SAMPLE AGREEMENT ANNOTATIONS

Sample Agreement for Non-Exclusive, World-Wide Patent License

-For Educational Purposes only-

License / Remarks
This License Agreement, [1] effective as of the ____ day of ______, 201_ (the "Effective Date"), is between ("Company"), a ______, with a principal place of business at ______, and ______("Licensee"), a ______, with a principal place of business at ______. Company and Licensee may each hereafter referred to individually as a "Party" and together as the "Parties."
R E C I T A L S
WHEREAS, Company is the owner of certain Patent Rights (as later defined herein) and has the right to grant licenses under said Patent Rights; and
WHEREAS, Licensee desires to obtain a license under the Patent Rights and Company is willing to grant such license under the terms and conditions hereinafter set forth.
NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, the Parties agree as follows:
1. Definitions
1.1  "Affiliate" shall mean, with respect to a Party, an entity that directly or indirectly controls, is controlled by, or is under common control with such Party.
1.2  "Field" shall mean ______.
1.3  "Issued Claim" shall mean a claim of an issued and unexpired patent included within the Patent Rights which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise.
1.4  "Licensed Product(s)" shall mean any product [services] [processes] [the use, development, manufacture, sale or transfer of which] is covered by [2] one or more Issued Claim or Pending Claim of the Patent Rights.
1.5  "Net Sales" [2a] shall mean the gross amount billed for Licensed Product(s) [Services][Processes][2b], less [3]:
(a) customary trade, quantity or cash discounts and brokers’ or agents’ commissions actually allowed and taken;
(b) amounts repaid or credited by reason of rejection or return;
(c) to the extent separately stated on purchase orders, invoices, or other documents of sale, taxes levied on and/or other governmental charges made as to production, sale, transportation, delivery or use and paid by or on behalf of Licensee; and
(d) reasonable charges for delivery or transportation provided by third parties and cost of insurance in transit paid by or on behalf of Licensee, if separately stated.
Net Sales also shall include the fair market value of any non-cash consideration received by Licensee for Licensed Products.
In any transfers of Licensed Product between Licensee and an Affiliate, the amounts above shall be the amounts that would have been billed and deducted had the transaction been an arms-length transaction with an independent third party.
1.6  "Pending Claim" shall mean a claim of a pending patent application within the Patent Rights. [4]
1.7  "Reporting Period" shall mean a six-month period beginning either on January 1st or July 1st and ending on June 30th or December 31st, respectively.
1.8  "Patent Rights" shall mean the patents and patent applications (including all provisional, nonprovisional, and PCT patent applications, and all national stage and foreign equivalents of the foregoing, accordingly) listed in APPENDIX A, all divisionals and continuations of these patent applications, all patents issuing from these applications, divisionals, and continuations and any reissues, reexaminations and extensions of these patents. [5]
1.9  "Term" shall mean the term of this Agreement, which shall commence on the Effective Date and shall remain in effect until ______, [6] unless earlier terminated in accordance with the provisions of this Agreement.
1.10 "Territory" shall mean [worldwide].
2. Grant of Rights
2.1  License Grant. Subject to the terms of this Agreement, Company hereby grants to Licensee [7] for the Term a royalty-bearing non-exclusive license under the Patent Rights to [make [8], use, sell or import] Licensed Product in the Field in the Territory. [8a] [9]
2.2  Sublicenses. Licensee shall not have the right to grant sublicenses of its rights under Section 2.12.1.
2.3  No Additional Rights. Other than as contemplated elsewhere in this Agreement nothing in this Agreement shall be construed to confer any rights upon Licensee by implication, estoppel, or otherwise as to any technology or patent rights of Company or any other entity other than the Patent Rights.
3. Royalties and Payment Terms
3.1  Royalties. [10] Licensee shall pay to Company a non-refundable running royalty according to APPENDIX B; provided, however, that, royalties applicable to the Licensed Product in a country covered by a Pending Claim, but not by a Issued Claim, shall bear a running royalty to Company calculated as [50%] percent of the rate applicable for coverageuse under a Issued Claim.
