CONFIDENTIAL
EXHIBIT 10.12
PUBLIC HEALTH SERVICE
PATENT LICENSE AGREEMENT-EXCLUSIVE
COVER PAGE
For PHS internal use only:
Patent License Number: L-226-96/D
Serial Numbers of Licensed Patents: U.S. PAT. 5,614,191 AND
U.S. PAT. 4,892,827
Licensee: NEOPHARM, INC.
CRADA Number (if applicable): N/A
Additional Remarks: None
This Patent License Agreement, hereinafter referred to as THE "AGREEMENT,"
consists of this Cover Page, an attached AGREEMENT, a Signature Page, Appendix A
(List of Patent(s) or Patent Applications(s)), Appendix B (Fields of Use and
Territory), Appendix C (Royalties), Appendix D (Benchmarks), and Appendix E
(Commercial Development Plan). The Parties to this AGREEMENT are:
1) The National Institutes of Health ("NIH"), the Centers for Disease
Control and Prevention ("CDC"), or the Food and Drug Administration
("FDA"), hereinafter singly or collectively referred to as "PHS,"
agencies ("DHHS"); and
2) The person, corporation, or institution identified ABOVE AND/OR ON THE
Signature Page, having offices at the address indicated on the
Signature Page, hereinafter referred to as "Licensee."
PHS PATENT LICENSE AGREEMENT--EXCLUSIVE
PHS and LICENSEE agree as follows:
1. BACKGROUND
1.01 In the course of conducting biomedical and behavioral
research, PHS investigators made inventions that may have
commercial applicability.
1.02 By assignment of rights from PHS employees and other
inventors, DHHS, on behalf of the United States
Government, owns intellectual property rights claimed in
any United States and foreign patent applications or
patents corresponding to the assigned inventions. DHHS
also owns any tangible embodiments of these inventions
actually reduced to practice by PHS.
1.03 The Assistant Secretary for Health of DHHS has delegated
to PHS the authority to enter into this AGREEMENT for the
licensing of rights to these inventions under 35 U.S.C.
Sections 200-212, the Federal Technology Transfer Act of
1986, 15 U.S.C. Section 3710a, and/or the regulations
governing the licensing of Government-owned inventions, 37
CFR Part 404.
1.04 PHS desires to transfer these inventions to the private
sector through commercialization licenses to facilitate
the commercial development of products and processes for
public use and benefit.
1.05 LICENSEE desires to acquire commercialization rights to
certain of these inventions in order to develop processes,
methods, or marketable products for public use and
benefit.
2. DEFINITIONS
2.01 "BACKGROUND PATENT RIGHTS" shall mean U.S. Patent No.
4,892,827.
2.02 "BENCHMARKS" mean the performance milestones that are set
forth in Appendix D.
2.03 "COMMERCIAL DEVELOPMENT PLAN" means the written
commercialization plan attached as Appendix E.
2.04 "FIRST COMMERCIAL SALE" means the initial transfer by or
on behalf of LICENSEE or its sublicensees of LICENSED
PRODUCTS or the initial practice of a LICENSED PROCESS by
or on behalf of LICENSEE or its sublicensees in exchange
for cash or some equivalent to which value can be assigned
for the purpose of determining NET SALES.
2.05 "GOVERNMENT" means the Government of the United States of
America.
2.06 "LICENSED FIELDS OF USE" means the fields of use
identified in Appendix B.
2.07 "LICENSED PATENT RIGHTS" means the fields of use
identified in Appendix B.
a) U.S. patent applications and patents listed in
Appendix A as such, all divisions and
continuations of these applications, all
patents issuing from such applications,
divisions, and continuations, and any reissues,
reexaminations, and extensions of all such
patents;
b) to the extent the following contain one or more
claims directed to the invention or inventions
disclosed in a) above: i) continuations-in-part
of a) above; ii) all divisions and
continuations of these continuations-in-part;
iii) all patents issuing from such
continuations-in-part, divisions, and
continuations; and iv) any reissues,
reexaminations, AND EXTENSIONS OF ALL SUCH
PATENTS;
c) to the extent that the following contain one or
more claims directed to the invention or
inventions disclosed in a) above: all
counterpart foreign applications and patents to
a) and b) above, including those listed in
Appendix A.
Licensed Patent Rights shall not include b) or c) above to
the extent that they contain one or more claims directed
to new matter which is not the subject matter disclosed in
a) above.
2.08 "LICENSED PROCESS(ES)" means processes which, in the
course of being practiced would, in the absence of this
AGREEMENT, infringe one or more claims of the LICENSED
PATENT RIGHTS that have not been held invalid or
unenforceable by an unappealed or unappealable judgment of
a court of competent jurisdiction.
