This agreement, which is to become effective _________, _________[date], is made between: _________, a _________ corporation having a principal office at _________("Licensee"), and _________, residing in _________(collectively called "Licensors"); and
Witnesseth that, in consideration of the mutual promises made in this agreement, the parties agree as follows:
Certain terms used in this agreement shall be defined as follows:
Par 1(a). "Licensed patent rights" shall mean U.S. Patent Application Serial No. _________ for _________, filed _________, _________[date], in the names of Licensors; any divisions or continuations in whole or in part thereof; any U.S. or foreign patents or applications that are later added to this license; any patents issuing on any of such applications; any reissues or extensions or reexaminations of any such patents; and any foreign patent or patent application corresponding to any of the U.S. patents or patent applications included in the "licensed patent rights."
Par 1(b). "Licensed article" shall mean any article, whether consisting of one or more separate units, made, used or marketed in any country, that is covered by any unexpired patent, or is covered by one or more claims of a pending patent application, in that country, which patent or application is part of the "licensed patent rights."
Par 1(c). "Royalty base" shall mean the "net proceeds" of "licensed articles" marketed.
Par 1(d). "Net proceeds" shall mean the total amount of monies received by Licensee for "licensed articles" and not subsequently refunded or credited, less the sum of the following deductions when applicable: cost of installation; all taxes and duties paid by Licensee with reference to "licensed articles;" insurance, transportation and special packaging paid by Licensee; and commissions and fees paid by Licensee to third parties, including but not limited to manufacturers' representatives; but in any case the total of such deductions shall not exceed fifteen percent of the total amount of monies received and not subsequently refunded or credited.
Par 1(e). "Subsidiary" shall mean any U.S. or foreign company, at least half the beneficial or controlling interest in which belongs to another company at the time in question.
Par 1(f). "Competition" shall mean any device whatsoever marketed by a third party, which device is designed for _________, whether or not such device infringes the "licensed patent rights."
Par 1(g). "_________ purchase order" shall mean a purchase order from a company that is franchised to operate a _________.
Par 1(h). "Undiscounted licensed article" shall mean a "licensed article," the selling price of which is not lower than the published base price for such articles.
License and Warranty
Par 2(a). Licensors hereby grant, and agree to grant, to Licensee and its "subsidiaries" a worldwide exclusive license under the "licensed patent rights" to make, use, sell and lease "licensed articles." Subsequent references to Licensee in this agreement shall apply also to its licensed "subsidiaries."
Par 2(b). Licensors warrant that they have title to the "licensed patent rights" and the right to enter into every term of this agreement.
Improvements and Methods
Licensors agree to tender in writing for incorporation into the "licensed patent rights" a like license under any U.S. or foreign patents or patent applications now or hereafter owned or enjoyed by any or all of the Licensors that claim any improvement in any invention disclosed in any patent or patent application included in the "licensed patent rights," or any method or process for manufacturing any such invention. Licensee at its option may accept such written tender by a written instrument mailed within six months after receipt of tender. Such additional licenses shall be upon the same terms as this license and shall terminate upon any termination or cancellation of this agreement.
Par 4(a). Licensee at its option may file at its own expense in any country a patent application corresponding to any U.S. patent application included in the "licensed patent rights," except that Licensors shall have the first option to file such applications in _________; and they are not excluded from filing any patent application in any country where Licensee elects not to file such application.
Par 4(b). Licensors on request shall promptly execute papers to enable Licensee to file foreign applications as provided in this article.
Par 4(c). Once Licensee files at its own expense under Par 4(a), it shall thereafter have and retain control over the resulting application, and any application that is a division or a continuation in whole or in part of that application, any patent issuing on any such application, and any patent that is a reissue or extension of any such patent until the expiration of the patent in question or the cancellation or termination of this license agreement, whichever occurs first.
Par 4(d). Licensee shall give Licensors thirty days written notice prior to abandonment of the maintenance or prosecution of any foreign patent or application included in the "licensed patent rights," together with sufficient information to enable Licensors to assume control over it within the notice period, and Licensors shall then be entitled at their option to assume such control.
Lump Sum and Royalties
Par 5(a). Lump sum. Licensee shall pay to Licensors a lump sum of $_____, which shall not be creditable against royalties earned on the marketing of "licensed articles." Payment of the lump sum shall be made in three equal installments of $_____ each, the first to be paid upon the signing of this license agreement, the second to be paid sixty days after the signing, and the third to be paid one hundred and twenty days after the signing; except that upon receipt of the first "_________ purchase order" for "licensed articles" the entire balance of the lump sum still unpaid at that time shall fall due immediately.
