join in such Beneficiary Claim,
and the failure of any such Eligible Licensee to provide written
notice to MEI of such election and to join in such Beneficiary
Claim within such sixty (60) day period shall be deemed a waiver
of such Eligible Licensee's third party beneficiary right under
this Section 9.4 with respect to all Beneficiary Claims against
such Defendant Licensee arising out of the alleged breach by such
Defendant Licensee raised in such Beneficiary Claims. Plaintiff
Licensee shall support, and Defendant Licensee shall not oppose,
any motion to intervene by such Eligible Licensees or MEI
electing to join such Beneficiary Claim within such sixty (60)
day period. Neither an Eligible Licensee's failure to notify or
consult with MEI or provide copies of documents to MEI as
required by Section 9.4(b), nor MEI's failure to give notice
under this Section 9.4(c) shall be a defense against any
Beneficiary Claim or grounds for a request to delay the granting
of any preliminary relief requested.
(d) Eligible Licensees shall have no right to, and Licensee agrees
that it will not, enter into any settlement that: (i) amends any
material term of this Agreement or of the Associate License
(Exhibit E), (ii) has a material adverse effect on the integrity
and/or security of CSS; or (iii) impacts any of MEI's rights in
and to CSS or any intellectual property right embodied therein
unless MEI shall have provided prior written consent thereto.
23
(e) NOTWITHSTANDING SECTION 10.4(b), LICENSEE AGREES THAT ALL
BENEFICIARY CLAIMS INSTITUTED UNDER THIS SECTION 9.4 SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA, EXCLUDING THAT BODY OF LAW RELATING TO
CONFLICTS OF LAW PRINCIPLES, AND SHALL BE CONDUCTED IN FEDERAL
AND STATE COURTS LOCATED IN ANY COUNTY IN THE STATE OF CALIFORNIA
AND HEREBY IRREVOCABLY CONSENTS TO (i) THE EXCLUSIVE JURISDICTION
AND VENUE IN THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF
CALIFORNIA; AND (ii) THE SERVICE OF PROCESS OF SAID COURTS IN ANY
MATTER ARISING OUT OF THIS SECTION 9.4 BY PERSONAL DELIVERY OR BY
MAILING OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, AT THE ADDRESSES AS SPECIFIED IN THIS AGREEMENT OR TO
THE AGENT REQUIRED BY SECTION 10.4(c). LICENSEE 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 SUCH COURT PERTAINING TO THIS AGREEMENT, TO THE
MAXIMUM EXTENT PERMITTED BY THE LAW OF THE PLACE WHERE
ENFORCEMENT OR EXECUTION OF ANY SUCH ORDER OR JUDGMENT MAY BE
SOUGHT AND BY THE LAW OF ANY PLACE WHOSE LAW MIGHT BE CLAIMED TO
BE APPLICABLE REGARDING THE EFFECTIVENESS, ENFORCEMENT, OR
EXECUTION OF SUCH ORDER OR JUDGMENT, INCLUDING PLACES OUTSIDE OF
THE STATE OF CALIFORNIA AND OF THE UNITED STATES.
9.5 Nothing contained in Section 9.2 or Section 9.4 is intended to limit
remedies or relief available pursuant to statutory or other claims
that a CSS Licensee may have under separate legal authority.
10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement, the exhibits hereto and the CSS
----------------
Specifications constitute the entire Agreement between the parties
hereto and supersede all oral or written agreements, either entered
prior to or contemporaneously with this Agreement. Subject to Section
10.7, this Agreement may not be modified except by written agreement
dated subsequent to the date of this Agreement and signed by both
parties.
10.2 Assignment. The licenses granted hereunder are personal to Licensee,
----------
and Licensee's rights under this Agreement shall not be assigned or
otherwise transferred without the written approval of MEI, which shall
not be unreasonably withheld, except where such assignment is to a
corporation controlling, controlled
24
by or under common control with Licensee or to the purchaser of all or
substantially all of the outstanding capital stock or assets of
Licensee or to the surviving entity in a merger, reorganization, or
other business combination and where notice of such assignment has
been provided in advance to MEI. Subject to the limitations set forth
in this Agreement, this Agreement will inure to the benefit of and be
binding upon the parties, their successors and permitted assigns. MEI
may assign or transfer this Agreement to another party that agrees to
assume MEI's obligations hereunder, and will provide Licensee with
written notice thereof. Either party may assign or transfer any of its
Disc IP, Absolutely Necessary Claims, or Relatively Necessary Claims
provided that the successor-in-interest agrees to be bound by such
party's obligations with respect to the Disc IP, Absolutely Necessary
Claims, and Relatively Necessary Claims under the terms of this
Agreement.