2.09 "LICENSED PRODUCT(S)" means tangible materials which, in
the course of manufacture, use, or sale would, in the
absence of this AGREEMENT, infringe one or more claims of
the LICENSED PATENT RIGHTS that have not been held invalid
or unenforceable by an unappealed or unappealable judgment
of a court of competent jurisdiction.
2.10 "LICENSED TERRITORY" means the geographical area
identified in Appendix B.
2.11 "NET SALES" means the total gross receipts for sales of
LICENSED PRODUCTS or practice of LICENSED PROCESSES by or
on behalf of Licensee or its sublicensees, and from
leasing, renting, or otherwise making LICENSED PRODUCTS
available to others without sale or other dispositions,
whether invoiced or not, less returns and allowances
actually granted, 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. No deductions shall be
made for commissions paid to individuals, whether they be
with independent sales agencies or regularly employed by
LICENSEE, or sublicensees, and on its payroll, or for the
cost of collections.
2.12 "PRACTICAL APPLICATION" means to manufacture in the case
of a composition or product, to practice in the case of a
process or method, or to operate in the case of a machine
or system; and in each case, under such
conditions as to establish that the invention is being
utilized and that its benefits are to the extent permitted
by law or GOVERNMENT regulations available to the public
on reasonable terms.
2.13 "RESEARCH LICENSE" means a nontransferable, nonexclusive
license to make and to use the LICENSED PRODUCTS OR
LICENSED PROCESSES as defined by the LICENSED PATENT
RIGHTS for purposes of research including human clinical
trials and not for purposes of commercial manufacture or
distribution or in lieu of purchase if LICENSED PRODUCTS
or LICENSED PROCESSES are marketed by LICENSEE.
3. GRANT OF RIGHTS
3.01 PHS hereby grants and LICENSEE accepts, subject to the
terms and conditions of this AGREEMENT, an exclusive
license under the LICENSED PATENT RIGHTS in the LICENSED
TERRITORY to make and have made, to use and have used, and
to sell and have sold any LICENSED PRODUCTS in the
LICENSED FIELDS OF USE and to practice and have practiced
any LICENSED PROCESSES in the LICENSED FIELDS OF USE.
3.02 PHS hereby grants and LICENSEE accepts, subject to the
terms and conditions of this AGREEMENT, a non-exclusive
license under the BACKGROUND PATENT RIGHTS in the LICENSED
TERRITORY to make and have made, to use and have used, and
to sell and have sold any LICENSED PRODUCTS in the
LICENSED FIELDS OF USE and to practice and have practiced
any LICENSED PROCESSES in the LICENSED FIELDS OF USE.
3.03 This AGREEMENT confers no license or rights by
implication, estoppel, or otherwise under any patent
applications or patents of PHS other than LICENSED PATENT
RIGHTS and BACKGROUND PATENT RIGHTS regardless of whether
such patents are dominant or subordinate to LICENSED
PATENT RIGHTS or BACKGROUND PATENT RIGHTS.
4. SUBLICENSING
4.01 Upon written approval by PHS which will be given within
thirty (30) days of a written request by LICENSEE, said
approval not to be unreasonably withheld, LICENSEE may
enter into sublicensing agreements under the LICENSED
PATENT RIGHTS.
4.02 LICENSEE agrees that any sublicenses granted by it shall
provide that the obligations to PHS of Paragraphs
5.01-5.04, 8.01, 10.01, 10.02, 12.05 and 13.07-13.09 of
this AGREEMENT shall be binding upon the sublicensee as if
it were a party to this AGREEMENT. LICENSEE further agrees
to attach copies of these Paragraphs to all sublicense
agreements.
4.03 Any sublicenses granted by LICENSEE shall provide for the
termination of the sublicense, or the conversion to a
license directly between such sublicensees and PHS, at the
option of the sublicensee, upon termination of this
AGREEMENT under Article 13. Such conversion is subject to
PHS approval and contingent upon acceptance by the
sublicensee of the remaining provisions of this AGREEMENT.
4.04 LICENSEE agrees to forward to PHS a copy of each fully
executed sublicense agreement postmarked within thirty
(30) days of the execution of such agreement. To the
extent permitted by law, PHS agrees to maintain each such
sublicense agreement in confidence.
5. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
5.01 PHS reserves on behalf of the GOVERNMENT an irrevocable,
nonexclusive, nontransferable, royalty-free license for
the practice of all inventions licensed under the LICENSED
PATENT RIGHTS throughout the world by or on behalf of the
GOVERNMENT and on behalf of any foreign government or
international organization pursuant to any existing or
future treaty or agreement to which the GOVERNMENT is a
signatory. Prior to the FIRST COMMERCIAL SALE, LICENSEE
agrees to provide PHS reasonable quantities of LICENSED
PRODUCTS or materials made through the LICENSED PROCESSES
for PHS research use including for human clinical trials
but not for purposes of commercial development,
manufacture or distribution.
5.02 LICENSEE agrees that products used or sold in the United
States embodying LICENSED PRODUCTS or produced through use
of LICENSED PROCESSES shall be manufactured substantially
in the United States, unless a written waiver is obtained
in advance from PHS.
5.03 LICENSEE acknowledges that PHS may enter into future
Cooperative Research and Development Agreements (CRADAs)
under the Federal Technology Transfer Act of 1986 that
relate to the subject matter of this AGREEMENT. LICENSEE
agrees not to unreasonably deny requests for a Research
License from such future collaborators with PHS when
acquiring such rights is necessary in order to make a
CRADA project feasible. LICENSEE may request an
opportunity to join as a party to the proposed CRADA.
5.04 In addition to the reserved license of Paragraph 5.01
above, PHS reserves the right to grant such nonexclusive
RESEARCH LICENSES directly or to require LICENSEE to grant
nonexclusive RESEARCH LICENSES on reasonable terms. The
purpose of this RESEARCH LICENSE is to encourage basic
research, whether conducted at an academic or corporate
facility. In order to safeguard the LICENSED PATENT
RIGHTS, however, PHS shall consult with LICENSEE before
granting to commercial entities a RESEARCH LICENSE or
providing to them research samples of the materials.
6. ROYALTIES AND REIMBURSEMENT
6.01 LICENSEE agrees to pay to PHS a noncreditable,
nonrefundable license issue royalty as set forth in
Appendix C within thirty (30) days from the date that this
AGREEMENT becomes effective.
6.02 LICENSEE agrees to pay to PHS a nonrefundable minimum
annual royalty as set forth in Appendix C. The minimum
annual royalty is 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. The minimum
annual royalty due for the first calendar year of this
AGREEMENT 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.
6.03 LICENSEE agrees to pay PHS earned royalties as set forth
in Appendix C.
6.04 LICENSEE agrees to pay PHS benchmark royalties as set
forth in Appendix C.
6.05 LICENSEE agrees to pay PHS sublicensing royalties as set
forth in Appendix C.
6.06 LICENSEE agrees to pay PHS assignment royalties as set
forth in Appendix C.
6.07 A claim of a patent or patent application licensed under
this AGREEMENT shall cease to fall within the LICENSED
PATENT RIGHTS or BACKGROUND PATENT RIGHTS for the purpose
of computing the minimum annual royalty and earned royalty
payments in any given country on the earliest of the dates
that a) the claim has been abandoned but not continued, b)
the patent expires or irrevocably lapses, or c) the claim
has been held to be invalid or unenforceable by an
unappealed or unappealable decision of a court of
competent jurisdiction or administrative agency.
6.08 No multiple royalties shall be payable because any
LICENSED PRODUCTS or LICENSED PROCESSES are covered by
more than one of the LICENSED PATENT RIGHTS.
6.09(a) Transfer of LICENSED PRODUCTS by LICENSEE to sublicensees
or an affiliated party made in other than an arm's-length
transaction for no further resale shall be attributed a
value which would have been received in an arm's-length
transaction of like quantity and quality of products sold
on or about the time of the transfer of LICENSED PRODUCTS
for the purpose of calculating NET SALES.
6.09(b) Transfer of LICENSED PRODUCTS by LICENSEE to sublicensees
or affiliated party for further resale shall have
attributed either a value which would have been received
in an arm's-length transaction based on sales of like
quantity and quality of products transferred on or about
the time of such transfer of LICENSED PRODUCTS or the
actual value received in a later arm's-length transaction,
whichever is greater, for purposes of calculating NET
SALES.
6.10(a) With regard to expenses associated with the preparation,
filing, prosecution, and maintenance of all patent
applications and patents included within the LICENSED
PATENT RIGHTS incurred by PHS prior to the effective date
of this AGREEMENT, LICENSEE shall pay to PHS, as an
additional royalty, within sixty (60) days of PHS's
submission of a statement and request for payment to
LICENSEE, an amount equivalent to such patent expenses
previously incurred by PHS.
6.10(b) With regard to expenses associated with the preparation,
filing, prosecution, and maintenance of all patents
included within the BACKGROUND PATENT RIGHTS incurred by
PHS prior to the effective date of this AGREEMENT,
LICENSEE shall pay to PHS, as an additional royalty,
within (60) days of PHS's submission of a statement and
request for
payment an amount equivalent to three-thousand
three-hundred dollars ($3,300.00).
