Common use of Option to License Clause in Contracts

Option to License. (i) Institute hereby grants to Sponsor an exclusive option to negotiate an exclusive, worldwide, royalty-bearing commercial license to all of Institute’s interest and rights in any Improvement(s) or Other Invention(s) (and related patent rights), which license would, unless otherwise agreed in writing by the parties, be implemented by adding the patent rights to the Improvements to the Exclusive License Agreement between the parties dated February , 2014 (“ELA”). This option must be exercised within [***] from the end of the research term for the applicable Research Plan. If the research term is not stated in a Research Plan, then the research term ends for each Research Plan on delivery of the final report for the Research conducted under the Research Plan. Sponsor may exercise its option for any Improvement or Other Invention, such Improvement to Sponsor by Sponsor notifying Institute’s Vice President of Research in writing. Following exercise of the option for one or more particular Improvement(s) or Other Invention(s), Sponsor and Institute shall negotiate in good faith terms for a license on commercially reasonable terms to such Improvement(s) or Other Invention(s) within [***], which terms shall be consistent with the following, as applicable: (a) For any Improvement(s) where (x) all the inventors are also inventors named on one or more of any of the Licensed Patents subject to the ELA, and (z) such Improvement(s) cannot be practiced without a license to one or more of the Licensed Patents, no additional payments shall be due to Institute for a license to such Improvement, and no other payments (e.g., additional royalties, milestone payments, etc.) will be due to Institute for such a license. (b) For any Improvements not subject to Section 9(d)(i)(a), Sponsor and Institute shall negotiate an option exercise fee for each such Improvement based on the value of the Improvement and the following principles: (i) for Improvement(s) that do not provide substantial new functionality or commercial benefit beyond the Licensed Patents or cannot be practiced without a license to one or more of the Licensed Patents, an option exercise fee of up to $[***] may be agreed, (ii) for Improvement(s) that provide substantial new functionality or commercial benefit but cannot can be practiced without a license to any of the Licensed Patents, an option exercise fee of up to $[***] may be agreed, and (iii) for Improvement(s) that provide substantial new functionality or commercial benefit and can be practiced without a license to any of the Licensed Patents, an option exercise fee of up to $100,000 may be agreed. If subparagraphs (i) or (ii) above apply, no payments (e.g., additional royalties, milestone payments, etc.) or diligence obligations will be due to Institute for a license to such Improvement(s). If subparagraph (iii) above applies, the parties may agree to additional royalties, development milestones and diligence obligations with respect to the such Improvement(s). (ii) In the event the parties are unable to agree on terms within [***] after the exercise of an option under Section (9)(d)(i) above, Institute and Sponsor shall appoint a neutral, independent expert with extensive expertise in the licensing of pharmaceutical technology and products to act as an expert (not as an arbitrator) (the “Expert”), at the expense of each of each of Institute and Sponsor in equal proportions, to make its independent determination of the commercially reasonable terms for such a license to the applicable intellectual property (the “Expert’s Determination”). In any such determination the Expert shall take into account, inter alia, (i) any joint ownership interest that Sponsor may have in such intellectual property, (ii) the ability (or inability, as the case may be) for such intellectual property to be practiced without a license to any other intellectual property that is licensed to Sponsor by Institute, (iii) any new functionality or commercial benefit provided by the intellectual property, and (iv) the terms of the ELA as a benchmark for reasonable and customary terms. If Institute and Sponsor are unable to agree on an expert within [***], each of the Institute and Sponsor will each designate a neutral, independent individual with the qualifications above, and those individuals will select a third neutral independent individual with the qualifications above to act as the Expert. Each of the parties shall provide the Expert with a written proposal detailing their respective proposed terms, and make available to such Expert on a confidential basis such books, accounts, records and forecasts as the Expert may reasonably request, including terms of other licenses entered into by each of the parties that may be useful in determining the commercially reasonable terms of licensing. The Expert shall select the proposal of one of the parties as his or her Expert’s Determination, without varying any of the terms thereof. If the Expert selects the position of the Institute, Sponsor may accept such terms or decline to enter into a license with respect to such Improvement or Other Invention on such terms; provided, that Sponsor shall be responsible for and reimburse the Institute for [***] in connection with the Expert’s Determination under this Section if Sponsor [***]. Should no license result from this process for a particular Improvement or Other Invention, Institute shall be free to license such Improvement(s) or Other Invention(s) to any third party, and Sponsor will have no obligation to pay any future patent prosecution or other expenses related to such patent applications or patents. (iii) With respect to any Biological Materials that are within the scope of one or more claims of any patent applications or patents licensed to Sponsor under the ELA, Institute hereby grants to Sponsor a non-exclusive, license under Institute’s rights therein to use such Biological Materials in connection with the manufacture and/or commercialization of Licensed Products under the ELA, including the right to sublicense such rights to Sponsor’s sublicensees of Sponsor’s other intellectual property and partners in accordance with Section 2.5.1 of the ELA. With respect to any Biological Materials that are not within the scope of one or more claims of any patent applications or patents licensed to Sponsor under the ELA, except to the extent Institute has on or before the Effective Date entered into a written agreement with a third party that prevents Institute from doing so, Institute hereby grants to Sponsor an option to negotiate a worldwide, nonexclusive or exclusive (at Sponsor’s option), sublicenseable (through multiple tiers) license (which may be royalty-bearing) to Institute’s rights in Biological Materials for use in connection with the manufacture and/or commercialization of Licensed Product(s) under the ELA. Sponsor acknowledges that the licenses under the ELA are royalty-bearing, (iv) To the extent Institute has the right to do so (i.e., as of the Effective Date does not have a written commitment with a third party precluding it from granting such a right to Sponsor), Institute hereby grants to Sponsor an exclusive option to negotiate a worldwide, royalty-bearing, non-exclusive or exclusive (at Sponsor’s option), sublicenseable (through multiple tiers) license to Institute’s rights in any and all Other Invention(s) for use in connection with the development, manufacture and/or commercialization of Licensed Products under the ELA. Any such license may be implemented as a stand-alone license or by adding such license rights to the ELA, with the terms and form of such implementation to be determined in good faith by the mutual agreement of Institute and Sponsor. (v) Pursuant to Section 9(e), Sponsor shall be responsible for paying [***] associated with any Improvements and Other Inventions to which it retains an option. Institute shall conduct such activities using patent counsel reasonably acceptable to Sponsor and shall utilize reasonable efforts to mitigate such expenses, e.g., by filing provisional applications initially, and taking such other steps as may be agreed by the parties.