EXHIBIT 10.57
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND SEPARATELY FILED
WITH THE COMMISSION
PHS AND PDC SUBSCRIBER UNIT
PATENT LICENSE AGREEMENT
BETWEEN
INTERDIGITAL TECHNOLOGY CORPORATION
and
SHARP CORPORATION
Dated and Effective March 19, 1998 ("Effective Date")
SUBSCRIBER UNIT PATENT LICENSE AGREEMENT
THIS IS A PATENT LICENSE AGREEMENT (the "Agreement"), dated March 19, 1998, (the
"Effective Date") between InterDigital Technology Corporation ("ITC"), a
Delaware corporation with a mailing address of [**], Xxxxxxxxxx, XX 00000,
and Sharp Corporation ("Licensee"), a corporation organized and existing under
the laws of Japan, with a mailing address [**] JAPAN.
PREAMBLE
ITC owns and has the right to license the Licensed Patents (defined below) and
is willing to grant world-wide, non-exclusive licenses thereunder on the terms
set forth below. Licensee desires to obtain such a license.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound, the parties agree as follows:
ARTICLE I - DEFINITIONS
1.1 "Affiliate" means IDC or a corporation or other legal entity of which more
than fifty percent (50%) of the voting stock or control is owned, directly
or indirectly, by Licensee, IDC, or ITC, as the case may be. An "Affiliate"
may also include, subject to the mutual agreement of the parties, a company
over whose senior management Sharp Corporation exercises substantial
control.
1.2 "Covered Standards" mean PHS and PDC.
1.3 "Covered Subscriber Units" means Subscriber Units that are built to operate
in accordance with one or more Covered Standards.
1.4 "Multi Mode Unit" means a Covered Subscriber Unit designed to operate in
accordance with at least two Covered Standards.
1.5 "Essential Patents" means all patents (excluding Licensed Patents) that are
essential to any practical implementation of a Covered Standard.
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** Material has been omitted and filed separately with the Commission.
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1.6 "IDC" means InterDigital Communications Corporation, having an office at
000 Xxxxx Xxxxxx, Xxxx xx Xxxxxxx, XX 00000.
1.7 "Infrastructure Equipment" means switching centers, base stations, base
station controllers, digital transceivers, and like telephony equipment,
which are used to interconnect a Subscriber Unit to the wired telephone
network.
1.8 "Licensed Patents" means every issued TDMA-based digital wireless telephone
related patent and patent application on file or filed within five (5)
years of the Effective Date, which patents and patent applications are
owned by ITC or for which ITC has the right to grant the licenses conveyed
hereunder, (including utility models but excluding design patents and
design registrations) in every country of the world. A listing of Licensed
Patents as of the Effective Date is included as EXHIBIT A.
1.9 "Licensee" means the company identified as "Licensee" on page 2 of this
Agreement, and its Affiliates.
1.10 "Net Selling Price" means (for royalty calculation purposes) the greater of
(i) the amount actually invoiced to the customer for a Covered Subscriber
Unit, less actual battery cost (as invoiced to Licensee by non-affiliated
parties), packing, insurance and shipping costs, applicable import, export
and excise duties (including VAT added by the Licensee to the completed
Covered Subscriber Unit), returns, and trade discounts given, to the extent
included in the amount invoiced to the customer, or (ii) 120% of the
manufactured cost (consisting of direct product costs and factory overhead
of Covered Subscriber Unit but excluding actual invoiced battery cost by
non-affiliated third parties). As used in this Agreement, "factory
overhead" may include standard cost components such as direct labor and
supplies together with depreciation of manufacturing equipment but shall
exclude, without limitation, sales and marketing, and general and
administrative overhead and expenses.
1.11 "Patent Issuance Date" means the date on which the first patent issues to
ITC based on Japanese patent application [**].
1.12 "PDC" means the XXX XXX00X compatibility standard developed in Japan known
as PDC, or Personal Digital Cellular (also Japan Digital Cellular) for TDMA
digital wireless mobile radio communication systems, as amended from time
to time.