6.11 With regard to expenses associated with the preparation,
filing, prosecution, and maintenance of all patent
applications and patents included within the LICENSED
PATENT RIGHTS incurred by PHS on or after the effective
date of this AGREEMENT, PHS, at its sole option, may
require LICENSEE:
(a) to pay PHS on an annual basis, within sixty (60) days
of PHS's submission of a statement and request for
payment, a royalty amount equivalent to all such patent
expenses incurred during the previous calendar year(s); or
(b) to pay such expenses directly to the law firm employed
by PHS to handle such functions. However, in such event,
PHS and not LICENSEE shall be the client of such law firm.
Under exceptional circumstances, 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, LICENSEE shall directly pay the
attorneys or agents engaged to prepare, file, prosecute or
maintain such patent applications or patents and shall
provide to PHS copies of each invoice associated with such
services as well as documentation that such invoices have
been paid.
6.12 LICENSEE may elect to surrender its rights in any country
of the LICENSED TERRITORY under any LICENSED PATENT RIGHTS
upon sixty (60) days written notice to PHS and owe no
payment obligation under Article 6.10 (a) for
patent-related expenses incurred in that country after the
effective date of such written notice.
7. PATENT FILING, PROSECUTION, AND MAINTENANCE
7.01 Except as otherwise provided in this Article 7, PHS agrees
to take responsibility for, but to consult with, the
LICENSEE in the preparation, filing, prosecution, and
maintenance of any and all patent applications or patents
included in the LICENSED PATENT RIGHTS and shall furnish
copies of relevant patent-related documents to LICENSEE.
7.02 Upon PHS's written request, LICENSEE shall assume the
responsibility for the preparation, filing, prosecution,
and maintenance of any and all patent applications or
patents included in the LICENSED PATENT RIGHTS and shall
on an ongoing basis promptly furnish copies of all
patent-related documents to PHS. In such event, LICENSEE
shall, subject to the prior approval of PHS, select
registered patent attorneys or patent agents to provide
such services on behalf of LICENSEE and PHS.PHS shall
provide appropriate powers of attorney and other documents
necessary to undertake such actions to the patent
attorneys or patent agents providing such services.
LICENSEE and its attorneys or agents shall consult with
PHS in all aspects of the preparation, filing, prosecution
and maintenance of patent applications and patents
included within the LICENSED PATENT RIGHTS and shall
provide PHS sufficient opportunity to comment on any
document that LICENSEE intends to file or to cause to
be filed with the relevant intellectual property or
patent office.
7.03 At any time, PHS may provide LICENSEE with written notice
that PHS wishes to assume control of the preparation,
filing, prosecution, and maintenance of any and all patent
applications or patents included in the LICENSED PATENT
RIGHTS. If PHS elects to assume such responsibilities,
LICENSEE agrees to cooperate fully with PHS, its attorneys
and agents in the preparation, filing, prosecution, and
maintenance of any and all patent applications or patents
included in the LICENSED PATENT RIGHTS and to provide PHS
with complete copies of any and all documents or other
materials that PHS deems necessary to undertake such
responsibilities. If PHS elects to assume control of the
preparation, filing, prosecution, and maintenance of any
and all patent applications or patents included in the
LICENSED PATENT RIGHTS for a reason other than LICENSEE'S
failure to perform under this AGREEMENT, PHS shall be
responsible for all costs associated with transferring
patent prosecution responsibilities to an attorney or
agent of PHS's choice.
7.04 Each party shall promptly inform the other as to all
matters that come to its attention that may affect the
preparation, filing, prosecution, or maintenance of the
LICENSED PATENT RIGHTS and permit each other to provide
comments and suggestions with respect to the preparation,
filing, and prosecution of LICENSED PATENT RIGHTS, which
comments and suggestions shall be considered by the other
party.
8. RECORD KEEPING
8.01 LICENSEE agrees to keep accurate and correct records of
LICENSED PRODUCTS made, used, or sold and LICENSED
PROCESSES practiced under this Agreement appropriate to
determine the amount of royalties due PHS. Such records
shall be retained for at least five (5) years following a
given reporting period. They shall be available during
normal business hours for inspection at the expense of PHS
by an accountant or other designated auditor selected by
PHS for the sole purpose of verifying reports and payments
hereunder. The accountant or auditor shall only disclose
to PHS information relating to the accuracy of reports and
payments made under this AGREEMENT. If an inspection shows
an underreporting or underpayment in excess of five
percent (5%) for any twelve (12) month period, then
LICENSEE shall reimburse PHS for the cost of the
inspection at the time Licensee pays the unreported
royalties, including any late charges as required by
Paragraph 9.08 of this AGREEMENT. All payments required
under this Paragraph shall be due within thirty (30) days
of the date PHS provides LICENSEE notice of the payment
due.