10.3 Presumptions. In construing the terms of this Agreement, no
------------
presumption shall operate in either party's favor as a result of its
counsel's role in drafting the terms or provisions hereof.
10.4 Governing Law; Jurisdiction. (a) THIS AGREEMENT SHALL BE GOVERNED BY
---------------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
EXCLUDING THAT BODY OF LAW RELATING TO CONFLICTS OF LAW PRINCIPLES.
(b) IN CONNECTION WITH ANY LITIGATION BETWEEN THE PARTIES HERETO
ARISING OUT OF OR RELATING TO THIS AGREEMENT, EACH PARTY HERETO
IRREVOCABLY CONSENTS TO: (i) THE EXCLUSIVE JURISDICTION AND VENUE IN
THE FEDERAL AND STATE COURTS LOCATED IN THE COUNTY OF SANTA CLARA,
CALIFORNIA; AND (ii) THE SERVICE OF PROCESS OF SAID COURTS IN ANY
MATTER RELATING TO THIS AGREEMENT BY PERSONAL DELIVERY OR BY MAILING
OF PROCESS BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE
ADDRESSES SPECIFIED IN THIS AGREEMENT. OR TO THE AGENT TO BE
APPOINTED PURSUANT TO (c), BELOW. (c) LICENSEE SHALL APPOINT AN AGENT
IN THE STATE OF CALIFORNIA FOR ACCEPTANCE OF SERVICE OF PROCESS
PROVIDED FOR UNDER THIS AGREEMENT AND SHALL NOTIFY MEI OF THE IDENTITY
AND ADDRESS OF SUCH AGENT WITHIN THIRTY (30) DAYS AFTER THE EFFECTIVE
DATE; (d) LICENSEE 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 SUCH COURT PERTAINING TO THIS AGREEMENT, TO THE
MAXIMUM EXTENT PERMITTED BY THE LAW OF THE PLACE WHERE ENFORCEMENT OR
EXECUTION OF ANY SUCH ORDER OR JUDGMENT MAY BE SOUGHT AND BY THE LAW
OF ANY PLACE WHOSE LAW MIGHT BE CLAIMED TO BE APPLICABLE REGARDING THE
EFFECTIVENESS, ENFORCEMENT, OR EXECUTION
25
OF SUCH ORDER OR JUDGMENT, INCLUDING PLACES OUTSIDE OF THE XXXXX XX
XXXXXXXXXX XXX XX XXX XXXXXX XXXXXX.
10.5 Severability; Waiver. Subject to Section 10.7, should any clause,
--------------------
sentence, or paragraph of this Agreement judicially be declared to be
invalid, unenforceable, or void, such decision shall not have the
effect of invalidating or voiding the remainder of this Agreement.
The parties agree that the part or parts of this Agreement so held to
be invalid, unenforceable, or void shall be reformed without further
action by the parties hereto and only to the extent necessary to make
such part or parts valid and enforceable. Subject to Section 10.7, a
waiver by either of the parties hereto of any of the covenants to be
performed by the other party or any breach thereof shall not be
effective unless made in writing and signed by the waiving party and
shall not be construed to be a waiver of any succeeding breach thereof
or of any covenant herein contained.
10.6 Notice. All notices to be provided pursuant to this Agreement shall
------
be given in writing and shall be effective when either served by
personal delivery or upon receipt via certified mail, return receipt
requested, postage prepaid, overnight courier service or sent by
facsimile transmission with hard copy confirmation sent by certified
mail, in each case to the party at the addresses listed below:
If to MEI:
Matsushita Electric Industrial Co., Ltd.
