EXHIBIT 10.53
CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED AND SEPARATELY FILED
WITH THE COMMISSION.
NARROWBAND CDMA AND THIRD GENERATION
PATENT LICENSE AGREEMENT
BETWEEN
INTERDIGITAL TECHNOLOGY CORPORATION
and
NEC CORPORATION
Dated and Effective January 15, 2002 ("Effective Date")
PATENT LICENSE AGREEMENT
THIS NARROWBAND CDMA and THIRD GENERATION PATENT LICENSE AGREEMENT ("3G
Agreement") dated as of January 15, 2002, (the "Effective Date") is between
InterDigital Technology Corporation ("ITC"), a Delaware corporation with a
mailing address of ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, and NEC
Corporation ("Licensee"), a company organized and existing under the laws of
Japan, with a mailing address of [**] Japan.
PREAMBLE
WHEREAS, ITC and Licensee are parties to an existing Patent License Agreement,
dated May 8, 1995, covering certain TDMA-based products manufactured and sold by
Licensee (the "Prior Agreement");
WHEREAS, a substantial dispute has arisen between Licensee and ITC as to whether
royalties are owed by Licensee for its sale in Japan of Covered Infrastructure
Units and Covered Subscriber Units compliant with the PHS and PDC Covered
Standards;
WHEREAS, the parties have engaged in both a mediation and an arbitration dispute
resolution process pursuant to the Prior Agreement with respect to such dispute,
and are desirous of settling the dispute amicably;
WHEREAS, ITC holds a large and valuable patent portfolio with regard to
Narrowband CDMA and Third Generation and NEC is desirous of obtaining a license
thereunder and ITC is willing to grant such license on the term and conditions
set forth herein;
WHEREAS, NEC holds a large and valuable patent portfolio with regard to
Narrowband CDMA and Third Generation and ITC is desirous of obtaining a
non-assert thereunder and NEC is willing to grant such non-assert on the term
and conditions set forth herein;
** Material has been omitted and filed seperately with the Commission.
WHEREAS, the parties have agreed upon a settlement of the dispute, wherein the
settlement provides:(i) for certain amendments to the Prior Agreement, the
principal amendment providing for certain payments to ITC in lump sum amounts in
exchange for a paid-up license for Covered Subscriber Units and Covered
Infrastructure Units compliant with PHS and PDC Covered Standards, and (ii) for
a new license agreement (this 3G Agreement) involving Covered Subscriber Units
and Covered Infrastructure Units compliant with Narrowband CDMA and Third
Generation (as defined herein); and
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
intending to be legally bound, the parties agree as follows:
ARTICLE 1. DEFINITIONS
1.1. "Affiliate" means (i) IDC with respect to ITC or (ii) 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. Such corporation or other entity in item (ii)
shall be considered as Affiliate of Licensee, IDC, or ITC, as the case
may be, only so long as the requisite ownership of the voting stock or
control exists.
1.2. "Combi-Unit" means any Subscriber Unit which has substantial
functionality unrelated to basic voice or wireless data transmission,
such as video phones, personal digital assistant, computers, and the
like, but which performs modulation and demodulation.
1.3. "Communication Card" means a Subscriber Unit in card or similar format
(e.g. PCMCIA card) which contains at a minimum all of the circuitry
necessary for modulation and demodulation in accordance with one or more
Covered Standards and may be readily attachable to, and detachable from,
the body of an
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end-user terminal device, whether fixed, mobile, transportable,
vehicular, portable or hand-held, with RF transmit and/or RF receive
capabilities by end-user. A Communication Card shall include all
attachments necessary to enable the information and/or communication
unit to transmit and receive wireless communications.
1.4. "Covered Infrastructure Unit" means Infrastructure Units designed to
operate in accordance with one or more of the Covered Standards.
1.5. "Covered Standards" mean standards for Narrowband CDMA and Third
Generation.
1.6. "Covered Subscriber Units" means Subscriber Units designed to operate in
accordance with one or more Covered Standards.
1.7. "IDC" means InterDigital Communications Corporation, having an office at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
1.8. "Infrastructure Unit" means mobile switching centers, radio network
controllers, service nodes, Node B's, base stations, radio resource
management devices and software, base station controllers, digital
transceivers, digital channel cards, and software necessary to operate
the aforementioned devices (including software maintenance agreements to
the extent that free upgrades are provided in exchange for the
maintenance fee, or to the extent that the software maintenance provides
an upgrade or enhancement as to functionality), whether sold as
individual items or bundled as an integrated product, which is used to
interconnect a Covered Subscriber Unit to a public or private data or
voice network (whether wired or unwired), including the internet.