3.2  Payments.
(a)  Method of Payment. All payments under this Agreement should be made payable to ______and sent to the address identified in Section 11.511.5. Each payment should reference this Agreement and identify the obligation under this Agreement that the payment satisfies.
(b)  Payments in U.S. Dollars. All payments due under this Agreement shall be drawn on a United States bank and shall be payable in United States dollars. Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States (as reported in the Wall Street Journal) on the last day of trading on the New York Stock Exchange in the applicable Reporting Period. Such payments shall be made free and clear of and without deduction of exchange, collection or other charges and, specifically, without deduction of withholding or similar taxes or other government imposed fees or taxes, except as permitted in the definition of Net Sales. If any such deduction or withholding is required by law with respect to any payment due to Company under this Agreement, such payment shall be increased by an additional amount such that the net amount actually received by Company, after such deduction or withholding, will equal the full amount that Company would have received if no such deduction or withholding had been required. The payment of any taxes, charges or fees required to be deducted or withheld from royalties, fees, compensations or other payments due to Company, and the filing of any information or tax returns with respect thereto, shall be the responsibility of Licensee, who shall promptly forward to Company an official receipt ( or a certified copy) or other documentation reasonably acceptable to Company evidencing such payment and who shall be liable to Company with respect to any amounts, fines, or penalties arising out of or resulting from any failure, delay, or error in discharging the aforesaid obligations.
(c)  Late Payments. Any payments by Licensee that are not paid on or before the date such payments are due under this Agreement shall bear interest at a rate equal to the lessor of (i)______%, compounded ______or (ii) the maximum percent permitted by applicable law, on the unpaid amount until the amount is paid. The payment of the foregoing late will not foreclose or limit Company from exercising any other rights or remedies it may have available to it as a consequence of the lateness of any payment.
(d)  Royalties are payable for each Reporting Period and shall be due to Company no later than thirty (30)[30] days after the end of each Reporting Period.
4. RECORDS AND Reports
4.1  Records. Licensee shall maintain complete and accurate records relating to the rights and obligations under this Agreement and any amounts payable to Company in relation to this Agreement, which records shall contain sufficient information to permit Company to confirm the accuracy of any reports delivered to Company and compliance in other respects with this Agreement.
4.2  Records Retention. The relevant Party shall retain such records for at least five (5)[5] years following the end of the calendar year to which they pertain.
4.3  Audit. Company or Company’s appointed agents shall have the right to audit Licensee’s records during normal business hours to verify any reports and payments made or compliance in other respects under this Agreement. In the event that an audit reveals any underpayment by Licensee, then Licensee shall pay to Company all underpaid amounts no later than thirty (30) days after receiving notice thereof from Company, including late payment interest due under Section 3.23.2(c)(c). Such audit shall be at Company’s expense, except that if such audit shows an underreporting or underpayment in excess of [five percent (5%) for any twelve (12) month period], then Licensee shall pay the full cost of audit. [11]
4.4  Report After First Commercial Sale. After the first commercial sale of a Licensed Product, Licensee shall deliver reports to Company no later than thirty (30)[30] days after the end of each Reporting Period. Each report delivered by Licensee to Company shall contain at least the following information for the immediately preceding Reporting Period:
(a)  the number of Licensed Products [Services] [Process] sold by Licensee;
(b)  the gross price charged by Licensee for each Licensed Product [Service][Process];
(c)  calculation of Net Sales for the applicable Reporting Period in each country, including a listing of applicable deductions; and
(d)  total royalty payable on Net Sales in U.S. dollars, together with the exchange rates used for conversion.
If no amounts are due to Company for any Reporting Period, the report shall nevertheless be delivered and shall so state.