Par 5(b). Earned royalties. In addition to the lump sum payment mentioned in Par 5(a) of this agreement, Licensee shall pay to Licensors, at the times specified in Par 5(g), an earned royalty equal to a percentage, specified in Par 5(e) or Par 5(f), of the "royalty base" of "licensed articles" marketed by Licensee for which payment has been received. Such royalty shall be earned at the time payment for the relevant "licensed article" is received by Licensee unless such article is delivered without expectation of payment, in which case an equivalent royalty shall be negotiated.
Par 5(c). Guaranteed minimum royalty. Subject only to the possibility of cancellation or termination under Article 17, Licensee guarantees that Licensors shall receive at least a minimum of $_____ in royalties in the event that a lesser amount of royalties is earned on the marketing of "licensed articles" under Par 5(b). Except for the guaranteed minimum royalty, no further earned royalty payments under Par 5(b) shall be guaranteed. No royalties mentioned in Par 5(b) shall be due on the marketing of "licensed articles" in the United States or foreign countries except to the extent that the total of such royalties earned during the entire life of this license exceeds the guaranteed minimum royalty.
Par 5(d). Time of payment of guaranteed minimum royalty. So long as no "competition" has appeared and Licensee's selling price of "undiscounted licensed articles" remains above $_____, the guaranteed minimum royalty of Par 5(c) shall be paid in annual installments of $_____ each, one such installment being payable within two months after each of the first five anniversaries of the effective date of this license agreement. After "competition" appears, or during any time when Licensee's selling price of "undiscounted licensed articles" is reduced to $_____ or less, the guaranteed minimum royalty or any unpaid balance of it shall be paid in annual installments of $_____ each, one such installment being payable within two months after each anniversary of the effective date of this license agreement for as many years as required until the guaranteed minimum royalty has been satisfied.
Par 5(e). Earned royalty rates in the United States.
(1). For the purpose of computing royalties earned under Par 5(b) during a time when there is no "competition" and licensee's selling price of "undiscounted licensed articles" remains above $_____, the royalty rate used shall be _________ percent of the "royalty base" of "licensed articles" marketed in the United States as to all royalties earned on sales agreed on up to the expiration of five years from the effective date of this license agreement.
(2). For the purpose of computing royalties under Par 5(b) on sales agreed on during a time when there is "competition" or when Licensee's selling price of "undiscounted licensed articles" is reduced to $_____ or lower, the royalty rate used shall be _________ percent of the "royalty base" of "licensed articles" marketed in the United States, at least as to royalties earned on sales agreed on up to the expiration of five years from the effective date of this license agreement, and if earned royalties accrued up to that time do not at least equal the guaranteed minimum royalty mentioned in Par 5(c), then the _________ percent royalty rate shall continue in effect in the United States until the earned royalties accrued do equal the guaranteed minimum royalty.
(3). For the purpose of computing royalties earned after subparagraph (1) and (2) of this Par 5(e) are both no longer applicable, the royalty rates applicable to "licensed articles" marketed in the United States shall be: _________ percent of the "royalty base" as to royalties earned on sales agreed on during a time when there is no "competition" and Licensee's selling price of "undiscounted licensed articles" remains above $_____; and _________ percent of the "royalty base" as to royalties earned on sales agreed on during a time when there is "competition" or Licensee's selling price of "undiscounted licensed articles" is reduced to $_____ or lower.
Par 5(f). Earned royalty rates in foreign countries. The royalty rate applicable to marketing of "licensed articles" in foreign countries shall be:
(1). _________ percent of the "royalty base" as to "licensed articles" marketed in any foreign country except _________ in which there is at least one unexpired patent or pending application that licensors control under Pars 4(a) or (d) at the time the royalty is earned, which patent or application covers such articles and is then included in the "licensed patent rights," provided the royalty is earned at a time when the royalty rate in the United States is governed by subparagraphs (1) or (2) of Par 5(e); and
(2). _________ percent of the "royalty base" as to "licensed articles" that are either marketed in any foreign country except _________ where the only unexpired patents or pending applications that cover such articles and are included in the "licensed patent rights" are not controlled by licensors under Pars 4(a) or (d) at the time the royalty is earned; or the royalty for which is earned at a time when the royalty rate in the United States is governed by subparagraph (3) of Par 5(e).
(3). As to _________[country] the royalty rates shall be _________ and _________ percent under the conditions specified in subparagraphs (1) and (2) respectively of this Par 5(f).
Par 5(g). Time of payment.
