“NET SALES” means the total amount invoiced or otherwise charged (including fair market value of any non-cash consideration) by LICENSEE or a SUBLICENSEE on account of the SALE, lease, provision, transfer, or other disposition of a LICENSED PRODUCT or LICENSED SERVICE, after deduction of the following in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) to the extent separately itemized in the applicable invoice, and not otherwise reimbursed, and allowed: any shipping costs, allowances because of returned products, or sales taxes. If LICENSEE or a SUBLICENSEE makes any SALES to any third party in a transaction in a given country that is not an arms’-length transaction, or a LICENSED PRODUCT or LICENSED SERVICE is sold, transferred or otherwise provided to a third party without charge or at a discount, then NET SALES means the gross amount normally charged in arm’s length transactions less the allowable deductions set forth above. In the case of transfers between any of LICENSEE, SUBLICENSEE, or their respective AFFILIATES for subsequent SALE, lease, provision, distribution or other transfer, then NET SALES will be the greater of the total amount invoiced or otherwise charged (including fair market value of any non-cash consideration) (i) for the transfer of the LICENSED PRODUCT or LICENSED SERVICE between LICENSEE, SUBLICENSEES, or AFFILIATES, as applicable, or (ii) for any subsequent SALE of such LICENSED PRODUCT or LICENSED SERVICE in an arms’-length transaction.
“SUBLICENSE INCOME” means any consideration (including, without limitation, any licensing or optioning fees, or license maintenance fees, or milestone payments, and fair market value of any non-cash consideration) received by, or payable to, LICENSEE from any SUBLICENSEE, based in whole or in part on rights granted in a SUBLICENSE. SUBLICENSE INCOME excludes earned royalty payments but only to the extent such royalty payments are calculated using the same sales that generated payment of an earned royalty to the REGENTS pursuant to Paragraph 6.1.
3.3 Humanitarian Purposes. […]
(b) Notwithstanding the foregoing, prior to issuance of any such license to REGENTS’ PATENT RIGHTS to a third party, REGENTS will notify LICENSEE of its intention to grant such license so that LICENSEE may have the opportunity to fill the anticipated market need itself and/or to engage in discussions for a sublicense with such third party in accordance with the procedures set forth in Paragraph 4.8. In the event any LICENSED PRODUCT SOLD in any LMI COUNTRY by any such third party according to the provisions of Paragraph 3.3(a) is exported, re-SOLD or otherwise introduced in any LICENSEE MARKETS, LICENSEE will provide REGENTS with written notification thereof, and if such exportation, re-sale or introduction does not cease within ninety (90) days after the date of such notice, then an amount equal to the retail price of LICENSED PRODUCT so exported, re-SOLD or introduced to such LICENSEE Market will be credited to royalties due to REGENTS hereunder.
4.2 LICENSEE will pay to REGENTS the following percentages of any SUBLICENSE INCOME:
(a) [Written percent] (XX%) of SUBLICENSE INCOME received with respect to a SUBLICENSE executed _______________; and
(b) [Written percent] (XX%) of SUBLICENSE INCOME received with respect to a SUBLICENSE executed ___________.
For the purposes of calculating the amount of SUBLICENSE INCOME due REGENTS, the amount of SUBLICENSE INCOME due REGENTS is based on when the SUBLICENSE is executed. SUBLICENSE INCOME received by LICENSEE, for achievement of any of the milestone events by a SUBLICENSEE that is required to be paid to REGENTS, will be reduced by the amount of the milestone payment due from LICENSEE to REGENTS in respect of the same milestone event.
5. LICENSE ISSUE FEE; EQUITY
5.1 License Issue Fee. LICENSEE will pay to REGENTS a non-creditable, nonrefundable license issue fee of [Written amount] ($ Number) due upon signing of this AGREEMENT. This fee is non-refundable and not an advance against royalties or other payments due under this AGREEMENT.
5.2 Equity. As additional consideration for this AGREEMENT, LICENSEE shall execute a Stock Issuance Agreement(s) on terms as set forth in the Summary of Equity Terms attached hereto as APPENDIX C and within thirty (30) days of the effective date of such Stock Issuance Agreement, issue and deliver such equity to the REGENTS; provided, in the case of uncertificated equity, LICENSEE will track the REGENTS’ ownership on the books of LICENSEE and within thirty (30) days of the effective date of such Stock Issuance Agreement provide evidence of ownership to the REGENTS via account update.
6. ROYALTIES, LICENSE MAINTENANCE FEES, MINIMUM ANNUAL ROYALTIES
6.1 Earned Royalty. LICENSEE will pay to REGENTS earned royalties at the rate of [Written percent] (Number%) of the NET SALES of LICENSED PRODUCTS, LICENSED SERVICES, and LICENSED METHODS. Royalties will be payable on SALEs covered by both pending patent applications and issued patents. Royalties accruing to REGENTS will be paid to REGENTS quarterly within sixty (60) days after the end of each calendar quarter.
6.2 License Maintenance Fee. LICENSEE will pay to REGENTS an annual license maintenance fee of [Written amount] U.S. Dollars ($Number) on the one (1) year anniversary date of the Effective Date and on each anniversary of the Effective Date thereafter. Notwithstanding the foregoing, the license maintenance fee will not be due and payable on any anniversary of the Effective Date, if on such date the LICENSEE is selling LICENSED PRODUCTS or LICENSED METHODS, and LICENSEE pays an earned royalty to REGENTS.
