EXCLUSIVE LICENSE AGREEMENT
This EXCLUSIVE LICENSE AGREEMENT(referred to as “Agreement”) made as of the [Day] of [Month], [Year] (the “Effective Date”), is entered into by and between [Company Name], a [Type of Company] duly organized and existing under the laws of the state of [State of Incorporation], having its principal place of business at [Address] (hereinafter referred to as “COMPANY”) and the Board of Trustees of Southern Illinois University, a body politic and corporate of the State of Illinois, by and on behalf of [SIU Campus], located at [Campus Location] (hereinafter referred to as “UNIVERSITY”).
RECITALS
WHEREAS, UNIVERSITY is the owner of the Licensed IP defined below;
WHEREAS, COMPANY is in the business of designing, manufacturing, marketing, and selling [Description of Development/Commercialization] products and services;
WHEREAS, COMPANY desires to include the technology covered by the Licensed IP in certain of its products and services. Furthermore, COMPANY desires to develop and advance a product or products or services covered by the Licensed Patents and Licensed Technology;
WHEREAS, COMPANY desires to obtain an exclusive license to the Licensed IP; and
WHEREAS, UNIVERSITY is willing to grant such an exclusive license to the Licensed IP upon the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the faithful performance of the mutual promises contained in this Agreement, the Parties agree as follows:
ARTICLE 1. DEFINITIONS
For the purposes of this Agreement, the following terms shall have the meaning set forth below:
1.1“Affiliate” means an entity that controls, is controlled by or is under common control with a Party. For purposes of this definition, “control” shall mean the possession directly or indirectly, of a majority of the voting power of such entity (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that such entity shall be deemed an Affiliate only so long as such control continues.
1.2“Confidential Information” means proprietary information, know-how and other information disclosed by one Party, or by any Affiliates of a Party, to the other Party pursuant to its rights or obligations under the agreement. In order to be deemed confidential, Confidential Information must be supplied to the other party in written form and identified as being confidential or, if disclosed orally, shall be confirmed in writing within forty-five (45) days of its oral disclosure, provided, however, that failure to do so shall not constitute a designation of non-confidentiality, particularly when the confidential nature is apparent from the context and subject matter, all of which a reasonable person would conclude is proprietary and confidential in nature. Confidential Information includes, but is not limited to, information and correspondence relating to the Licensed Patents received from UNIVERSITY or UNIVERSITY's patent counsel and all Licensed Technology.
1.3“Expiration Date” means the date of expiration of the last surviving Valid Claim within the Licensed Patents covering the Licensed Products and/or Licensed Services in the United States. No Improvements will extend such expiration date unless agreed to in writing by both Parties.
1.4“Field of Use” means any and all fields covered by the Licensed IP.
1.5“Gross Sales” means the gross sales amounts received for commercial sales or commercial services of the Licensed Product in the Field of Use and in the Territory by COMPANY and/or an Affiliate of COMPANY to a Third Party.
1.6“Improvement” means any new, improved or modified product, method or process conceived, invented, or developed by UNIVERSITY or its employees during the course of research and relating to the Field of Use.
1.7“Licensed IP” means Licensed Patents and Licensed Technology.
1.8“Licensed Patents” means United States Patent Nos.[Patent Numbers], as well as any reissues, reexaminations, extensions, divisions, continuations, continuations-in-part and foreign counterparts of any of the foregoing, and any patented Improvements thereto. A list of patents comprising the Licensed Patents as of the Effective Date is attached hereto as Exhibit A.
1.9“Licensed Products” means products or portions of a product manufactured, caused to be manufactured, sold, offered for sale, used, imported, or exported by COMPANY, that but for the license granted herein would infringe a Valid Claim of a Licensed Patent by virtue of such manufacture, caused manufacture, sale, offer for sale, use, importation or exportation.
1.10“Licensed Services” means any and all services performed for consideration by or for COMPANY and/or an Affiliate of COMPANY which employs a Licensed Product in their performance.
1.11“Licensed Technology” means all unpatented products, methods, inventions, innovations, know-how, discoveries, designs, techniques and/or improvement otherwise conceived in whole or in part by UNIVERSITY or its employees, including without limitation [UNIVERSITY Inventor(s)], or a person working under their joint or individual direction, in the course of conducting research in the Field of Use.