5. CONFIDENTIALITY
5.1  Licensee Confidential Information. All reports provided to Company by Licensee pursuant to this Agreement shall be treated as confidential information and shall not, without the prior written consent of Licensee, be disclosed to any third party except to Company’s accountants, attorneys, and other professional advisors or to parties that have been conveyed or may be conveyed rights under the Patent Rights (including without limitation licensees or prospective licensees of the Patent Rights) ; provided, however, that disclosures may be made to the extent required by law, or to perform an audit according to Section 4.3
5.2  The Agreement as Confidential. Except as expressly provided herein, each Party agrees not to disclose any terms of this Agreement to any third party without the prior written consent of the other Party; provided, however, that disclosures may be made as required or authorized by law, or, in confidence, to actual or prospective investors or corporate partners, or to a Party’s accountants, attorneys, and other professional advisors.
6. Patent Prosecution
6.1  No Obligation to Prosecute or Maintain Patent Rights. Company retains the sole right and discretion, but has no obligation, to file or prosecute patent applications or maintain or defend patents within the Patent Rights.
7. Legal Action
7.1  Legal Action. Any legal action regarding infringement of the Patent Rights or otherwise concerning the Patent Rights shall be at the sole discretion and expense of Company and Company shall have no obligation to initiate or maintain any legal action regarding the Patent Rights.. Any damages or costs recovered by the Company in connection with a legal action filed by Company hereunder shall be retained by Company.
8. indemnification & Insurance
8.1  Indemnification by Licensee. [11a] Licensee shall indemnify, defend and hold harmless Company, its directors, officers, employees, and Affiliates and their respective successors, heirs and assigns (collectively, "Indemnitees"), against any liability, damage, loss or expenses (including reasonable attorneys' fees and expenses of litigation) incurred by or imposed upon the Indemnitees or any of them in connection with any claims, suits, actions, demands or judgments arising out of any theory of liability (including, without limitation, product liability actions in the form of tort, warranty, or strict liability and regardless of whether such action has any factual basis) concerning any product[, process or service] made, used or sold pursuant to any right or license granted under this Agreement.
8.2  Insurance. Throughout the term of this Agreement, Licensee shall secure and maintain, where appropriate, the following insurance: ______.
9. DISCLAIMER OF WARRANTIES & LimitationS oN Liability
9.1  COMPANY, ITS DIRECTORS, OFFICERS, EMPLOYEES, AND Affiliates, MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED and expressly disclaim any warranties regarding the validity, enforceability or scope of the Patent Rights or THAT THE PRACTICE BY Licensee OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE Patent Rights OF ANY THIRD Party. company shall not be required to file any patent application, secure any patent, or maintain any patent in force and shall not be obligated to bring or prosecute any action or suit against any Third Party for infringement.
9.2  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, company, ITS DIRECTORS, OFFICERS, EMPLOYEES, AND Affiliates, MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, and expressly disclaim all warranties, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS for a particular purpose, and ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.
9.3  EXCEPT FOR THE OBLIGATIONS UNDER SECTION 8.18.1, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR EXEMPLARY DAMAGES (INCLUDING DAMAGES RELATED TO DELAYS, LOSS OF DATA, INTERRUPTION OF PRODUCT OR LOSS OF USE, BUSINESS, REVENUE, OR PROFITS OR OTHER ECONOMIC ADVANTAGE) IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, HOWEVER IT ARISES, WHETHER FOR BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), WARRANTY OR ANY OTHER LEGAL THEORY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. Termination
10.1  Voluntary Termination by Licensee. Licensee shall have the right to terminate this Agreement, at any time and from time to time without cause, upon at least ninety (90) days prior written notice to Company, such notice to state the date at least ninety (90) days in the future upon which termination is to be effective.
10.2  Termination for Default.
(a)  Nonpayment. In the event Licensee fails to pay any amounts due and payable to Company hereunder, and fails to make such payments within [thirty (30)] days after receiving written notice of such failure, Company may terminate this Agreement immediately upon written notice to Licensee.
(b)  Material Breach. In the event Licensee commits a material breach of its obligations under this Agreement and fails to cure that breach within [ninety (90)] days after receiving written notice thereof, Company may terminate this Agreement immediately upon written notice to Licensee.