“Net Sales” means the total gross receipts for sales of Licensed Products or practice of Licensed Processes by or on behalf of the Licensee or its sublicensees, and from leasing, renting, or otherwise making the Licensed Products available to others without sale or other dispositions, whether invoiced or not, less returns and allowances, packing costs, insurance costs, freight out, taxes or excise duties imposed on the transaction (if separately invoiced), and wholesaler and cash discounts in amounts customary in the trade to the extent actually granted. No deductions shall be made for commissions paid to individuals, whether they are with independent sales agencies or regularly employed by the Licensee, or sublicensees, and on its payroll, or for the cost of collections.
6. ROYALTIES AND REIMBURSEMENT
6.1 The Licensee agrees to pay the IC a noncreditable, nonrefundable license issue royalty as set forth in Appendix C.
6.2 The Licensee agrees to pay the IC a minimum annual royalty as set forth in Appendix C.
6.3 The Licensee agrees to pay the IC earned royalties as set forth in Appendix C.
6.4 The Licensee agrees to pay the IC benchmark royalties as set forth in Appendix C.
6.5 The Licensee agrees to pay the IC sublicensing royalties as set forth in Appendix C.
6.6 A patent or patent application licensed under this Agreement shall cease to fall within the Licensed Patent Rights for the purpose of computing earned royalty payments in any given country on the earliest of the dates that:
(a) the application has been abandoned and not continued;
(b) the patent expires or irrevocably lapses; or
(c) the patent has been held to be invalid or unenforceable by an unappealed or unappealable decision of a court of competent jurisdiction or administrative agency.
6.7 No multiple royalties shall be payable because any Licensed Products or Licensed Processes are covered by more than one of the Licensed Patent Rights.
6.8 On sales of Licensed Products by the Licensee made in other than an arms-length transaction, the value of the Net Sales attributed under this Article 6 to this transaction shall be that which would have been received in an arms-length transaction, based on sales of like quantity and quality products on or about the time of this transaction.
6.9 With regard to unreimbursed expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights and paid by the IC prior to the effective date of this Agreement, the Licensee shall pay the IC, as an additional royalty, within sixty (60) days of the IC’s submission of a statement and request for payment to the Licensee, an amount equivalent to the unreimbursed patent expenses previously paid by the IC.
6.10 With regard to unreimbursed expenses associated with the preparation, filing, prosecution, and maintenance of all patent applications and patents included within the Licensed Patent Rights and paid by the IC on or after the effective date of this Agreement, the IC, at its sole option, may require the Licensee:
(a) to pay the IC on an annual basis, within sixty (60) days of the IC’s submission of a statement and request for payment, a royalty amount equivalent to these unreimbursed expenses paid during the previous calendar year(s);
(b) to pay these unreimbursed expenses directly to the law firm employed by the IC to handle these functions. However, in this event, the IC and not the Licensee shall be the client of the law firm; or
(c) under exceptional circumstances, the Licensee may be given the right to assume responsibility for the preparation, filing, prosecution, or maintenance of any patent application or patent included with the Licensed Patent Rights. In that event, the Licensee shall directly pay the attorneys or agents engaged to prepare, file, prosecute, or maintain these patent applications or patents and shall provide the IC with copies of each invoice associated with these services as well as documentation that these invoices have been paid.
6.11 The IC agrees, upon written request, to provide the Licensee with summaries of patent prosecution invoices for which the IC has requested payment from the Licensee under Paragraphs 6.9 and 6.10. The Licensee agrees that all information provided by the IC related to patent prosecution costs shall be treated as confidential commercial information and shall not be released to a third party except as required by law or a court of competent jurisdiction.
6.11 The Licensee may elect to surrender its rights in any country of the Licensed Territory under any of the Licensed Patent Rights upon sixty (60) days written notice to the IC and owe no payment obligation under Paragraph 6.10 for patent-related expenses paid in that country after the effective date of the written notice.
APPENDIX C – ROYALTIES
I. The Licensee agrees to pay to the IC a noncreditable, nonrefundable license issue royalty in the amount of _______ Dollars ($X) within sixty (60) days from the effective date of this Agreement.
II. The Licensee agrees to pay to the IC a nonrefundable minimum annual royalty in the amount of _______ Dollars ($X) as follows:
(a) The first minimum annual royalty is due within sixty (60) days of the effective date of this Agreement and may be prorated according to the fraction of the calendar year remaining between the effective date of this Agreement and the next subsequent January 1; and
(b) Subsequent minimum annual royalty payments are due and payable on January 1 of each calendar year and may be credited against any earned royalties due for sales made in that year.
III. The Licensee agrees to pay the IC earned royalties of ___ percent (X%) on Net Sales by or on behalf of the Licensee.
IV. The Licensee agrees to pay the IC Benchmark royalties within sixty (60) days of achieving each Benchmark.
V. The Licensee agrees to pay the IC additional sublicensing royalties of ____ percent (X%) on the fair market value of any consideration received for granting each sublicense within sixty (60) days of the execution of each sublicense.