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** Material has been omitted and filed separately with the Commission.
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1.13 "Per Unit Royalty" has the meaning ascribed to that term in Article III.
1.14 "PHS" means the RCR STD28 compatibility standard developed in Japan known
as PHS or Personal Handy Phone System, as amended from time to time.
1.15 "Subscriber Unit" means a radiotelephone or other end-user terminal devise,
whether fixed, mobile, transportable, vehicular, portable or hand-held,
adapted for use by a single person. A Subscriber Unit shall include a
Wireless Local Loop Subscriber Unit.
1.16 "TDMA" means time division multiple access.
1.17 "Wireless Local Loop Applications" means a digital wireless communications
system that is primarily directed to providing fixed wireless telephone
service in place of wireline service
1.18 "Wireless Local Loop Subscriber Unit" means a radiotelephone, designed
generally in accordance with a Covered Standard, used in a Wireless Local
Loop Application.
ARTICLE II - LICENSE GRANT
2.1 Grant. ITC hereby grants to Licensee a non-exclusive, non-transferrable
(except as to pass-through rights as provided herein), worldwide,
royalty-bearing license under the Licensed Patents to make, have made, use,
sell and otherwise distribute Covered Subscriber Units. The license granted
hereunder excludes the right to grant sublicenses. ITC hereby releases,
acquits and forever discharges Licensee (and those Affiliates affiliated
with Licensee on the Effective Date) from any and all claims or liability
for infringement of any Licensed Patents by the making, selling or
otherwise distributing of Covered Subscriber Units prior to the April 1,
1998.
2.2 Limitations on License Grant. No license is granted directly or by
implication to any Infrastructure Equipment used in connection with Covered
Subscriber Units.
2.3 Additional Covered Standards. If and when Licensee requires a license under
ITC's patents to manufacture and sell products under other TDMA-based
standards, ITC and Licensee shall negotiate such a license in good faith.
Any
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disputes between the parties as to such license shall be resolved pursuant
to the dispute resolution procedures set forth in Article VII.
2.4 Cross-License. Licensee hereby grants to IDC and its Affiliates a
royalty-free, worldwide, non-transferrable, irrevocable license under any
and all patents in relation with Covered Subscriber Units and
Infrastructure Equipment held or controlled by the Licensee as of the
Effective Date or that issue from patent applications on file as of, or
filed within five years of, the Effective Date to make, have made, use,
sell or otherwise distribute Covered Subscriber Units and/or Covered
Infrastructure.
ARTICLE III - ROYALTY RATES/CREDITS
3.1 Royalty Payments. In consideration for the license granted herein, Licensee
shall pay to ITC a Per Unit Royalty on each sale by Licensee of a Covered
Subscriber Unit (exclusive of returns and credits, and exclusive of the
Covered Subscriber Unit released, acquitted or discharged under Section
2.1). The Per Unit Royalty shall be as follows:
(A) Covered Subscriber Units (Non-Wireless Local Loop Applications):
(i) PDC: [**]
(ii) PHS: [**]
(B) Covered Subscriber Units (Wireless Local Loop Applications):
(i) PHS and PDC: [**]
3.2 Timing of Payments. Licensee's obligation to make royalty payments to ITC
hereunder shall commence:
(A) Upon April 1, 1998, for all Covered Subscriber Units sold on or after
April 1, 1998 for which the manufacture, sale or use of such equipment
(or components thereof) takes place outside of the country of Japan,
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** Material has been omitted and filed separately with the Commission.
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(B) Upon the Patent Issuance Date, for all Covered Subscriber Units sold
on or after April 1, 1998 for which the manufacture, sale and use of
such equipment (or components thereof) shall occur within the country
of Japan.
In the event that the Patent Issuance has not occurred, ITC and Licensee
shall negotiate in good faith the commencement of royalty payments
hereunder based on other ITC Patents issued in Japan. Any disputes arising
under this Section shall be subject to the Dispute Resolution procedures
set forth in Article VII.
