Provision Language
Definitions
“NET SALES” shall mean:
(a) gross invoice price from the sale, lease or other transfer or disposition of the LICENSED PRODUCTS or LICENSED METHODS, or from services performed using LICENSED PRODUCTS or LICENSED METHODS, by LICENSEE, SUBLICENSEES or AFFILIATES to third parties, except as set forth in Article 2.16(b), less the following deductions, provided they actually pertain to the disposition of the LICENSED PRODUCTS or LICENSED METHODS and are separately invoiced: (i) all discounts, credits and allowances on account of returns; (ii) customary trade, quantity or cash discounts to the extent actually allowed and taken; (iii) amounts actually repaid or credited by reason of rejection or return of any previously sold, leased or otherwise transferred LICENSED PRODUCTS or refunded for previously performed LICENSED METHODS; (iv) customary freight charges; and (v) sales, value added or similar taxes, customs duties or other similar governmental charges levied on the production, sale, transportation, delivery or use of a LICENSED PRODUCT or practice of a LICENSED METHOD, but not including income taxes. No deductions shall be made for any other costs or expenses, including but not limited to commissions to independents, agents or those on LICENSEE’s, SUBLICENSEE’s or an AFFILIATE’s payroll or for the cost of collection.
(b) “NET SALES” shall not include the gross invoice price for LICENSED PRODUCTS or LICENSED METHODS sold to, or services performed using LICENSED PRODUCTS or LICENSED METHODS for, any AFFILIATE unless such AFFILIATE is an end–user of any LICENSED PRODUCT or LICENSED METHOD, in which case such consideration shall be included in NET SALES at the average selling price charged to a third party during the same quarter.
“SUBLICENSE INCOME” shall mean consideration in any form, except as further defined below, received by LICENSEE or an AFFILIATE (if such AFFILIATE has the right to sublicense) in consideration for a grant to any third party or parties of a sublicense or other right, license, privilege or immunity from suit to make, have made, use, sell, have sold, distribute, import or export LICENSED PRODUCTS or to practice LICENSED METHODS, but excluding consideration received by LICENSEE (a) in the form of EARNED ROYALTIES; (b) in reimbursement of LICENSEE’s and its AFFILIATES’ actual, documented cost to perform research, development, commercialization or similar services or activities conducted for such LICENSED PRODUCT; (c) in reimbursement of documented, out–of–pocket patent expenses for the LICENSED PATENTS; or (d) in consideration of the purchase of any securities of such party or its affiliates at a price equal to the then fair market value of such securities. SUBLICENSE INCOME shall include without limitation any license signing fee, license maintenance fee, unearned portion of any minimum royalty payment received by LICENSEE, equity, distribution or joint marketing fee, research and development funding in excess of LICENSEE’s cost of performing such research and development, funding received for reimbursement of LICENSEE’s patent expenses that is in excess of such expenses, and any consideration received for an equity interest in, extension of credit by or other investment in LICENSEE to the extent such consideration exceeds the fair market value of the equity or other interest as determined by an independent appraiser mutually agreeable to the parties. In case an extension of credit or loan to LICENSEE by a third party is forgiven in whole or in part by the third party, such amount shall constitute SUBLICENSE INCOME. Notwithstanding anything in this definition, SUBLICENSE INCOME shall not include any income or consideration received by a LICENSEE or an AFFILIATE from a third party if LICENSEE or AFFILIATE, in good faith, provides a sublicense or other right, license, privilege or immunity from suit to the LICENSED PATENTS in conjunction with other intellectual property rights or products owned or controlled by LICENSEE or its AFFILIATES that are required by a SUBLICENSEE for the manufacture, use or sale of a LICENSED PRODUCT. For the avoidance of doubt, in the event that LICENSEE or an AFFILIATE sublicenses the LICENSED PATENTS in conjunction with other intellectual property rights or products owned or controlled by LICENSEE or its AFFILIATES, then all milestones, royalties, and other payments due for such a LICENSED PRODUCT that is being developed, manufactured, or sold by a SUBLICENSEE shall be paid to YALE on the same financial terms as if developed, manufactured, or sold by LICENSEE.
4. SUBLICENSES
[…]
4.2 LICENSEE shall pay royalties to YALE on NET SALES of SUBLICENSEES based on the same royalty rate as apply to NET SALES by LICENSEE and its AFFILIATES, regardless of the royalty rates payable by SUBLICENSEES to LICENSEE under a sublicense agreement. In addition, LICENSEE shall pay to YALE Forty Per Cent (40%) of any SUBLICENSE INCOME.
5. LICENSE ISSUE FEE; LICENSE MAINTENANCE FEE; MILESTONE PAYMENTS
5.1 LICENSEE shall pay to YALE, within 14 days of the EFFECTIVE DATE, a non–refundable license issue fee of Twenty–Five Thousand Dollars ($25,000.00).
5.2 During the TERM of this Agreement, LICENSEE agrees to pay to YALE an annual license maintenance fee (“LMF”) commencing on the each anniversary of the EFFECTIVE DATE according to the following schedule:
[TABLE REDACTED]
The LMF above may be credited against any EARNED ROYALTIES payable under Article 6.1, or SUBLICENSE INCOME payable under Section 5.4, in the same calendar year.
5.3 LICENSEE shall pay the following milestone fees to YALE for each LICENSED PRODUCT developed by LICENSEE, its AFFILIATES or SUBLICENSEES:
(a) [***]
(b) [***]
(c) For each additional LICENSED PRODUCT:
i. [***]
ii. [***]
iii. [***]
[***] shall not be viewed as additional or different products for the purposes of paying milestones.
5.4 The milestone royalties set forth in Article 5.3 shall not be credited against EARNED ROYALTIES payable under Article 6.1.
6. EARNED ROYALTIES; MINIMUM ROYALTY PAYMENTS
6.1 During the TERM of this Agreement, as partial consideration for the LICENSE, LICENSEE shall pay to YALE an earned royalty of [***] percent ([***]%) on worldwide cumulative NET SALES of LICENSED PRODUCTS or LICENSED METHODS by LICENSEE or its SUBLICENSEES or AFFILIATES (“EARNED ROYALTY”).
6.2 LICENSEE shall pay all EARNED ROYALTIES accruing to YALE within [***] days from the end of each calendar quarter (March 31, June 30, September 30 and December 31), beginning in the first calendar quarter in which NET SALES occur. Unless YALE requests otherwise, LICENSEE shall report all EARNED ROYALTIES and other payments accruing to YALE on a quarterly basis, but shall defer payments accruing to YALE that do not, in total, [***]
6.3 All EARNED ROYALTIES and other payments due under this Agreement shall be paid to YALE in United States Dollars. If overdue, the royalties and any other payments due under this Agreement shall bear interest until payment at a per annum rate [***] on the due date. The payment of such interest shall not foreclose YALE from exercising any other right it may have as a consequence of the failure of LICENSEE to make any payment when due.