1.12“Net Accrued Licensing Revenue” means any and all consideration received by or due and owing to COMPANY from any Third Party sublicensee of COMPANY with respect to the Licensed IP, less amounts received by COMPANY from such Third Party as: (i) funding or reimbursement for research and/or development expenses incurred by COMPANY; (ii) payment or reimbursement for patent-related expenses incurred by COMPANY with respect to the Licensed Patents; and (iii) royalties.
1.13“Net Sales” means Gross Sales less: (i)normal and customary price reductions or discounts, including cash discounts, or rebates, actually granted by COMPANY; (ii)credits or allowances actually granted by COMPANY upon claims, rejections or returns of the Licensed Product, including recalls, regardless of the Party requesting such; (iii)the actual cost of freight and insurance that has been included in the Gross Sales; and (iv)any tax imposed or other governmental charge (other than an income or withholding tax) charged or levied on the sale, transportation, or delivery of a Licensed Product and borne by COMPANY on such sales in the Field of Use and in the Territory. For purposes of clarity, Net Sales shall not include revenues received by COMPANY for sales of products that are not Licensed Products, whether such products are sold together with or separate from Licensed Products.
1.14“Parties” means both COMPANY and UNIVERSITY, and the term “Party” shall mean either of them.
1.15“Territory” means worldwide.
1.16“Third Party” means any person or entity other than the Parties, or an Affiliate of the Parties.
1.17“Valid Claim” means: (i) a claim of an issued and unexpired patent within the Licensed Patents which has not been held unpatentable, invalid or unenforceable by a court or other government agency of competent jurisdiction and has not been admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise; or (ii) a claim of a pending patent application within the Licensed Patents being prosecuted in good faith that has not been abandoned or finally rejected.
ARTICLE 2. GRANT OF LICENSE
2.1License Grant. UNIVERSITY hereby grants to COMPANYand its Affiliates an exclusive license to manufacture, have manufactured on its behalf, use, sell, offer to sell, import, and export Licensed Products and Licensed Services under the Licensed IP in the Territory within the Field of Use. Subject to all applicable law and subject to UNIVERSITY’s written approval, which shall not be unreasonably withheld, the license granted pursuant to this Agreement shall include the right to sublicense such Licensed IP to any Third Party.
Because the Licensed IP was developed in part under funding by the [Funding Agency], the Licensed IP is subject to overriding obligations to the United States Government, including those specified in 35 U.S.C. §§ 200-212 and applicable governmental implementing regulations. Specifically, the United States Government requires a non-transferable, paid up, non-exclusive, irrevocable license to use the Licensed IP throughout the world. UNIVERSITY shall be solely responsible for executing such license and complying with all other applicable reporting and licensing requirements to the United States Government under this Article 2.1. COMPANY shall work with UNIVERSITY in perfecting the non-transferable, paid up, non-exclusive, irrevocable license to the United States Government as reasonably required by UNIVERSITY.[Note: This entire paragraph is not applicable and should be deleted if Licensed Patents were not federally funded.]
2.2Restrictions on Other Grants. UNIVERSITY hereby agrees to refrain from directly or indirectly exercising or granting any rights which are inconsistent with the license rights granted pursuant to Article 2.1 of this Agreement. COMPANY grants back to UNIVERSITY a perpetual, non-exclusive and non-transferable right of research and teaching within the Field of Use. UNIVERSITY shall be free to publish information relating to Licensed Patents in scientific journals. In furtherance of this publication right, UNIVERSITY will use its reasonable efforts to assure that COMPANY is provided with a copy of any manuscript prior to its submission for publication, to permit COMPANY to evaluate such manuscript in order to determine whether it contains additional patentable subject matter relating to Licensed Patents. At the request of COMPANY, the submission of the manuscript for publication will be delayed in order to enable the preparation and filing of a patent application on any patentable subject matter described in the manuscript. In implementation of the foregoing, within thirty (30) days after receipt of a manuscript intended for publication, COMPANY will notify UNIVERSITY in writing whether or not a patent application would be filed in accordance with the terms and conditions of this Agreement. If at the end of such thirty (30) day period, the Parties are not able to agree to a mutually acceptable date for submission of the manuscript for publication to enable the implementation of the decision to file a patent application, UNIVERSITY shall notify COMPANY in writing of its intention to submit such manuscript for publication without COMPANY’s approval and may do so sixty (60) days after giving such notice.