Subject to the
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foregoing, absent some substantial difference in design and/or function
of Infrastructure Units, the parties agree, generally, the
interpretation of Infrastructure Equipment and Net Selling Price (as
defined in the Prior Agreement), and used in the arbitration, including
for audit purposes, shall generally be considered acceptable guidelines
in determining the royalty base hereunder.
1.9. "Licensed Patents" means any issued patent relating to TDMA or
CDMA-based digital wireless communications and similar patent
applications on file as of the Effective Date or filed within five (5)
years of the Effective Date, which patents and patent applications are
owned by ITC or its Affiliates and/or for which ITC or its Affiliates
has the right to grant the licenses conveyed hereunder, without such
grant or the exercise of rights thereunder resulting in the payment of
royalties or other consideration by ITC or its Affiliates to third
parties (except for payments between ITC and Affiliates of ITC, payments
between Affiliates of ITC and payments to third parties for inventions
made by said third parties while employed by ITC or any of its
Affiliates), including utility models but excluding design patents and
design registrations, in every country of the world and any
continuation, continuation-in-part and divisional application based on
such patents, and any foreign counterparts of any such patents,
continuations, continuations-in-part or divisional applications. A
listing (which is not intended to be exhaustive) of Licensed Patents as
of the Effective Date is included as Attachment A.
1.10. "Licensee" means NEC Corporation.
1.11. "Module" means a Subscriber Unit which is an integrated modem/base
band/RF device containing the complete functionality of an applicable
Covered Standard
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(excluding display, keypad and antenna) and which is sold for physical
integration into a Covered Subscriber Unit.
1.12. "Narrowband CDMA" means standards for direct sequence code division
multiple access digital cellular radiotelephone service adopted as a
standard by either a standards development organization - such as ETSI,
TIA/EIA or ARIB- or a major operator of public subscription systems for
in-country requirements (e.g. frequency spectrum availability,
interconnection with preexisting telephony networks, etc.) which limit
the spread of the signal over a bandwidth not greater than 1.25 MHz,
including, but not limited to, IS-95 Rev.A, IS-95 Rev. B and various
derivations thereof that do not fundamentally alter the character
thereof.
1.13. "NEC Patents" means any issued patent relating to TDMA or CDMA-based
digital wireless communications and similar patent applications on file
as of the Effective Date or filed within five (5) years of the Effective
Date, for which Licensee or its Affiliates has the right to grant the
non-assertion and the licenses described in Article 2.3 below without
such grant or the exercise of rights thereunder resulting in the payment
of royalties or other consideration by Licensee or its Affiliates to
third parties (except for payments between Licensee and Affiliates of
Licensee, payments between Affiliates of Licensee and payments to third
parties for inventions made by said third parties while employed by
Licensee or any of its Affiliates), (including utility models but
excluding design patents and design registrations) in every country of
the world and any continuation, continuation-in-part and divisional
application based on such patents, and any foreign counterparts of any
such patents, continuations, continuations-in-part or divisional
applications.
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1.14. "Net Selling Price" means the amount actually invoiced to the customer
for a Covered Infrastructure Unit or Covered Subscriber Unit, less
packing, insurance and shipping costs, applicable import, export and
excise duties, returns, trade discounts given, insurance and
installation costs, to the extent included in the Net Selling Price,
[**]. If base stations or other Covered Infrastructure Units contain
integrated switching equipment, royalties shall be payable with respect
to the entire cost of such base stations or other Covered Infrastructure
Units; [**].
1.15. "Subscriber Unit" means an end-user terminal device, whether fixed,
mobile, transportable, vehicular, portable or hand-held, with RF
transmit and/or RF receive capabilities (or a Module therefor), which
device is designed for wireless voice and/or wireless data
communications but which may have other functionality such as, without
limitation, appointment functions, MP3 player, etc.
1.16. "TDD" means time division duplex technology, including all chip rates
and modes thereof.
1.17. "Third Generation" means those TDMA or CDMA-based digital cellular
mobile radio telecommunication standards generally considered by the
industry to be the third generation, whether adopted by any recognized
standardizing body or promoted by major telecommunications operators as
de facto standards. Examples of current Third Generation Standards
under development, or related standardization efforts, are the
International Telecommunications Union -
_____________
** Material has been omitted and filed separately with the Commission.
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Radio efforts under the label IMT-2000, the specifications being
developed under the Third Generation Partnership Projects (3GPP and
3GPP2), and comparable or related standards adopted by ARIB, ETSI, TTA,
TIA, T1P1, CWTS, as well as other recognized standards development
organizations.