6.3 Minimum Annual Royalty. Beginning in the calendar year after the first occurrence of SALEs, and in each succeeding calendar year thereafter, LICENSEE will pay to REGENTS a minimum annual royalty of [Written amount] U.S. Dollars ($ Number) for the life of this AGREEMENT. This minimum annual royalty will be paid to REGENTS by February 28 of each year and will be credited against the earned royalty due and owing for the calendar year in which the minimum payment is made.
6.5 Validity Challenge. Earned Royalty if LICENSEE or the SUBLICENSEE challenges any REGENTS’ PATENT RIGHTS: Notwithstanding the above, should LICENSEE or the SUBLICENSEE bring an action seeking to invalidate any REGENTS’ PATENT RIGHTS,
(a) LICENSEE or the SUBLICENSEE will pay royalties to REGENTS at the rate of two times Y percent (2xY%) of the NET SALES of all LICENSED PRODUCTS SOLD during the pendency of such action. Moreover, should the outcome of such action determine that any claim of a patent challenged by LICENSEE is both valid and infringed by a LICENSED PRODUCT, LICENSEE or the SUBLICENSEE will pay royalties at the rate of three times Y percent (3xY%) of the NET SALES of all LICENSED PRODUCTS
SOLD, when Y is the royalty rate in 6.1,
(b) LICENSEE or the SUBLICENSEE will have no right to recoup any royalties paid before or during the period challenge,
(c) any dispute regarding the validity of any REGENTS’ PATENT RIGHTS will be litigated in the courts located in California, and the parties agree not to challenge personal jurisdiction in that forum, and;
(d) LICENSEE or the SUBLICENSEE will provide written notice to REGENTS at least three months prior to bringing an action seeking to invalidate any REGENTS’ PATENT RIGHTS. LICENSEE or the SUBLICENSEE will include with such written notice an identification of all prior art it believes invalidates any claim of REGENTS’ PATENT RIGHTS.
6.6 Payments. All payments due REGENTS will be payable in United States dollars by check payable to “REGENTS of the University of California” or by wire transfer to REGENTS at the addresses shown in Article 23 (Notices). When LICENSED
PRODUCTS or LICENSED SERVICES are SOLD for monies other than United States dollars, earned royalties will first be determined in the foreign currency of the country in which the SALE was made and then converted into equivalent United
States dollars. The exchange rate will be that rate quoted in the Wall Street Journal on the last business day of the reporting period. REGENTS may provide invoices upon request or as a courtesy, but failure to receive an invoice from REGENTS does not relieve or otherwise change LICENSEE’S obligation to make accurate and complete payments at the time such payments are due.
(a) Taxes. SUBLICENSE INCOME, earned royalties, and other consideration accrued in any country outside the United States may not be reduced by any taxes, fees or other charges imposed by the government of such country. LICENSEE will also be responsible for all bank transfer charges.
(b) Late Payments. If monies owed to REGENTS under this AGREEMENT are not received by REGENTS when due, LICENSEE will pay to REGENTS interest charges at a rate of ten percent (10%) per annum. Such interest will be calculated from the date payment was due until actually received by REGENTS. Such accrual of interest will be in addition to, and not in lieu of, enforcement of any other rights of REGENTS related to such late payment. Acceptance of any late payment will not constitute a waiver under Article 24 (Waiver) of this AGREEMENT.
(c) Payments accrued prior to expiration. If any patent or patent application, or any VALID CLAIM thereof, included within REGENTS’ PATENT RIGHTS expires or is held invalid in a final decision by a court of competent jurisdiction and last resort and from which no appeal has been or can be taken, all obligations to pay royalties based on such patent, patent application or VALID CLAIM, or any claims patentably indistinct therefrom will cease as of the date of such expiration or final decision. LICENSEE will not, however, be relieved from paying any royalties that accrued before such expiration or decision or that are based on another VALID CLAIM not expired or involved in such decision.
7.3 Failure to Meet Development Milestones.
(a) If LICENSEE is unable to meet any of its diligence obligations set forth in Paragraphs 7.1 and 7.2, then REGENTS will so notify LICENSEE of failure to perform. LICENSEE will have the right and option to extend the target date of any such due diligence obligation for a period of six (6) months upon the payment of [Written amount]_thousand dollars ($ Number) within thirty (30) days of the date to be extended for each such extension option exercised by LICENSEE. LICENSEE may further extend the target date of any diligence obligation for an additional six (6) months upon payment of an additional [Written amount] thousand dollars ($ Number). Additional extensions may be granted only by mutual written AGREEMENT of the parties to this AGREEMENT. These payments are in addition to the minimum royalty payments specified in Paragraph 6.5. Should LICENSEE opt not to extend the obligation or fail to meet it by the extended target date, then REGENTS will have the right and option either to terminate this AGREEMENT or to reduce LICENSEE’s exclusive license to a non-exclusive royalty-bearing license. This right, if exercised by REGENTS, supersedes the rights granted in Article 3 (Grant). The right to terminate this AGREEMENT or reduce LICENSEE’s exclusive license granted hereunder to a non-exclusive license will be REGENTS’ sole remedy for breach of Paragraph 7.1 or 7.2.