“Patent Expenses” means all reasonable, out-of-pocket expenses incurred relating to the preparation, filing, prosecution, maintenance or defense of Patent Rights, both past and future. For avoidance of doubt, the salaries and overhead costs of each Party’s technology transfer office or legal affairs office are not included as out-of-pocket expenses for purposes of calculating the Patent Expenses.
2. Patent Prosecution and Protection
2.1 Authority to File Patents. The Lead Institution has the responsibility and authority to take all reasonable actions necessary and appropriate to seek patent protection for the Patent Rights in accordance with the terms of this Agreement. The Lead Institution may not delegate this authority to a Licensee, unless stated otherwise in Exhibit A or unless such delegation is approved by the Other Institution(s) for a particular Licensee (or deemed approved in accordance with Section 3.3). Although the Lead Institution will have the ultimate decision authority in these matters, the Lead Institution will use reasonable efforts to keep the Other Institution(s) reasonably informed as to all material patent prosecution actions and decisions, and the Lead Institution will give due consideration to any recommendations made by the Other Institution(s) concerning the patent prosecution. Lead Institution will provide, or direct outside patent counsel to provide, Other Institution(s) with all serial numbers and filing dates, together with copies of all applications in the Patent Rights and patents that issue from the Patent Rights, including copies of all office actions, responses and all other communications from the U.S. Patent and Trademark Office and the patent offices in any other jurisdictions.
2.2 Foreign Patent Prosecution. In instances where there is no commitment from a Licensee to reimburse Patent Expenses, Lead Institution will consult with the Other Institution(s) regarding foreign filings reasonably in advance of the filing deadline. If an Other Institution(s) is not willing to pay its Share of Patent Expenses for any such foreign filing, it will so notify the Lead Institution in writing in accordance with Section 4.1(c) and the consequences stated under Section 2.3 will apply if the Lead Institution elects to proceed with foreign filings.
2.3 Consequences of Other Institution Withdrawing from Paying or Defaulting on Payment of Patent Expenses. If an Other Institution becomes a Withdrawing Party, then the other Party(ies) may elect to either terminate this Agreement by providing 30 days’ prior written notice, or to pay the Withdrawing Party’s Share of Patent Expenses (the “Covered Expenses”). If the other Party(ies) elect to pay the Covered Expenses, the “Consequences of Withdrawal” indicated in the Transaction Terms will apply, subject to the following:
(a) If the Transaction Terms indicate a reduction in the Withdrawing Party’s Share of Net Consideration, that reduction will only be applicable to Net Consideration reasonably attributable to the Patent Rights for which the other Party(ies) are paying Covered Expenses;
(b) If the Transaction Terms indicate a recovery of a multiple of the Covered Expenses, the Party(ies) paying the Covered Expenses will be entitled to recover that amount from the first of any License Consideration reasonably attributable to Patent Rights for which the other Party(ies) are paying Covered Expenses;
(c) If the Transaction Terms indicate “Share only with Withdrawing Party’s Inventors,” then the Withdrawing Party’s Share of Net Consideration for any Net Consideration reasonably attributable to the Patent Rights for which the other Party(ies) are paying Covered Expenses will be reduced to zero, but the paying Party will pay the Withdrawing Party’s inventors a share of such Net Consideration in accordance with the paying Party’s policy;
(d) If the Transaction Terms indicate “Meet and Confer,” then the Parties will confer and negotiate in good faith a fair accommodation to the other Party(ies) for the additional cost and risk, if any, assumed by paying the Covered Expenses; and
(e) Nothing in this Section 2.3 will eliminate the right of a Withdrawing Party under Section 4.2(b) to reimbursement of Patent Expenses actually paid by the Withdrawing Party.
2.4 Abandonment of Patent Rights by Lead Institution. The Lead Institution will not abandon the prosecution of any patent application (except in favor of a continuation, divisional or continuation-in-part application) or the maintenance of any Patent Rights without notifying the Other Institution(s) in writing at least 90 days in advance of any applicable deadline and allowing the Other Institution(s) the opportunity to prosecute or maintain such Patent Rights at its sole expense in the name of Other Institution(s) and Lead Institution. If the Other Institution(s) wishes to continue prosecution of such Patent Rights, then the Parties will negotiate in good faith an appropriate arrangement to enable the Other Institution(s) to continue prosecution and commercialization of such Patent Rights, which may include the Parties entering into a new agreement that gives an Other Institution the lead in patent prosecution and licensing with appropriate adjustments in the economic arrangements between the Parties.
2.5 Patent Assignments. Lead Institution will record assignments of Patent Rights in the names of the Lead Institution and the Other Institution(s) in the U.S. Patent and Trademark Office and other government patent offices, as applicable, and will provide Other Institution(s) with a copy of each recorded assignment.
4. Financial Terms
4.1 Patent Expenses.
(a) The Patent Expenses invoiced to the Parties prior to the Effective Date are identified as Past Patent Expenses in the Transaction Terms. Within 90 days of the Effective Date, the other Party(ies) will pay its Share of Patent Expenses with respect to the Past Patent Expenses to the Parties that incurred such expenses.
(b) The Lead Institution will be solely responsible for reviewing and approving all Patent Expenses incurred after the Effective Date and for ensuring that all Patent Expenses are paid in a timely manner. The Lead Institution will furnish to the Other Institution(s) copies of all invoices for Patent Expenses on a regular basis. The Other Institution(s), within 90 days after receipt of the invoices, will reimburse to the Lead Institution its Share of Patent Expenses, which have been paid by the Lead Institution and not reimbursed by a Licensee. Notwithstanding the foregoing, Lead Institution will notify Other Institution(s) prior to incurring any Extraordinary Patent Expenses. In the event such advance notice is given, the Other Institution(s) may elect to pay its Share of Patent Expenses for such Extraordinary Patent Expenses or decline to pay such share and have the consequences stated in Section 2.3 apply. In the event Extraordinary Patent Expenses are incurred and advance notice was not given, Other Institution(s) will not be responsible for reimbursing any portion of such Extraordinary Patent Expenses.
(c) Upon at least 90 days’ prior written notice from an Other Institution to the other Party(ies), such Other Institution may decline to pay its Share of Patent Expenses incurred after such notice period for either of the following as specified in such notice: (i) all Patent Expenses outside the United States, or (ii) all Patent Expenses. If the other Party(ies) pays such Patent Expenses, then the consequences stated in Section 2.3 will apply.
6. Patent Challenge or Infringement
If any Party learns of a claim by a third party challenging the validity of any Patent Rights (such as an inter partes review, interference or opposition proceeding) or a potential infringement of the Patent Rights, it will promptly notify the other Parties hereto. Subject to the rights granted to the Licensee in any License Agreement, the Parties agree to discuss the situation and determine in good faith how best to proceed. In the event of a challenge to the validity of any Patent Rights by a third party, the Lead Institution will have the right, but not the obligation, to defend such challenge in the absence of the Parties reaching another agreement on how to respond to such challenge.