2.3Sublicensing. COMPANY shall have the exclusive right to grant sublicenses under the License Grant of Article 2.1. COMPANY shall provide written notice to UNIVERSITY of any proposed sublicense relating to the Licensed IP within thirty (30) days of the grant date. COMPANY shall remain responsible for payment to UNIVERSITY of proceeds of sublicensing according to Article 3.2. COMPANY may not sublicense unless the terms of the sublicense are consistent with all the terms of this Agreement.
2.4Further Notification. UNIVERSITY shall give COMPANY advance notice of the acquisition or issuance of patent applications, patents, or other intellectual property rights comprising the Licensed Patents set forth in Exhibit A.
2.5UNIVERSITY Rights in Data. In the event that COMPANY abandons development of a Licensed Product or Licensed Service in the Field of Use during the term of this Agreement, it shall so notify UNIVERSITY, and COMPANY will make available to UNIVERSITY a copy of any data generated by COMPANY and/or its Affiliates in the course of development of any Licensed Product, provided that UNIVERSITY shall have the right to use such data for development and to disclose such data to Third Parties in connection with efforts to commercialize Licensed Products and Licensed Services.
ARTICLE 3. CONSIDERATION AND REPORTS
3.1Consideration. In consideration of the rights and license granted to COMPANY by UNIVERSITY under this Agreement, COMPANY agrees to pay UNIVERSITY as follows:
3.1.1Upfront Consideration. Within sixty (60) days of the Effective Date of this Agreement, COMPANY shall pay UNIVERSITY an upfront payment of [Upfront Amount] as partial consideration for this agreement.
3.1.2 Royalty. The Parties recognize that the Milestone Payments listed in 3.1.5 below are insufficient to compensate UNIVERSITY for the license granted herein. Therefore, COMPANY, or COMPANY on behalf of its Affiliates or sublicensees, will pay UNIVERSITY a royalty of [Primary Royalty Rate] on Net Sales of Licensed Products and Licensed Services. This royalty shall cease at the expiration of the last surviving Licensed Patent. All royalties payable under this Article 3.1.2 shall be due on an annual basis no later than March 1 following the calendar year ending December 31.
3.1.3Minimum Annual Royalty. COMPANY, or COMPANY on behalf of its Affiliates or sublicensees, shall pay UNIVERSITY a Minimum Annual Royalty, payable on an annual basis no later than March 1 following the calendar year ending December 31. The Minimum Annual Royalty will not begin until the first full calendar year after the Effective Date of this Agreement (Year 1). For clarity, no Minimum Annual Royalty will be due for the calendar year in which this Agreement has the assigned Effective Date (Year 0). The Minimum Annual Royalty for Year 1 shall be [Minimum Royalty #1], due by March 1 of Year 2. The Minimum Annual Royalty for Year 2 shall be [Minimum Royalty #2], due by March 1 of Year 3. The Minimum Annual Royalty for Year 3 shall be [Minimum Royalty #3], due by March 1 of Year 4. The Minimum Annual Royalty shall be [Minimum Royalty #4] for Year 4 and all subsequent years of the Term. All Minimum Annual Royalties paid under this Article 3.1.3 shall be credited against royalty payments for commercial sales under Articles 3.1.2 and 3.2.1, and shall not constitute an additional royalty or other payment obligation of licensee. For purposes of clarity, no Minimum Annual Royalty shall be due in any year in which the payments made pursuant to Articles 3.1.2 and 3.2.1 together equals or exceeds the Minimum Annual Royalty stated in this Article 3.1.3 for that year.
3.1.4Equity. The Parties agree that the consideration defined in Articles 3.1.1, 3.1.2 and 3.1.3 is insufficient consideration for this Agreement. As additional consideration for the grant of rights to COMPANY by UNIVERSITY in this agreement, COMPANY shall, upon execution of this Agreement or as mutually agreed in writing by the Parties, issue to Southern Illinois Research Park, Inc. (SIRP), on behalf of the Board of Trustees of Southern Illinois University a fully paid, fully vested, non-assessable, non-voting share of ownership interest in COMPANY equaling [Number of Shares]of COMPANY’s shares outstanding. The Parties acknowledge and agree that the interest to be granted to UNIVERSITY by this paragraph is a material part of this Agreement and that the granting of said interest is a material inducement to UNIVERSITY granting the license.