8.02 LICENSEE agrees to conduct an independent audit of sales
and royalties at least every two years if annual sales of
the LICENSED PRODUCT or LICENSED PROCESSES are over two
(2) million dollars. The audit may be conducted in
conjunction with the annual audit performed on behalf of
LICENSEE. The audit shall address, at a minimum, the
amount of gross sales by or on behalf of LICENSEE during
the audit period, the amount of funds owed to the
GOVERNMENT under this AGREEMENT, and whether the amount
owed has been paid to the GOVERNMENT and is reflected in
the records of the LICENSEE. A report by the auditor shall
be submitted promptly to PHS on completion. LICENSEE shall
pay for the entire cost of the audit.
9. REPORTS ON PROGRESS, BENCHMARKS, SALES, AND PAYMENTS
9.01 Prior to signing this AGREEMENT, LICENSEE has provided to
PHS the COMMERCIAL DEVELOPMENT PLAN at Appendix F, under
which LICENSEE intends to bring the subject matter of the
LICENSED PATENT RIGHTS to the point of PRACTICAL
APPLICATION. This COMMERCIAL DEVELOPMENT PLAN is hereby
incorporated by reference into this Agreement. Based on
this plan, performance BENCHMARKS are determined as
specified in Appendix D.
9.02 LICENSEE shall provide written annual reports on its
product development progress or efforts to commercialize
under the COMMERCIAL DEVELOPMENT PLAN for each of the
LICENSED FIELDS OF USE within sixty (60) days after
December 31 of each calendar year. These progress reports
shall include, but not be limited to: progress on research
and development, status of applications for regulatory
approvals, manufacturing, sublicensing, marketing, and
sales during the preceding calendar year, as well as plans
for the present calendar year. PHS also encourages these
reports to include information on any of LICENSEE'S public
service activities that relate to the LICENSED PATENT
RIGHTS. If reported progress differs from that projected
in the COMMERCIAL DEVELOPMENT PLAN and BENCHMARKS,
LICENSEE shall explain the reasons for such differences.
In any such annual report, LICENSEE may propose amendments
to the COMMERCIAL DEVELOPMENT PLAN, acceptance of which by
PHS may not be denied unreasonably. LICENSEE agrees to
provide any additional information reasonably required by
PHS to evaluate LICENSEE'S performance under this
AGREEMENT. LICENSEE may amend the Benchmarks at any time
upon written consent by PHS. PHS shall not unreasonably
withhold approval of any request of LICENSEE to extend the
time periods of this schedule if such request is supported
by a reasonable showing by LICENSEE of diligence in its
performance under the COMMERCIAL DEVELOPMENT PLAN and
toward bringing the LICENSED PRODUCTS to the point of
practical application as defined in 37 CFR 404.3(d).
LICENSEE shall amend the COMMERCIAL DEVELOPMENT PLAN and
BENCHMARKS at the request of PHS to address any LICENSED
FIELDS OF USE not specifically addressed in the plan
originally submitted.
9.03 LICENSEE shall report to PHS the date of the FIRST
COMMERCIAL SALE in each country in the LICENSED TERRITORY
within thirty (30) days of such occurrence.
9.04 LICENSEE shall submit to PHS within sixty (60) days after
each calendar half-year ending June 30 and December 31 a
royalty report setting forth for the preceding half-year
period the amount of the LICENSED PRODUCTS sold or
LICENSED PROCESSES practiced by or on behalf of LICENSEE
in each country within the LICENSED TERRITORY, the NET
SALES, and the amount of royalty accordingly due. With
each such royalty report, LICENSEE shall submit payment of
the earned royalties due. If no earned royalties are due
to PHS for any reporting period, the written report shall
so state. The royalty report shall be certified as correct
by an authorized officer of LICENSEE and shall include a
detailed listing of all deductions made
under Paragraph 2.11 to determine NET SALES made under
Article 6 to determine royalties due.
9.05 LICENSEE agrees to forward semi-annually to PHS a copy of
such reports received by LICENSEE from its sublicensees
during the preceding half-year period as shall be
pertinent to a royalty accounting to PHS by LICENSEE for
activities under the sublicense.