ARTICLE IV - LUMP SUM PAYMENT
4.1 Lump Sum Payment. In consideration for the rights granted herein, Licensee
shall pay an Up-Front Fee to ITC in the amount of $US4,444,000. Licensee
shall also pay the amount of $US1,111,000 as a Royalty Prepayment for
Covered Subscriber Units sold on and after April 1, 1998. The above
payments shall be irrevocable and non-refundable. The above-mentioned
aggregated $US5,555,000 shall be paid by Licensee to ITC within thirty (30)
days after the execution of this Agreement
ARTICLE V - PASS-THROUGH LICENSE
5.1 Pass-Through License. Provided Licensee is not in default of its
obligations hereunder, Licensee's customers that are operators and
end-users but who are not also suppliers (other than retail) will receive a
pass-through license for sale (including lease) or use of Covered
Subscriber Units. Neither this Agreement nor any payments made hereunder,
are intended, nor should they be construed, as exhausting ITC's rights to
royalties or damages from unlicensed purchasers.
ARTICLE VI - TERM/TERMINATION
6.1 Term. The term of this Agreement shall commence on the Effective Date and
terminate five (5) years thereafter, unless sooner terminated as provided
herein. Any extensions to this Agreement shall be made by mutual agreement
of the parties, subject to each party's discretion.
6.2 Termination for Default. This Agreement may be canceled by either party,
upon thirty (30) days' prior written notice, if the other party is in
breach of any of its material obligations hereunder and the breach is not
remedied within the notice period. During the term of this Agreement, if
Licensee institutes or actively participates as an adverse party in, or
otherwise provides material support to, any legal action anywhere in the
world, the purpose of which is to invalidate or limit the validity or scope
of the Licensed Patents, ITC shall have the right to consider
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such action as a material breach of this Agreement. Licensee's other
material obligations shall include, but shall not be limited to, its
royalty reporting and payment obligations.
ARTICLE VII - DISPUTE RESOLUTION
7.1 Negotiation of Disputes. In the event of any dispute arising under this
Agreement, senior executives of the parties with decision making authority
will meet in Wilmington, Delaware, unless some other city as may be
agreeable to the parties, as soon as reasonably possible (but no later than
sixty (60) days after notice) and will enter into good faith negotiations
aimed at resolving the dispute. If they are unable to resolve the dispute
in a mutually satisfactory manner within an additional sixty (60) days, the
matter may be submitted to mediation/arbitration as provided for in
Sections 7.2 and 7.3 hereto
7.2 Mediation of Disputes. The parties agree to submit any unresolved dispute
to a sole mediator selected by the parties as soon as reasonably possible
(but no later than sixty (60) days after notice). Such mediation shall
occur in Wilmington, DE. If not thus resolved, the parties will proceed as
specified in Section 7.3 hereto.
7.3 Arbitration of Disputes. Any unresolved disputes arising under this
Agreement shall be submitted to an arbitration proceeding which shall take
place in Washington, D.C. The proceeding shall be conducted under the then
prevailing rules for commercial arbitration of the American Arbitration
Association, by a panel of three (3) arbitrators, one of whom must have
substantial experience in the field of telecommunications. Each party shall
select one arbitrator and the two arbitrators will select the third
arbitrator. The arbitrators shall have the authority to permit limited
discovery to the extent required by a party in order to establish its case.
The decision of the arbitrators shall be final and binding and may be
entered and enforced in any court of competent jurisdiction. Any monetary
award shall be payable in U.S. dollars, free of any tax, offset or other
deduction. Any determination of the arbitration shall be confidential to
the parties hereto and binding solely on the parties hereto.
ARTICLE VIII - MISCELLANEOUS
8.1 Payments. Payments made pursuant to Sections 4.1 shall be made by wire
transfer in U.S. dollars at License Agreement execution. All other payments
required under this Agreement shall be made by wire transfer in U.S.
dollars on a semi-annual basis by February 28 for the preceding six-month
period ending December 31 and August 31 for the preceding six-month period
ending June 30.