COMPANY agrees to enact a term of COMPANY’s operating agreement that SIRP, on behalf of the Board of Trustees of Southern Illinois University, shall be a member of COMPANY with a fully paid, fully vested, non-assessable, non-voting share of ownership interest in COMPANY equaling [Number of Shares] membership units ([Ownership %] of outstanding COMPANY equity at the time of execution of the operating agreement), which shall be exchanged for UNIVERSITY’s [Ownership %] share in COMPANY. Said ownership interest shall be dilutable only to the same extent as other founding/initial members’ shares are at the time of issuance to the UNIVERSITY. Any such ownership interest shall be issued in the name of “Southern Illinois Research Park, Inc., on behalf of the Board of Trustees of Southern Illinois University.” Other terms and conditions pursuant to said ownership interest shall be consistent with terms and conditions for other founders and as negotiated in good faith by the Parties. The Parties acknowledge and agree that the interest to be granted to UNIVERSITY by this paragraph is a material part of this Agreement and that the granting of said interest is a material inducement to UNIVERSITY granting the license.
UNIVERSITY’s status in COMPANY shall be that of a non-managing member and UNIVERSITY shall have all rights accorded to other non-managing members.
3.1.5Milestone Payment. A Milestone Payment of [Milestone Payment Amount] shall be owed to UNIVERSITY upon accrual of [Milestone Sales Amount] in Net Sales by COMPANY. Such Milestone Payment shall be payable within ninety (90) days of achieving such accrual in Net Sales. The Milestone Payment shall be creditable against the Minimum Annual Royalty as defined in Article 3.1.3.
3.2Proceeds from Sublicensing.
3.2.1Royalty from Sublicensing. COMPANY will pay to UNIVERSITY, for sales of Licensed Products or Licensed Services by Third Party sublicensees, an amount of revenue equal to the amountUNIVERSITY would have received from COMPANY if COMPANY had sold such Licensed Product or Licensed Service according to Article 3.1.2 above. COMPANY shall also have the option, at its discretion, to have the amount paid for sales by sublicensees under this Article 3.2.1 made directly to UNIVERSITY by said sublicensees. For purposes of clarity, payments made to UNIVERSITY under this Article 3.2.1 shall be the sole payment due UNIVERSITY for sales by Third Party sublicensees, and no additional royalty payment under Article 3.1.2 shall be due for any such sale.
3.2.2Net Accrued Licensing Revenue from Sublicensing. COMPANY shall pay to UNIVERSITY a [Sublicensing Percentage]share of any Net Accrued Licensing Revenue obtained by COMPANY during the Term of this Agreement.
3.3Auditing. COMPANY agrees to keep records for a period of three (3) years showing revenues attributable to this Agreement in sufficient detail to enable the royalties or other payments payable hereunder to be determined. Upon request by UNIVERSITY, COMPANY further agrees to permit its books and records to be examined no more than once per calendar year by an independent certified public accountant selected by UNIVERSITY, and reasonably acceptable by COMPANY, for the purpose of verifying the accuracy of payments made by COMPANY to UNIVERSITY under this Agreement. The examination of COMPANY’s records shall be conducted during normal business hours upon reasonable notice by UNIVERSITY. Prior to being provided access to COMPANY’s records, said independent certified public accountant shall execute a confidentiality agreement acceptable to COMPANY to protect its confidential information. Such examination is to be made at UNIVERSITY’s expense, except in the event that the results of the audit reveal that royalties have been underpaid by five percent (5%) or more for the period under audit, in which case the reasonable fees for the audit shall be paid by COMPANY.
3.4Payment Format. All amounts owing to UNIVERSITY under this Agreement shall be paid in U.S. dollars, by check or other instrument representing immediately available funds payable to “Southern Illinois University”. If COMPANY or any Third Party sublicensee receives payment in a currency other than U.S. dollars, such currency will be converted directly from the currency in the country of sales origin to U.S. dollars on the date initial payment was made, without intermediate conversions, and payments will be made based on such conversion. All foreign and domestic tax, tariff, fee, or other applicable obligations must be satisfied by Licensee with respect to payments made to University; i.e. University will not be responsible for satisfying any such obligations on behalf of Licensee upon receipt of payment.