9.06 Royalties due under Article 6 shall be paid in U.S.
dollars. For conversion of foreign currency to U.S.
dollars, the conversion rate shall be the New York foreign
exchange rate quoted in The Wall Street Journal on the day
that the payment is due. All checks and bank drafts shall
be drawn on United States banks and shall be payable, as
appropriate, for FDA or NIH licenses to the National
Institutes of Health, P.O. Box 360120, Pittsburgh,
Pennsylvania 15251-6120. Any loss of exchange, value,
taxes, or other expenses incurred in the transfer or
conversion to U.S. dollars shall be paid entirely by
LICENSEE. The royalty report required by Paragraph 9.04 of
this AGREEMENT shall accompany each such payment and a
copy of such report shall also be mailed to PHS at its
address for notices indicated on the Signature Page of
this AGREEMENT.
9.07 LICENSEE shall be solely responsible for determining if
any tax on royalty income is owed outside the United
States and shall pay any such tax and be responsible for
all filings with appropriate agencies of foreign
governments. The taxes paid by LICENSEE on behalf of PHS
may be deducted from the earned royalty due under
paragraph 6.03.
9.08 Late charges will be assessed by PHS as additional
royalties on any overdue payments at a rate of one (1)
percent per month compounded monthly. The payment of such
late charges shall not prevent PHS from exercising any
other rights it may have as a consequence of the lateness
of any payment.
9.09 All plans and reports required by this Article 9 and
marked "confidential" by LICENSEE shall, to the extent
permitted by law, be treated by PHS as commercial and
financial information obtained from a person and as
privileged and confidential and any proposed disclosure of
such records by the PHS under the Freedom of Information
Act, 5 U.S.C. Section 552 shall be subject to the
predisclosure notification requirements of 45 CFR Section
5.65(d).
10. PERFORMANCE
10.01 LICENSEE shall use its reasonable best efforts to bring
the License Products and Licensed Processes to Practical
Application. "Reasonable best efforts" for the purposes of
this provision shall include adherence to the COMMERCIAL
DEVELOPMENT PLAN at Appendix F and performance of the
BENCHMARKS at Appendix D. The efforts of a sublicensee
shall be considered the efforts of LICENSEE.
10.02 Upon the FIRST COMMERCIAL SALE, until the expiration of
this Agreement, LICENSEE shall use its reasonable best
efforts to make LICENSED PRODUCTS
and LICENSED PROCESSES reasonably accessible to the United
States public.
11. INFRINGEMENT AND PATENT ENFORCEMENT
11.01 PHS and LICENSEE agree to notify each other promptly of
each infringement or possible infringement of the LICENSED
PATENT RIGHTS, as well as any facts which may affect the
validity, scope, or enforceability of the LICENSED PATENT
RIGHTS of which either Party becomes aware.
11.02 Pursuant to this AGREEMENT and the provisions of Chapter
29 of title 35, United States Code, LICENSEE may a) bring
suit in its own name, at its own expense, and on its own
behalf for infringement of presumably valid claims in the
LICENSED PATENT RIGHTS; b) in any such suit, enjoin
infringement and collect for its use, damages, profits,
and awards of whatever nature recoverable for such
infringement; and c) settle any claim or suit for
infringement of the LICENSED PATENT RIGHTS provided,
however, that PHS and appropriate GOVERNMENT authorities
shall have the first right to take such actions. If
LICENSEE desires to initiate a suit for patent
infringement, LICENSEE shall notify PHS in writing. If PHS
does not notify LICENSEE of its intent to pursue legal
action within ninety (90) days, LICENSEE will be free to
initiate suit. PHS shall have a continuing right to
intervene in such suit. LICENSEE shall take no action to
compel the GOVERNMENT either to initiate or to join in any
such suit for patent infringement. LICENSEE may request
the GOVERNMENT to initiate or join in any such suit if
necessary to avoid dismissal of the suit. Should the
GOVERNMENT be made a party to any such suit, LICENSEE
shall reimburse the GOVERNMENT for any costs, expenses, or
fees which the GOVERNMENT incurs as a result of such
motion or other action, including any and all costs
incurred by the GOVERNMENT in opposing any such motion or
other action. In all cases, LICENSEE agrees to keep PHS
reasonably apprised of the status and progress of any
litigation. Before LICENSEE commences an infringement
action, LICENSEE shall notify PHS and give careful
consideration to the views of PHS and to any potential
effects of the litigation on the public health in deciding
whether to bring suit.