ARTICLE 2. LICENSE GRANT
2.1. Grant. ITC, for itself and its Affiliates, hereby grants to Licensee and
its Affiliates a non-exclusive, non-transferable, worldwide,
royalty-bearing license under the Licensed Patents to make, have made,
use, import, sell and otherwise dispose of Covered Subscriber Units and
Covered Infrastructure Units, including the right to make, have made,
use, import, and otherwise dispose of components therefor, or the supply
of replacement parts therefor.
2.2. Limitations on License Grant. The license granted hereunder excludes the
right to grant sublicenses. In addition, the above license shall not
include, by implication or otherwise, any license for components except
when used solely as a part of and within Covered Subscriber Units and
Covered Infrastructure Units sold or otherwise transferred by Licensee
or its Affiliates. Further, as regards Covered Infrastructure Unit, the
license as to the sale of Covered Infrastructure Unit such as base
station transceiver system and the like which may be installed into a
larger infrastructure shall extend only as to the Covered Infrastructure
Unit sold or otherwise transferred by Licensee or its Affiliates and
shall not extend, by implication or otherwise, to the portion of such
larger infrastructure other than the Covered Infrastructure Unit not
otherwise licensed hereunder.
2.3. Non-Assertion/TDD License/Optional License. Licensee hereby agrees, and
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shall cause its Affiliates to agree, not to bring any claim against ITC,
IDC or its Affiliates, for infringement of any claim or claims of the
NEC Patents with respect to Covered Subscriber Units, Covered
Infrastructure Units or components therefor made, used, sold or
otherwise transferred by IDC or its Affiliates, it being understood that
the foregoing shall not be construed to prevent Licensee or its
Affiliates to bring such claim against any other party (including but
not limited to direct or indirect customers of IDC or its Affiliates)
with respect to such Covered Subscriber Units, Covered Infrastructure
Units or components therefor. Further, Licensee grants, and shall cause
its Affiliates to grant, to IDC and its Affiliates, a non-exclusive,
royalty free, world wide, non-transferable license under the NEC Patents
for ITC, IDC or its Affiliates to make, have made, sell, distribute,
import or use Covered Subscriber Units and Covered Infrastructure Units,
including components therefor, compliant with TDD ("TDD License");
provided, however, that such TDD License shall not extend to other
non-TDD Third Generation functionality or Narrowband CDMA functionality
included in such product. NEC also agrees, to the extent requested by
IDC, to grant IDC or its Affiliates a non-transferable, non-exclusive,
royalty bearing license under the NEC Patents for IDC or its Affiliates
to make, have made, sell, distribute, import or use Covered Subscriber
Units and Covered Infrastructure Units to the extent not covered by the
TDD License. Such additional license shall be on the same terms and
conditions as applied to NEC and its Affiliates hereunder, with IDC
making a pre-payment of two-years worth of expected royalty payments as
agreed in amount by IDC and Licensee.
ARTICLE 3. ROYALTY RATES/PAYMENTS
3.1. Royalty Payments.
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3.1.1. Convenience Based Royalties on Products Compliant with Third
Generation and Narrowband CDMA. In consideration of the licenses
granted herein, Licensee shall pay ITC the following
non-refundable (except as the consequence of the royalty audit
under Article 7.7 or except in the case of computation error by
Licensee) royalties on each sale of the below listed products by
Licensee and/or its Affiliates, anywhere in the world:
i. For Covered Subscriber Units compliant with Narrowband
CDMA and Third Generation, [**]% of the Net Selling
Price of each such product sold by Licensee or its
Affiliates provided, however, that the above royalty
shall not exceed $[**] on a per unit basis.
ii. For Covered Infrastructure Units compliant with
Narrowband CDMA and Third Generation, [**]% of the
Net Selling Price of each such product sold by
Licensee and/or its Affiliates; provided, however,
that for sales of Covered Infrastructure Units in
Japan only, for sales occurring on or before December
31, 2003, the royalty rate shall be [**]%. For sales
of Covered Infrastructure Units occurring on or after
January 1, 2004, Licensee shall have the option to
pre-pay
___________
** Material has been omitted and filed separately with the Commission.
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additional royalties for Covered Infrastructure Units
for use in Japan only, at any time, based on
Licensee's good faith projection of its sales of such
products over a one (1) to three (3) year period(s).