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Regardless of whether payment is made, Licensee shall provide ITC (at the
same times as noted above) with a written report and associated
certification setting forth the quantity of each type of Covered Subscriber
Units sold, and additional information sufficient to determine the
royalties payable for such Covered Subscriber Units. All such reports shall
be held in confidence by ITC.
8.2 Taxes. All royalties payable hereunder are net of and free and clear from
any applicable taxes (whether based on income or otherwise), which taxes
shall be paid by Licensee on a grossed up basis, except any applicable
Japanese source withholding taxes which shall be deducted by Licensee from
amounts payable to ITC hereunder. On the basis of such deduction, Licensee
agrees that it shall be responsible for and pay, on ITC's behalf, the
withholding tax associated with the payments set forth under Section 3.1
and 4.1 hereto. Licensee will furnish ITC with appropriate documentation
evidencing the payment of such tax as issued by the appropriate authority
of such government.
8.3 Most Favored Licensee Rights. Provided Licensee is not in default of its
obligations hereunder, the Licensee shall be treated as a most favored
licensee ("MFL") under the Licensed Patents with regard to Covered
Subscriber Units. If, subsequent to the Effective Date, ITC enters into an
agreement with a third party comparable to the license granted in this
Agreement but containing commercial terms which, in the aggregate (i.e.,
not on a clause by clause basis), are more favorable to the third party
than the commercial terms in this Agreement, ITC will notify Licensee of
such agreement. Licensee shall have the right to substitute for this
Agreement the more favorable license agreement in its entirety (the
"Substitute Agreement") and such substitution shall constitute a novation
of this entire Agreement. MFL rights shall not extend to (i) TDMA License
Agreements executed as part of broad-based strategic alliance partnerships,
(ii) to any agreements executed prior to the Effective Date, or (iii) other
Agreements amended subsequent to the Effective Date pursuant to executory
amendment provisions entered into prior to the Effective Date. If Licensee
elects a Substitute Agreement, Licensee shall, as a condition precedent to
the effectiveness of the Substitute Agreement, pay all royalties owed (or
credit prepayments) based on this Agreement for Covered Subscriber Unit
sales made prior to the date Licensee executes the Substitute Agreement. To
the extent that Licensee continues to have pre-payments available, the
remaining pre-payment shall apply under the Substitute Agreement.
8.4 No Other Royalty Adjustment. The royalties set forth herein are based on a
variety of factors, among them the breadth of ITC's patent portfolio, the
avoidance of litigation costs related to challenges to the validity and
scope of such patents, and the reasonable expectations of TDMA market
growth.
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Because (i) the parties have considered a variety of factors in developing
the royalty rates, and (ii) those rates are already the subject of multiple
discounts, credits and readjustment as provided herein, the parties
irrevocably agree that neither will seek to alter, through negotiation,
arbitration, litigation or otherwise, the royalty rates except as provided
herein. Notwithstanding the foregoing, if there are drastic economic
changes in the market for Covered Subscriber Units such that the royalty
payments required hereunder present a substantial impediment for Licensee
to successfully compete for sales, Licensee may request that ITC modify the
royalty rates hereunder on a reasonable basis.
8.5 Confidentiality. Unless otherwise required by law or court order, the
parties shall maintain as confidential the License Agreement and any
proprietary information disclosed under, or as a result of the negotiation
of, the License Agreement.
8.6 Audit. Licensee shall keep books and records adequate to accurately
determine the payments due under this Agreement. The books and records must
be retained for at least five (5) years after the delivery of the royalty
report to which they relate. ITC shall have the right, no more than once
per calendar year, to have an independent certified public accountant, who
shall enter into an appropriate nondisclosure agreement with Licensee,
inspect all relevant books and records of Licensee on seven (7) business
days notice and during regular business hours to verify the reports and
payments required to be made hereunder. The auditor shall disclose no more
information than is reasonably necessary to determine the royalties owed
hereunder and to assess the average Net Selling Price. Should an
underpayment in excess of [**] percent ([**]) be discovered, Licensee shall
pay the cost of the audit. In any event, Licensee shall promptly pay any
underpayment together with interest at the compounded annual rate of [**]
percent ([**]). All information obtained through such audit shall be held
in confidence by Licensee.