11.03 In the event that a declaratory judgment action alleging
invalidity or non-infringement of any of the LICENSED
PATENT RIGHTS shall be brought against LICENSEE or raised
by way of counterclaim or affirmative defense in an
infringement suit brought by LICENSEE under Paragraph
11.02, pursuant to this AGREEMENT and the provisions of
Chapter 29 of Title 35, United States Code or other
statutes, LICENSEE may a) defend the suit in its own name,
at its own expense, and on its own behalf for presumably
valid claims in the LICENSED PATENT RIGHTS; b) in any such
suit, ultimately to enjoin infringement and to collect for
its use, damages, profits, and awards of whatever nature
recoverable for such infringement; and c) settle any claim
or suit for declaratory judgment involving the LICENSED
PATENT Rights-provided, however, that PHS and appropriate
Government authorities shall have the first right to take
such actions and shall have a continuing right to
intervene in such suit. If PHS does not notify LICENSEE of
its intent to respond to the legal action within a
reasonable time, LICENSEE will be free to do so. Licensee
shall take no action to compel the GOVERNMENT either to
initiate or to join in any such declaratory judgment
action. LICENSEE may request the GOVERNMENT to
initiate or to join any such suit if necessary to avoid
dismissal of the suit. Should the GOVERNMENT be made a
party to any such suit by motion or any other action of
LICENSEE, LICENSEE shall reimburse the GOVERNMENT for any
costs, expenses, or fees which the GOVERNMENT incurs as a
result of such motion or other action. If LICENSEE elects
not to defend against such declaratory judgment action,
PHS, at its option, may do so at its own expense. In all
cases, LICENSEE agrees to keep PHS reasonably apprised of
the status and progress of any litigation. Before LICENSEE
commences an infringement action, LICENSEE shall notify
PHS and give careful consideration to the views of PHS and
to any potential effects of the litigation on the public
health in deciding whether to bring suit.
11.04 In any action under Paragraphs 11.02 or 11.03, the
expenses including costs, fees, attorney fees, and
disbursements, shall be paid by LICENSEE. Up to
twenty-five percent (25%) of such expenses may be credited
against the royalties payable to PHS under Paragraph 6.03
under the LICENSED PATENT RIGHTS in the country in which
such a suit is filed. In the event that twenty-five
percent (25%) of such expenses exceed the amount of
royalties payable by LICENSEE in any calendar year, the
expenses in excess may be carried over as a credit on the
same basis into succeeding calendar years. A credit
against litigation expenses, however, may not reduce the
royalties due in any calendar year to less than the
minimum annual royalty. Any recovery made by LICENSEE,
through court judgment or settlement, first shall be
applied to reimburse PHS for royalties withheld as a
credit against litigation expenses and then to reimburse
LICENSEE for its litigation expense. Any remaining
recoveries shall be split with seventy-five (75%) going to
Licensee and twenty-five percent (25%) going to PHS.
11.05 PHS shall cooperate fully with LICENSEE in connection with
any action under Paragraphs 11.02 or 11.03. PHS agrees
promptly to provide access to all necessary documents and
to render reasonable assistance in response to a request
by LICENSEE.
12. NEGATION OF WARRANTIES AND INDEMNIFICATION
12.01 PHS offers no warranties other than those specified in
Article 1.
12.02 PHS does not warrant the validity of the LICENSED PATENT
RIGHTS and makes no representations whatsoever with regard
to the scope of the LICENSED PATENT RIGHTS, or that the
LICENSED PATENT RIGHTS may be exploited without infringing
other patents or other intellectual property rights of
third parties.
12.03 PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY
SUBJECT MATTER OR DEFINED BY THE CLAIMS OF THE LICENSED
PATENT RIGHTS.
12.04 PHS does not represent that it will commence legal actions
against third parties infringing the LICENSED PATENT
RIGHTS.
12.05 LICENSEE shall indemnify and hold PHS, its employees,
students, fellows, agents, and consultants harmless from
and against all liability, demands,
damages, expenses, and losses, including but not limited
to death, personal injury, illness, or property damage in
connection with or arising out of a) the use by or on
behalf of LICENSEE, its sublicensees, directors,
employees, or third parties of any LICENSED PATENT RIGHTS,
or b) the design, manufacture, distribution, or use of any
LICENSED PRODUCTS, LICENSED PROCESSES or materials by
Licensee, or other products or processes developed in
connection with or arising out of the LICENSED PATENT
RIGHTS. LICENSEE agrees to maintain a liability insurance
program consistent with sound business practice.
13. TERM TERMINATION. AND MODIFICATION OF RIGHTS
13.01 This AGREEMENT is effective when signed by all parties and
shall extend to the expiration of the last to expire of
the LICENSED PATENT RIGHTS unless sooner terminated as
provided in this Article 13.