Such pre-payment shall be paid to ITC prior to the
start of the royalty period used in determining the
pre-payment amount. Licensee's actual payment to ITC
for such royalty projection shall be discounted at
[**] % per annum, to reflect the time value of money
over the selected period. In addition, the optional
pre-payment shall be further discounted by the
following single volume discount, applied to the
present value amount, as follows:
Years Pre-paid Volume Discount
1 [**]%
2 [**]%
3 or more [**]%
The projected royalty shall serve as the royalty
credit, against which Licensee can at any time offset
its royalty obligations as to Covered Infrastructure
Unit for use in Japan only, until that royalty credit
is exhausted. A sample calculation of the pre-payment
method is set forth in Attachment B hereto.
_____________
** Material has been omitted and filed separately with the Commission.
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As used herein, "sale" means the first non-affiliated sale made
on an arms-length basis. In determining the royalty on a Module,
Licensee shall use the greater of (i) the Net Selling Price of
the Module or (ii) the average Net Selling Price of Covered
Subscriber Units for the period for which royalties are being
reported. In determining the Net Selling Price of a Combi-Unit,
Licensee shall use the lesser of (i) the Net Selling Price of
the Combi-Unit or (ii) the average Net Selling Price for Covered
Subscriber Units for the period for which royalties are being
reported. The average Net Selling Price for Covered Subscriber
Units shall be calculated using the total revenue (based upon
the Net Selling Price definition herein) for Covered Subscriber
Units (excluding Modules and Combi-Units) for the period covered
by the royalty report, divided by the number of Covered
Subscriber Units (excluding Modules and Combi-Units) sold in
that same period. Notwithstanding the foregoing, in the case
that no sales of Covered Subscriber Units (excluding Modules and
Combi-Units) exist for the period for which royalties are being
reported, Licensee shall use the average net selling price of
cellular handsets, which has no substantial functionality
unrelated to basic telephony or wireless data transmission,
built to the same Covered Standards for that period, as reported
by Dataquest or some other internationally recognized data
collection and reported firm agreeable to both parties.
3.2. Purchase of Licensed Products. If Licensee or any of its Affiliates
purchases Licensed Covered Subscriber Units (including Modules) or
Covered Infrastructure Units for incorporation into Licensee's or its
Affiliates' Covered
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Subscriber Units or Covered Infrastructure Units, ("Licensed Products"),
either in modified or unmodified form, Licensee shall receive a royalty
credit equal to the amount of the per unit royalty (whether calculated
as a $US per unit royalty or as a percentage of selling price) paid to
ITC by the manufacturer of such Licensed Product, such credit not to
exceed the amount of the per unit royalty due by Licensee hereunder for
the ultimate Covered Subscriber Unit or Covered Infrastructure Unit sold
by Licensee or its Affiliates, in which such Licensed Product, in the
same or modified form, is incorporated. As used herein, Licensed Product
shall mean a Covered Subscriber Unit (including Module) or Covered
Infrastructure Unit compliant with one or more Covered Standards
manufactured by a third party under a license from ITC under the
Licensed Patents and not known by Licensee at the time of purchase of
the Licensed Product to be other than in good standing (i.e., not in
default), and for which the third party licensee has paid ITC the per
unit royalty for the Licensed Product. For the purposes of determining
the credit, Licensee shall, in its royalty report, specify the number of
Licensed Products purchased, the date purchased, and from whom such
Licensed Products were purchased. ITC will then notify Licensee of the
applicable credit, which Licensee may apply in its subsequent royalty
reports to ITC until exhausted. ITC may also notify Licensee if the
third party licensee is in default of its obligations under the third
party license with ITC and that the credit as to future sales by
Licensee shall not be given unless and until such third party licensee
cures such default. Licensee shall have the right to audit ITC's books
and records in accordance with Article 7.7 below. If the license granted
by ITC to such third party is on other than a per unit or % of net
selling price running royalty basis, then for the purpose of the royalty
credit, the parties, subject to the dispute resolution provisions, shall
determine the per unit royalty deemed to have been paid by such third
party to ITC for such Licensed Product, based on lump sums or other cash
payments paid under the
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applicable patent license agreement and the volume of products licensed
thereunder.