(1). All royalties in excess of the guaranteed minimum royalty mentioned in Par 5(c) earned on the marketing of "licensed articles" during the first five years of this license agreement shall be reported but not paid until the sixth anniversary of the effective date of this license. Within two months after the sixth anniversary, all royalties that have accrued but have not been paid shall be paid to Licensors in a lump sum.
(2). Guaranteed minimum royalty installments for any year, and all royalties earned on the marketing of "licensed articles" during the sixth and subsequent years of this license agreement, shall be paid by Licensee within two months after the end of the relevant year.
Par 5(h). Unpatented articles. No royalty shall be earned on the marketing of any article in any country unless at the time such royalty is earned such article is covered by an unexpired patent or pending application in that country, which patent or application is included in the "licensed patent rights."
Par 5(i). Pending applications. No royalty shall be earned under Par 5(b) on the marketing of "licensed articles" covered solely by a claim of any pending patent application after the fourth anniversary of the filing date of that application until that application matures into a patent, and then not retroactively.
Par 5(j). _________Corporation. No royalty shall be earned on any sales to _________ or its "subsidiaries" or their successors in interest.
Par 5(k). Infringement. If any claim of any patent included in the "licensed patent rights" is infringed by any third party, and the number of infringing units sold in the country of that patent equals at least one fourth the number of "licensed articles" sold in that country by Licensee during any normal three month period, then thereafter no royalty shall be earned based on marketing in that country until the infringement is enjoined or otherwise terminated.
Par 5(l). Ancillary sales. No royalty shall be earned on the sale of _________ or spare parts for "licensed articles."
Par 5(m). Leasing. If "licensed articles" are marketed by Licensee on a lease basis, all the provisions of this agreement shall apply, except that: the selling price figures used for the purpose of computing royalty rates and the size of the guaranteed minimum royalty installments under this agreement shall be converted, so far as each lease transaction is concerned, to comparable figures based on the table of relationships between sales prices and lease prices actually used by Licensee to compute the lease price applicable to the lease transaction in question; and royalties under Par 5(b) shall be earned on each lease installment at the time it is received by Licensee.
Reporting and Audit
Licensee shall keep accurate books of account containing all information necessary to establish the amount payable as royalty under this agreement. Such books of account shall be kept at one of Licensee's principal places of business and shall be open, for three years following the close of the calendar year to which they pertain, to inspection and audit by an independent certified public accountant who is nominated by Licensors and to whom Licensee has no reasonable objection. Such inspection and audit shall take place no more than once each year and shall be confined to verification of the royalties due, and the accountant shall disclose to Licensors only whether the Licensee's reports and payments are accurate or not, and if not accurate shall specify the inaccuracies therein. Each payment of royalties shall be accompanied by a written report signed by the individual who prepared the report and by an officer of Licensee, showing the computation of royalties.
No Duplicate Royalties
Only one royalty shall be due for any one "licensed article" made or marketed anywhere in the world.
Par 8(a). Who shall sue. Upon learning of any infringement by any third party of any claim of any issue patent included within the "licensed patent rights," licensee shall promptly notify Licensors in writing of such infringement, giving details of the infringement. Licensors and Licensee both shall have the option either alone or jointly to take such measures as may be required to terminate any infringement. When either party brings an infringement suit, the other party may join as plaintiff and shall cooperate and assist in the preparation and prosecution of the suit.
Par 8(b). Expenses and recoveries. In the case of mutual agreement on the institution of an infringement suit, Licensee shall bear one half and Licensors collectively shall bear one half of all expenses unless one party declines to participate financially in the prosecution of such infringement suit, in which case the party declining to participate shall be excluded from bearing a part of such expenses. In the case of such mutual agreement on the institution of an infringement suit, Licensee shall have one half and Licensors collectively shall have one half of all damages and penalties recovered that remain after first reimbursing Licensee and then Licensors for any amounts expended by them in prosecuting such infringement suit and next reimbursing Licensors for royalties that they would have earned but for the suspension of royalty payments under Par 5(k) during the period of infringement. If one party declines to participate financially in the prosecution of such infringement suit, the party shall be excluded from any share of the damages and penalties recovered.
Par 9(a). Effect. If any claim of any patent included in the "licensed patent rights" is held invalid, awarded to another, or held not infringed, by a decision of any tribunal of competent jurisdiction, which decision is not or cannot be thereafter reversed, then with respect to any such claim so held not infringed, the construction placed upon such claim by such tribunal shall be followed from the date of entry of the opinion on such question of infringement, and with respect to any claim that is not infringed, not valid, or not the property of Licensors under such decision, Licensee shall thereafter be relieved from the payment of royalties solely with respect to such claim, and from including in its reports hereunder any equipment covered solely by such claim; provided, however, that if there are conflicting final decisions by courts of equal jurisdiction, the one of latest date shall be controlling.
