Provision Language
Definitions
“NET SALES” shall mean the gross amount billed by COMPANY and its AFFILIATES and SUBLICENSEES forLICENSED PRODUCTS and LICENSED PROCESSES, less the following:
(i) customary trade, quantity, or cash discounts to the extent actually allowed and taken;
(ii) amounts repaid or credited by reason of rejection or return;
(iii) to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a LICENSED PRODUCT or LICENSED PROCESS which is paid by or on behalf ofCOMPANY; and
(iv) outbound transportation costs prepaid or allowed and costs of insurance in transit. No deductions shall be made for commissions paid to individuals whether they be with independent sales agencies orregularly employed by COMPANY and on its payroll, or for cost of collections.
NET SALES shall occur on the earlier of thereceipt of payment or ninety (90) days after the date of billing for a LICENSED PRODUCT or LICENSED PROCESS. If aLICENSED PRODUCT or a LICENSED PROCESS is distributed at a discounted price that is substantially lower than thecustomary price charged by COMPANY (taking into account customary pricing for a governmental entity), or distributed for non-cash consideration (whether or not at a discount), NET SALES shall be calculated based on the non-discounted amount of theLICENSED PRODUCT or LICENSED PROCESS charged to an independent third party during the same REPORTING PERIODor, in the absence of such sales, on the fair market value of the LICENSED PRODUCT or LICENSED PROCESS.
Non-monetary consideration shall not be accepted by COMPANY, any AFFILIATE, or any SUBLICENSEE for anyLICENSED PRODUCTS or LICENSED PROCESSES without the prior written consent of M.I.T. In the event that non-monetary consideration is received for LICENSED PRODUCTS or LICENSED PROCESSES, NET SALES shall be calculated based on the fair market value of such non-monetary consideration, including all elements of such consideration, as determined by the parties in good faith.
NET SALES will be calculated only once with respect to each LICENSED PRODUCT or LICENSED PROCESS sold byCOMPANY, any AFFILIATE and/or any SUBLICENSEE, even if such LICENSED PRODUCT or LICENSED PROCESS is sold more than once in the course of its transfer to the ultimate end-user. The foregoing notwithstanding, NET SALES will not include transfers among COMPANY and any AFFILIATE and/or SUBLICENSEE unless the recipient does not intend to further sell or transfer the LICENSED PRODUCT or LICENSED PROCESS and is the end user thereof.
“SUBLICENSE INCOME” shall mean any payments that COMPANY receives from a SUBLICENSEE in consideration of the sublicense of the rights granted COMPANY under Section 2.1, including without limitation license fees, milestone payments (net of any amount due to M.I.T. under Section 4.1(c) for a substantially identical milestone event), license maintenance fees, and other payments, but specifically excluding (i) royalties on NET SALES or payments as a sharing of profits from NET SALES of LICENSED PRODUCTS or LICENSED PROCESSES, (ii) RESEARCH SUPPORT PAYMENTS, (iii) reimbursement of out-of-pocket patent prosecution and defense expenses for PATENT RIGHTS, and (iv) payments made as consideration for the issuance of equity or debt securities of COMPANY at fair market value (excluding amounts in excess of the fair market value of such securities). As used herein a “substantially identical” milestone event shall mean the achievement of a functionally equivalent developmental goal for a LICENSED PRODUCT; for example, the commencement of a Phase 2 clinical trial is a substantially identical milestone event as completion of a Phase 1 clinical trial, as both are in recognition of a LICENSED PRODUCT having completed Phase 1 trials and entering into Phase 2 trials. In addition, with respect to “payments as a sharing of profits from NET SALES”, “profits” shall mean NET SALES less selling expenses and manufacturing costs of the product, and such payments shall not include milestone and/or bonus payments related to sales of LICENSED PRODUCTS or LICENSED PROCESSES.
Consideration for any and all sublicenses of the PATENT RIGHTS shall be on commercially reasonable terms and conditions.In the event that non-monetary consideration is received for any sublicense of the PATENT RIGHTS, SUBLICENSE INCOME shall be calculated based on the fair market value of such non-monetary consideration, including all elements of such consideration.
2. GRANT OF RIGHTS
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2.3 Limited Term Option to COLLABORATION INVENTIONS.