3.3. Resale. If Licensee or its Affiliates (i) purchases Covered Subscriber
Units or Covered Infrastructure Units from a third party that, under a
license agreement executed subsequent to the Effective Date, is licensed
under the Licensed Patents by ITC to manufacture, have made, sell and
distribute such Covered Subscriber Units or Covered Infrastructure, and
(ii) resells without modification, addition or enhancement, such
purchased Covered Subscriber Units or Covered Infrastructure Units as
such, no royalty shall be payable by Licensee so long as said third
party license agreement includes express provisions under which
purchasers which are original equipment manufacturers receive pass
through rights under the Licensed Patents, including resale rights. If
Licensee or its Affiliates purchase products from an entity meeting the
above requirements except that (i) the applicable license was entered
into prior to the Effective Date or (ii) the applicable license
agreement (whether entered before or after the Effective Date) does not
have the aforementioned resale rights, Licensee shall be given a credit
for the per unit royalty paid by such entity, if any, using the same
procedure, terms and conditions set forth in Article 3.2. Such credit
shall not exceed the amount of royalty owed by Licensee. Licensee shall,
in its quarterly royalty reports, specify (i) the number of such Covered
Subscriber Units or Covered Infrastructure Units resold by Licensee and
its Affiliates during the quarter, (ii) the date of purchase of such
resold Covered Subscriber Units or Covered Infrastructure Units, and
(iii) from whom such resold Covered Subscriber Units or Covered
Infrastructure Units were purchased.
3.4. Pre-Payment Credit. On or prior to April 10, 2002, Licensee shall make a
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non-refundable cash payment to ITC of US$19,500,000 which payment shall
be a credit of US$19,500,000 toward Licensee's royalty obligations
hereunder. Such payment obligation shall be unconditional and
irrevocable. Such credit shall be applied, until exhausted, to: (i) 100%
of Licensee's royalty obligations for sales made on or before December
31, 2003; and (ii) 50% of Licensee's royalty obligations as to sales on
or after January 1, 2004 (with the other 50% to be paid in cash).
3.5. Reserved.
3.6. Repairs. It is understood and agreed by the parties that no royalty
shall be payable by Licensee hereunder with respect to any parts,
components or accessories sold or otherwise transferred by Licensee and
its Affiliates for repair, maintenance or returns, but excluding
upgrades and/or enhancements, of Covered Subscriber Units or Covered
Infrastructure Units sold or otherwise transferred by Licensee and its
Affiliates.
ARTICLE 4. PASS-THROUGH LICENSE
4.1. Pass-Through License. Licensee's and its Affiliates' customers who are
end users, operators or retail distributors will receive an irrevocable
pass-through license for sale, including lease, or use of Covered
Subscriber Units and/or Covered Infrastructure Units for which a royalty
has been paid hereunder. Neither this 3G Agreement nor any payments made
hereunder are intended or should they be construed as exhausting ITC's
rights to royalties or damages or other compensation from unlicensed
purchasers.
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ARTICLE 5. TERM/TERMINATION
5.1. Term. The term of this 3G Agreement shall commence on the Effective Date
and terminate upon expiration of the last-to-expire of the Licensed
Patents, unless sooner terminated as provided herein.
5.2. Termination for Default. This 3G Agreement may be canceled by either
party, upon thirty (30) days' prior written notice specifying the nature
of the breach, if the other party is in material breach of any of its
material obligations hereunder and the breach is not remedied within the
notice period. Licensee's material obligations shall include, but shall
not be limited to, its royalty reporting and payment obligations.
5.3. Adverse Actions. During the term of this 3G Agreement, neither party or
its Affiliates shall institute or actively participate as an adverse
party in, or otherwise provide material support to (except where such
participation or support is required by court order or applicable law)
any legal or administrative action anywhere in the world, the purpose of
which is to invalidate or limit the validity or scope of the NEC Patents
or the Licensed Patents and further if such party does not cease to
institute, actively participate as an adverse party in, or otherwise
provide material support to, such legal or administrative action within
thirty (30) days after receipt of written notice from the other party,
specifying such legal or administrative action and such party's
involvement therein, such other party shall have the right to terminate
this 3G Agreement by a written notice of termination.
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ARTICLE 6. DISPUTE RESOLUTION
6.1 Negotiation of Dispute. In the event of any dispute arising under this
3G Agreement, senior level executives of the parties will meet in
Wilmington, Delaware, unless some other city may be agreeable to the
parties, as soon as reasonably possible (but no later than sixty (60)
days after notice asking for the above meeting from either party to the
other party) 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
Articles 6.2 and 6.3 hereto.