Par 9(b). Contrary decision. In the event of a decision of a tribunal terminating royalty liability followed by a decision of a tribunal that revives royalty liability, no royalty shall be payable for the period between the two decisions.
Licensee shall use its best efforts to maximize the number of "licensed articles" sold and to maximize the selling price and "royalty base" of each such "licensed article."
Licensee shall have the right to grant exclusive or nonexclusive sublicenses within the scope of this license in any country upon such terms and conditions as Licensee deems appropriate. Licensee agrees that one half of all royalties received from its sublicensees will be paid to Licensors, except that as to any sublicensee that is a licensed "subsidiary," Licensors shall be entitled to receive the same royalties as if the sublicensee were the direct Licensee. Licensors' share of sublicense royalties shall be included in the reports and payments referred to in Par 5(g) and Article 6 and shall be counted toward the fulfillment of the guaranteed minimum royalty under this agreement.
Successors and Assigns
This agreement shall bind, and inure to the benefit of, each of the parties, and their respective successors in interest and assigns.
Information Concerning Licensed Patent Rights
Par 13(a). Inspection. Licensors hereby grant, and agree to grant, to Licensee and its duly authorized agents, under 37 CFR §1.14(a) and comparable rules of foreign patent practice, a power of inspection of all U.S. and foreign patent applications included in the "licensed patent rights," and Licensors further agree to execute and deliver to Licensee such further documents as may be requested to carry out the intent of this provision.
Par 13(b). Information. The parties agree to keep each other fully informed of the progress of the prosecution of all U.S. and foreign applications that are included in the "licensed patent rights."
Par 13(c). Notification. Licensee shall not be liable for any royalty under any claim of any patent or application in any country until after having actual notice of the filing, issuance or acquisition of such patent or application.
Notices, Communications, Payments
Licensee may send all notices and reports and other communications and may make all payments under this license to _________, or to h— successor designated in a written communication. Licensors may send all notices, tenders, and other communications to _________. All notices and other communications mentioned in this agreement, including royalty payments, may be mailed postpaid to the last known address of the designated individual. All notice periods and other times for taking any action mentioned in this license shall start on the day that such notice or other communication is actually mailed.
Choice of Law
This agreement and any disputes arising under it shall be governed by the law of the State of _________.
This agreement cannot be altered except by an instrument in writing signed by an authorized officer of the Licensee and an authorized representative of the Licensors.
Term and Termination
Par 17(a). This agreement and the license granted by it shall terminate upon the earliest occurring of the following events:
(1) Ninety days written notice by either party that the other party has committed a substantial breach of this agreement, specifying such breach, and such breach is not cured within the ninety days; or,
(2) Expiration of the last to expire of all the U.S. and foreign patents included within the "licensed patent rights," and there are no longer any pending U.S. or foreign patent applications included within the "licensed patent rights."
Par 17(b). Licensee may cancel this license upon thirty days written notice to Licensors, to take effect at any time; and such cancellation shall relieve Licensee of liability for any minimum royalty installment for the license year in which such cancellation takes effect and all subsequent years, but such cancellation shall not relieve licensee of liability for the $_____ lump sum mentioned in Par 5(a) or for any royalties earned prior to the effective date of such cancellation in excess of any guaranteed minimum royalty installments already paid.
Par 17(c). Following any cancellation or other termination of this agreement, Licensee at its option shall be entitled to a license limited to all "licensed articles" then on hand and all "licensed articles" that Licensee can manufacture with materials then on hand that were specifically purchased for the purpose of manufacturing "licensed articles," and may pay the same royalty rate with respect to such articles as that which would have been due if this agreement had remained in effect, but no other royalties shall be earned after cancellation or termination.
Par 17(d). All payments properly made and all royalties earned prior to the effective cancellation or termination date shall belong to Licensors.
Par 17(e). After any cancellation or termination of this license agreement, the "licensed patent rights" shall revert to Licensors.
Licensors shall make themselves available, upon request of the Licensee, at the earliest opportunity consistent with the responsibilities of their employment, to consult with Licensee at one of the Licensee's places of business at no charge to Licensee except that the latter shall reimburse Licensors for travel expenses and reasonable expenditures for food and lodging.
In witness whereof, the parties have executed this agreement by affixing respectively their individual signatures and the signature of a duly authorized Officer of Licensee, as of the effective date mentioned above.
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