8.7 Governing Law/Venue. The validity and interpretation of this Agreement
shall be governed by Delaware law, without regard to conflict of laws
principles. The parties further irrevocably consent to exclusive
jurisdiction of the state and federal courts in the State of Delaware.
Process shall be deemed sufficient if served on either party by courier
service or recognized mail delivery service (e.g. U.S. Mail), postage
prepaid, certified or registered, return receipt requested, and addressed
as indicated on page 1 of this Agreement. The parties hereby waive any
objection as to the sufficiency of the method of service provided such
service is made as set forth herein.
8.8 Limited Warranty. ITC represents and warrants that it has the right to
license the Licensed Patents. ITC makes no other representation or warranty
with regard to
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** Material has been omitted and filed separately with the Commission.
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the validity of the Licensed Patents or the Licensee's ability to use,
manufacture, have manufactured or sell Covered Subscriber Units free of
infringement of third party intellectual property rights. ITC shall have
no obligation to maintain or prosecute Licensed Patents.
8.9 Waivers. The failure of any party to insist upon the performance of any of
the terms or conditions of this Agreement or to exercise any right
hereunder, shall not be construed as a waiver or relinquishments of the
future performance of any such term or condition.
8.10 Severability. The provisions of this Agreement shall be severable, and if
any of them are held invalid or unenforceable, then that provision shall
be construed to the maximum extent permitted by law. The invalidity or
unenforceability of one provision shall not necessarily affect any other.
8.11 No Set Off. Licensee agrees and acknowledges that it has no right to, and
shall not, attempt to set off amounts claimed to be owed based on any
claim that it has or may have in the future against IDC or its Affiliates
other than ITC, against amounts owed hereunder.
8.12 Notices. All notices or other communications required or permitted under
this Agreement shall be in writing and shall be delivered by personal
delivery, registered mail, return receipt requested, or a qualified "Next
Day Air" delivery service addressed as indicated on page 2of this
Agreement.
8.13 Limitation. Nothing in this Agreement shall be construed as: (a) an
agreement to bring or prosecute actions against third party infringers of
the Licensed Patents; (b) conferring any license or right under any patent
other than the Licensed Patents; or (c) conferring any right to use the
Licensed Patents outside the field of use defined by the license grant of
this Agreement.
8.14 Personal Agreement. This Agreement is personal to Licensee and may not be
assigned or transferred, nor may any license granted hereunder be assigned
or transferred, whether by operation of law or otherwise, and any attempt
to make any such assignment or transfer shall be null and void; provided,
however, this Agreement may be transferred in connection with the sale of
all or substantially all of the business or assets of Licensee to which
this Agreement relates. ITC, may in its sole discretion, limit application
of this license to the permitted transferee to the transferred business.
The licenses granted hereunder to Licensee shall survive any transfer by
operation of law or otherwise of the Licensed Patents or this Agreement by
ITC. Licensee hereby guarantees the
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performance of, and shall be liable to ITC for any failure to perform by,
LicenseeAffiliates hereunder.
8.15 Entire Agreement/Amendment. This Agreement contains the complete and final
agreement between the parties, and supersedes all previous understandings
relating to the subject matter hereof whether oral or written. This
Agreement may only be modified by a written agreement signed by duly
authorized representatives of the parties.
8.16 Survival. The following provisions of this Agreement shall survive
expiration or termination of this Agreement: Section 2.1 (only as to the
release provision), 4.1, 7.1, 7.2, 7.3, 8.1, 8.2, 8.5, 8.7, and 8.13
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives.
INTERDIGITAL TECHNOLOGY CORPORATION SHARP CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx By:[**]
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Dated: March 19, 1998________________________ Dated: March 10, 1998__
** Material has been omitted and filed separately with the Commission.
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Index Of Exhibits
Exhibit A:
LIST OF TDMA PATENTS
Exhibit B: LIST OF SHARP AFFILIATES AS OF EFFECTIVE DATE
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