6.2 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 written notice asking
for the mediation from either party to the other party). The first such
mediation session shall occur in Tokyo and thereafter will alternate
between Washington, D.C. and Tokyo. Any such mediation shall be
non-binding. If not thus resolved, either party may proceed as specified
in Article 6.3.
6.3 Arbitration of Disputes. Any unresolved disputes arising under this 3G
Agreement shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce, with the venue and place of hearing
being designated as London, England. The dispute shall be resolved by
panel of three (3) arbitrators selected in accordance with said rules,
one of such arbitrators having substantial experience in the field of
telecommunications. The arbitrators shall have the authority to permit
limited confidential discovery to
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the extent required by a party in order to establish its case. The
arbitrators' award shall be written and 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, and their Affiliates. The arbitration proceedings shall be
conducted in English. The parties, their counsel, and the arbitrators
shall use all reasonable efforts to conclude the arbitration with one
(1) year of its being instituted.
ARTICLE 7. MISCELLANEOUS
7.1. Payments/Reports. All payments required under this 3G Agreement shall be
made by wire transfer to the following bank account of ITC in U.S.
dollars on a quarterly basis within forty-five (45) days after the end
of each calendar quarter.
PNC Bank, Delaware
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ABA # [**]
Credit: Trust Uninvested Funds
Account # [**]
Further Credit: InterDigital. Technology Corp.
____________
** Material has been omitted and filed separately with the Commission.
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Account # [**]
Attention: [**]
Phone: [**]
Such payment, less any available credit, shall be for all sales of
Covered Subscriber Units and Covered Infrastructure Units made by
Licensee or its Affiliates during such quarter. The first such report
shall include sales of any Covered Subscriber Units and Covered
Infrastructure Units made by Licensee and/or its Affiliates both during
the calendar quarter ending March 31, 2002 as well as the sales of any
such products made prior thereto (including prior to the Effective
Date), except that any royalties for Covered Subscriber Units and
Covered Infrastructure Units compliant with the Narrowband CDMA sold or
otherwise transferred by Licensee and its Affiliates prior to the
Effective Date, if any, are hereby irrevocably waived by ITC. Each
payment made within the required 45 days, described above, shall be
accompanied by a written report and associated certification by the
responsible personnel of Licensee, setting forth the amount of the
royalties payable and calculation thereof for the reported period. To
assist ITC in preparing necessary earnings reports, Licensee shall also
develop some form of advance royalty projection mechanism whereby
Licensee, on a non-binding basis, shall advise ITC, by no later than
thirty (30) days after the end of each calendar quarter, of the
aggregate (i.e., not on a product category basis) royalty amount
Licensee anticipates reporting for the subject calendar quarter. All
such reports shall be held in confidence by ITC.
7.2. Currency Conversion. United States Dollar ($US) denominated sales shall
be
______________
** Material has been omitted and filed separately with the Commission.
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reported as transacted. Other currency denominated sales shall be
reported based on the mathematical average foreign currency/$US
conversion rate applicable during the period over which sales are being
reported, using the currency exchange rates given in the Wall Street
Journal "Currency Trading Exchange Rates" section. Within fifteen (15)
days after the end of each calendar quarter period, ITC shall inform
Licensee in writing such applicable mathematical average foreign
currency/$US conversion rate together with the substantiating material
therefor. Licensee's timely performance of its royalty reporting and
payment obligations under Article 7.1 is contingent upon the timely
receipt by Licensee from ITC of such applicable conversion rate.
7.3. Taxes. All royalties payable hereunder are net of, and free and clear
from, any applicable taxes (excluding those based on income), which
taxes shall be paid by Licensee on a grossed-up basis, it being
understood Japanese source income withholding tax shall be deducted by
Licensee from the amounts payable to ITC hereunder. Licensee will
furnish ITC with appropriate documentation evidencing the payment of
such tax.