1006 Kadoma
Xxxxx 000, Xxxxx
Attn: General Manager, International Contracts Department
Fax: 000-00-0-000-0000
If to Licensee:
Quadrant International
000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx Xxx
Fax: (000) 000-0000
10.7 Amendment. No agreement pertaining to CSS similar to this Agreement
---------
or to the Associate License that is Exhibit E hereto between MEI and
any CSS Licensee or Associate Licensee may be entered into on terms
other than those contained in this Agreement or the Associate License,
as applicable, to the extent that any modified terms would have a
material adverse effect on the integrity or security of CSS or the
protections provided to Eligible Licensees pursuant to Section 9.4
hereof (including any of the Sections referenced therein) or in the
Associate License, and no agreement between MEI and any CSS Licensee
or Associate Licensee having terms contained herein or the Associate
License, as applicable
26
may be modified or its terms waived if such modification or waiver
would have a material adverse effect on the integrity or security of
CSS or the protections provided to Eligible Licensees pursuant to
Section 9.4 hereof (including any of the Sections referenced therein)
or in the Associate License.
10.8 MEI Obligations. MEI agrees that as the interim licensor, it shall
---------------
have the following affirmative obligations, breach of which shall be
subject to the remedies provided below.
(a) Prior to the transfer of this Agreement to the Entity, and
consistent with its roles as developer of CSS, interim licensor
of CSS, and promoter of adoption of CSS, MEI agrees that it will
make good faith efforts to maintain the confidentiality of CSS
Confidential Information and Highly Confidential Information.
MEI shall not be liable for breaches of this Section that are not
material. As non-exclusive examples of situations in which a
breach is not material under this section, the situations
described in Section 9.3 (1), (2), and (3) shall be applicable to
MEI in any determination of whether a breach is material. In the
event that MEI materially breaches its confidentiality obligation
set forth in this Section, MEI's total liability to all CSS
Licensees for such breach shall be limited to one million dollars
($1,000,000) for each such material breach. For purposes of this
Section, a series of related events shall constitute a single
material breach.
(b) MEI and Licensee acknowledge that MEI's affirmative obligations
under this Agreement (other than as provided in subsection (a)
above), consist of the following:
(i) having filed patent applications as stated in Recital A;
(ii) delivery of the CSS Specifications pursuant to Section
4.1;
(iii) providing written notice and extending the date of the
Entity's formation pursuant to Section 6.1(d);
(iv) cooperating reasonably in providing appropriate and
necessary information in connection with a Beneficiary
Claim filed by Eligible Licensees pursuant to Section 9.4;
(v) providing prompt notice to all Eligible Licensees of a
Beneficiary Claim pursuant to Section 9.4(c);
(vi) providing written notice to Licensee in the event MEI
assigns this Agreement pursuant to Section 10.2;
(vii) amending, as soon as reasonably possible following the
finalization of this Agreement, the specifications
applicable to licensees of CSS that entered licenses prior
to the use of
27
this Agreement, so that (1) such specifications contain
these Procedural Specifications and related Technical
Specifications, and (2) each such licensee of CSS is
required to comply with such amended specifications no
later than 30 days following receipt of MEI's notice
containing the amended specifications;
(viii) making all reasonable efforts, as soon as possible, to
obtain all required consents, from all licensees of CSS
that entered licenses prior to the use of this Agreement,
to an amended and restated license conforming to this
Agreement;
(ix) not amending or waiving provisions of this Agreement or of
the Associate License pursuant to the conditions set forth
in Section 10.7;
(x) not unreasonably withholding its consent where such
consent is called for under this Agreement;
(xi) notifying and applying to Licensee modifications to the
Specifications in accordance with Section 4.2;
(xii) not unreasonably withholding agreement for Licensee to
receive additional copies of documents containing Highly
Confidential Information pursuant to Section 5.2(b)(iii);
and
(xiii) maintaining confidentiality regarding Licensee in
accordance with Section 5.2(c).
In the event that MEI fails to perform any of the affirmative
obligations set forth in this Section 10.8(b) above, Licensee's
sole and exclusive remedy against MEI shall be to have MEI
specifically perform such obligations.
28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MATSUSHITA ELECTRIC INDUSTRIAL QUADRANT INTERNATIONAL INC.
CO., LTD.
/s/ Xxxx Xxxxxx /s/ Xxxxx Xxx
----------------------------------- --------------------------------------
Signature Signature
XXXX XXXXXX Xxxxx Xxx
----------------------------------- --------------------------------------
Printed Name Printed Name
Director, CSS Interim License
Organization Chief Financial Officer
----------------------------------- --------------------------------------
Title Title
November 20, 1997 November 28, 1997
----------------------------------- --------------------------------------
Date Date
[Signature Page to Amended and Restated CSS Interim License Agreement]