(a) To the extent that a COLLABORATION INVENTION is available for licensing, and subject to (i) any obligations of M.I.T. to third parties and (ii) the consent of M.I.T.’s Investigator Ram Sasisekharan, M.I.T. hereby grants to COMPANY a first option (the “Option”) to add M.I.T.’s interest in such COLLABORATION INVENTION to this Agreement, by amendment, in accordance with this Section 2.3.
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(d) For each Option so exercised, COMPANY will pay M.I.T. an Improvement Addition Fee of [**] dollars ($[**]), and shall be responsible for the payment of fees and costs relating to the filing, prosecution and maintenance of the patent rights covering such COLLABORATION INVENTION. Upon COMPANY’s exercise of such right and payment of the fee, the parties shall amend this Agreement to add the patent application(s) covering such COLLABORATION INVENTION under applicable terms and conditions.
4. ROYALTIES AND PAYMENT TERMS
4.1 Consideration for Grant of Rights
(a) License Issue Fee and Patent Cost Reimbursement. COMPANY shall pay to M.I.T. on the EFFECTIVE DATE a license issue fee of [**] dollars ($[**]), and, in accordance with Section 6.3, shall reimburse M.I.T. for its actual expenses incurred as of the EFFECTIVE DATE in connection with obtaining the PATENT RIGHTS. These payments are nonrefundable.
(b) License Maintenance Fees. Subject to Article 10, COMPANY shall pay to M.I.T. the following license maintenance fees during the TERM on the dates set forth below:
(c) Milestone Payments. Subject to Article 10, COMPANY shall pay to M.I.T. the following amounts upon the first achievement of the following milestones for each LICENSED PRODUCT or LICENSED PROCESS, whether by COMPANY or any of its AFFILIATES or SUBLICENSEES:
(d) Running Royalties.
(i) COMPANY shall pay to M.I.T. a running royalty of [**] percent ([**]%) of NET SALES, except on certain sales in DEVELOPING COUNTRIES as set forth in Section 4.1(d)(ii) below.
(ii) Global Access. Royalties shall not be due to M.I.T. on NET SALES made at a COST BASED PRICE in DEVELOPING COUNTRIES. As used in this subsection, the term “COST BASED PRICE” shall mean, in respect of each LICENSED PRODUCT, a price not exceeding that which fairly reflects the direct cost of manufacture of such LICENSED PRODUCT plus a typical margin for a generic pharmaceutical product for the respective market (i.e., priced to enable availability and accessibility to people most in need), as will be mutually agreed by the parties.
(e) Sharing of SUBLICENSE INCOME. COMPANY shall pay M.I.T. a total of [**] percent ([**]%) of all SUBLICENSE INCOME received by COMPANY.
Article 6. PATENT PROSECUTION
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6.3 Payment of Expenses. Payment of all fees and costs, including attorneys’ fees, relating to the filing, prosecution and maintenance of the PATENT RIGHTS shall be the responsibility of COMPANY, whether such amounts were incurred before or after the EFFECTIVE DATE. As of June 27, 2013, M.I.T. has incurred approximately $[**] for such patent-related fees and costs. COMPANY shall reimburse all amounts due pursuant to this Section within thirty (30) days of invoicing; late payments shall accrue interest pursuant to Section 4.2(c). In all instances, M.I.T. shall pay the fees prescribed for large entities to the United States Patent and Trademark Office.
7. INFRINGEMENT
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7.4 Offsets. COMPANY may offset a total of [**] percent ([**]%) of any expenses incurred under Sections 7.2 and 7.3 against any payments due to M.I.T. under Article 4, provided that in no event shall such payments under Article 4, when aggregated with any other offsets and credits allowed under this Agreement, be reduced by more than [**] percent ([**]%) in any REPORTING PERIOD, it being understood that any expenses which COMPANY is prevented by the foregoing proviso from offsetting in any REPORTING PERIOD may be carried forward and offset in one or more subsequent REPORTING PERIODS (applying the foregoing proviso, including the cap, in each subsequent REPORTING PERIOD).
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7.7 Right to Sublicense. So long as COMPANY remains the exclusive licensee of the PATENT RIGHTS in the FIELD in the TERRITORY, COMPANY shall have the sole right to sublicense any alleged infringer in the FIELD) in the TERRITORY for future use of the PATENT RIGHTS in accordance with the terms and conditions of this Agreement relating to sublicenses. Any upfront fees as part of such sublicense shall be shared equally between COMPANY and M.I.T.; other revenues to COMPANY pursuant to such sublicense shall be treated as set forth in Article 4.