7.4. Most Favored Licensee Rights. Provided Licensee is not in material
default of its obligations hereunder, Licensee shall be treated as a
most favored licensee ("MFL") under the Licensed Patents with regard to
Covered Subscriber Units and Covered Infrastructure Units. If subsequent
to the Effective Date, ITC enters into an agreement, including a
settlement agreement, with a third party pursuant to which ITC licenses
said third party to sell products that operate under Covered Standards,
ITC will notify Licensee of such agreement and will provide a copy of
such agreement, in confidence, to Licensee. Licensee shall have the
right to substitute for this 3G Agreement, on a forward going basis, the
more favorable license agreement in its entirety and such substitution
shall
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constitute a novation of those portions of this 3G Agreement addressed
in such substitute agreement; provided, however, that any royalty
obligation under such substitute agreement relating to Covered
Subscriber Units and Covered Infrastructure Units compliant with only
PHS and PDC shall not apply as to Licensee and/or its Affiliates. Such
election shall be made by Licensee in writing within thirty (30) days of
receiving said license agreement from ITC, with any failure to elect to
take such new agreement within such period shall serve as waiver as to
any rights under such agreement. If Licensee elects to take such
substitute agreement, Licensee shall pay royalties based on the rates
set forth in its then existing agreement up to the date of such
substitute agreement. Any remaining pre-payments under Licensee's then
existing agreement shall apply as to the substitute agreement.
7.5 Confidentiality/Press Release. Unless otherwise required by law,
government regulations, stock exchange listing rules or court order, the
parties shall maintain as strictly confidential the royalty terms of the
3G Agreement and any proprietary information disclosed under, or as a
result of the negotiation of, the 3G Agreement, provided that each party
may disclose in confidence the royalty terms to (i) its outside counsel
or accountant, or (ii) its financial advisors or prospective acquiring
or acquired entity in connection with its prospective M&A transactions.
Further, ITC or IDC may provide the royalty terms of this 3G Agreement
in confidence to other licensees to the extent required by MFL clauses.
ITC and IDC may issue a press release regarding this 3G Agreement having
the content shown in Exhibit 1, attached hereto. Licensee may also issue
a press release regarding the fact of the execution of this 3G
Agreement. To the extent ITC and IDC desire to amend the press release
contained in said Exhibit 1, or Licensee desires to make a press
release, said desiring party shall provide the other party with an
advance copy of its respective proposed press release for review,
consent
21
and comment; whereby consent by the other party shall not be
unreasonably withheld or delayed. Licensee may disclose the royalty
terms of this 3G Agreement in confidence (i) to its suppliers and
customers to the extent reasonably necessary for the purpose of
discussion of the burden of royalty between Licensee and its suppliers
or between Licensee and its customers and (ii) to Licensee's Affiliates.
Licensee's Affiliates may disclose the royalty terms of this 3G
Agreement in confidence to their suppliers and customers to the extent
reasonably necessary for the purpose of discussion of the burden of
royalty between Licensee's Affiliates and their suppliers or between
Licensee's Affiliates and their customers.
7.6 Licensee Identification on Covered Subscriber Units. All Licensee
Covered Subscriber Units and Covered Infrastructure Units intended for
sale within the United States shall include a statement that they are
licensed under U.S. patents, including up to five patent numbers to be
provided by ITC; provided that such marking requirement shall not apply
to the extent that ITC fails to require other licensees manufacturing
Covered Infrastructure Units and Covered Subscriber Units to ▇▇▇▇ their
corresponding products with such patent numbers. ITC may designate
certain Licensed Patents for inclusion on such label. Additionally, if
the laws of any other country require marking goods as a condition of
any award of damages in a patent infringement action, ITC may notify
Licensee in writing of the name of such other country together with a
copy of the text of such law. In such case, the first sentence of this
Article 7.6 shall similarly apply as to such country, provided that in
no event shall the total number of patent numbers to be included in a
statement pursuant to this Article 7.6 exceed five, unless required by
the laws of such other country.
7.7 Audit. Licensee shall (and shall cause its Affiliates to) keep books and
records
22
adequate to accurately determine the payments due under this 3G
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 and its Affiliates on not less than
forty-five (45) calendar days prior notice and during regular business
hours to verify the reports and payments required to be made hereunder.
The nondisclosure agreement with the auditor may include an obligation
that the auditor shall not disclose to ITC more information than is
reasonably necessary to determine the royalties owed hereunder. 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 annual rate
of [**] percent [**](%). ITC shall, at Licensee's election, either
promptly reimburse any overpayment, or credit Licensee with any
overpayment to Licensee against any royalties owed ITC in the subsequent
calendar quarters until exhausted. All information obtained through such
audit shall be held in confidence by ITC.
Licensee shall have the right, not more than once per calendar year, to
have an independent certified public accountant, who shall enter into an
appropriate nondisclosure agreement with ITC, inspect all relevant
agreements, books and records and the like relating to the Licensed
Patents on not less than forty-five (45) calendar days prior notice and
during regular business hours to verify the credit provided for pursuant
to Articles 3.2 and 3.3 hereunder and the MFL
______________
** Material has been omitted and filed separately with the Commission.
23
status of the Licensee. The nondisclosure agreement with the auditor may
include an obligation that the auditor shall not disclose to NEC more
information than is reasonably necessary to determine the credits owed
hereunder. All information obtained through such audit shall be held in
confidence by Licensee.
7.8 Governing Law/Venue. The validity and interpretation of this 3G
Agreement shall be governed by Delaware law, without regard to conflict
of laws principles. 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 3G
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.
7.9 Limited Warranty. Each party represents and warrants that it has the
right to license the patents described herein. Neither party makes any
other representation or warranty with regard to the validity of such
patents or the licensed party's ability to use, manufacture, have
manufactured or sell Covered Subscriber Units free of infringement of
third party intellectual property rights. Neither party shall have any
obligation to maintain or prosecute patents described hereunder.
7.10 Affiliate Performance. Each party shall be responsible for all actions
required of its Affiliates hereunder and shall be liable to the other
party for any adverse action or failure to perform by such party's
Affiliates hereunder.
7.11 Waivers. The failure of any party to insist upon the performance of any
of the terms or conditions of this 3G Agreement or to exercise any right
hereunder, shall
24
not be construed as a waiver or relinquishment of the future performance
of any such term or condition.
7.12 Severability. The provisions of this 3G 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.
7.13 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.
7.14 Notices. All notices or other communications required or permitted under
this 3G 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 1 of this
3G Agreement (provided that in case of notice to Licensee such notice
shall be to the attention of General Manager of Intellectual Property
Division) or as subsequently amended for itself by notice of a party.
7.15 Limitation. Nothing in this 3G 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 3G Agreement.
7.16 Personal Agreement. This 3G Agreement is personal to Licensee and may
not be
25
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 3G Agreement may be transferred in
connection with the sale of all or substantially all of the business or
assets of Licensee to which this 3G Agreement relates. ITC may, in its
sole discretion, limit application of this license to the permitted
transferee to the transferred business. If Licensee remains a separate
entity after such sale, then the acquiring entity shall continue to pay
royalties[**]. If Licensee does not remain a separate corporate entity,
or Licensee's production facilities are merged into the acquiring
company or one of its subsidiaries, then the acquiring company shall pay
royalties [**]. In addition, to the extent that, after the Effective
Date, Licensee acquires a new Affiliate during the term of this 3G
Agreement, and such new Affiliate was not licensed under ITC's patents
but sold Covered Subscriber Units and/or Covered Infrastructure Unit,
Licensee shall pay ITC, within thirty (30) days of the completion of
such acquisition, [**]. The licenses granted hereunder to Licensee shall
survive any transfer by operation of law or otherwise of the Licensed
Patents or this 3G Agreement by ITC. Notwithstanding the foregoing, the
non-assertion granted by Licensee hereunder to the other parties
hereunder shall be personal to such entities and shall not be assigned
or transferred in any manner.
7.17 Entire Agreement/Amendment. This 3G 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 3G Agreement may only be modified by a written agreement
signed by duly authorized
_____________
** Material has been omitted and filed separately with the Commission.
26
representatives of the parties. To the extent that, prior to the
Effective Date, the parties hereto were parties to a prior written
agreement covering the subject matter hereof, and Licensee has elected
pursuant to an MFL clause to take the terms of this 3G Agreement,
Licensee shall pay any royalties required under such prior agreement up
to the date of election to take this Agreement.
7.18 Survival. The following provisions of this 3G Agreement shall survive
expiration or termination of this 3G Agreement: Article 2.1 (for
products manufactured, sold or otherwise transferred prior to such
expiration or termination and for which a royalty has been or will be
paid, and subject to all other limitations herein which shall survive to
the extent necessary as regards such license grant); Article 6; Article
7.2, 7.3, 7.5, 7.7, 7.8, 7.10, 7.11, 7.13, and 7.17.
[Signature on Next Page]
27
IN WITNESS WHEREOF, the parties have executed this 3G Agreement by their duly
authorized representatives.
INTERDIGITAL TECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Dated: January 14, 2002
-----------------------------
NEC CORPORATION
By: /s/[**]
---------------------------------
Dated: January 15, 2002
-----------------------------
____________
** Material has been omitted and filed separately with the Commission.
28
Index of Attachments and Exhibits
ATTACHMENT A: LICENSED PATENTS
ATTACHMENT B: ROYALTY PREPAYMENT
EXHIBIT 1: PRESS RELEASE