13.02 In the event that LICENSEE is in default in the
performance of any material obligations under this
AGREEMENT, including but not limited to the obligations
listed in Article 13.05, and if the default has not been
remedied within ninety (90) days after the date of notice
in writing of such default, PHS may terminate this
AGREEMENT by written notice.
13.03 In the event that LICENSEE becomes insolvent, files a
petition in bankruptcy, has such a petition filed against
it, determines to file a petition in bankruptcy, or
receives notice of a third party's intention to file an
involuntary petition in bankruptcy, LICENSEE shall
immediately notify PHS in writing.
13.04 LICENSEE shall have a unilateral right to terminate this
AGREEMENT and/or any licenses in any country by giving PHS
sixty (60) days written notice to that effect.
13.05 PHS shall specifically have the right to terminate or
modify, at its option, this AGREEMENT, if PHS determines
that the LICENSEE: 1) is not executing the COMMERCIAL
DEVELOPMENT PLAN submitted with its request for a license
and the LICENSEE cannot otherwise demonstrate to PHS's
satisfaction that the LICENSEE has taken, or can be
expected to take within a reasonable time, effective steps
to achieve practical application of the LICENSED PRODUCTS
or LICENSED PROCESSES; 2) has not achieved the Benchmarks
as may be modified under Paragraph 9.02; 3) has willfully
made a false statement of, or willfully omitted, a
material fact in the license application or in any report
required by the license agreement; 4) has committed a
material breach of a covenant or agreement contained in
the license; 5) is not keeping LICENSED PRODUCTS or
LICENSED PROCESSES reasonably available to the public
after commercial use commences; 6) cannot reasonably
satisfy unmet health and safety needs; or 7) cannot
reasonably justify a failure to comply with the domestic
production requirement of Paragraph 5.02 unless waived. In
making this determination, PHS will take into account the
normal course of such commercial development programs
conducted with sound and reasonable business practices and
judgment and the annual reports submitted by LICENSEE
under Paragraph 9.02. Prior to invoking this right, PHS
shall give written notice to LICENSEE providing LICENSEE
specific notice of,
and a ninety (90) day opportunity to respond to, PHS's
concerns as to the previous items 1) to 7). If LICENSEE
fails to alleviate PHS's concerns as to the previous items
1) to 7) or fails to initiate corrective action to PHS's
satisfaction, PHS may terminate this AGREEMENT.
13.06 When the public health and safety so require, and after
written notice to LICENSEE providing LICENSEE a sixty (60)
day opportunity to respond, PHS shall have the right to
require LICENSEE to grant sublicenses to responsible
applicants, on resonable terms, in any Licensed Fields of
Use under the Licensed Patent Rights, unless LICENSEE can
reasonably demonstrate that the granting of the sublicense
would not materially increase the availability to the
public of the subject matter of the LICENSED PATENT
RIGHTS. PHS will not require the granting of a sublicense
unless the responsible applicant has first negotiated in
good faith with LICENSEE.
13.07 PHS reserves the right according to 35 U.S.C. Section
209(f)(4) to terminate or modify this AGREEMENT if it is
determined that such action is necessary to meet
requirements for public use specified by federal
regulations issued after the date of the license and such
requirements are not reasonably satisfied by LICENSEE.
13.08 Within thirty (30) days of receipt of written notice of
PHS's unilateral decision to modify or terminate this
Agreement, LICENSEE may, consistent with the provisions of
37 CFR 404.11, appeal the decision by written submission
to the designated PHS official. The decision of the
designated PHS official shall be the final agency
decision. LICENSEE may thereafter exercise any and all
administrative or judicial remedies that may be available.
13.09 Within ninety (90) days of termination of this AGREEMENT
under this Article 13 or expiration under Paragraph 3.02,
a final report shall be submitted by LICENSEE. Any royalty
payments, including those related to patent expense, due
to PHS shall become immediately due and payable upon
termination or expiration. If terminated under this
Article 13, sublicensees may elect to convert their
sublicenses to direct licenses with PHS pursuant to
Paragraph 4.03.
14. GENERAL PROVISIONS
14.01 Neither Party may waive or release any of its rights or
interests in this AGREEMENT except in writing. The failure
of the GOVERNMENT to assert a right hereunder or to insist
upon compliance with any term or condition of this
AGREEMENT shall not constitute a waiver of that right by
the GOVERNMENT or excuse a similar subsequent failure to
perform any such term or condition by LICENSEE.
14.02 This AGREEMENT constitutes the entire agreement between
the Parties relating to the subject matter of the LICENSED
PATENT RIGHTS, and all negotiations, representations,
agreements, and understandings are merged into,
extinguished by, and completely expressed by this
AGREEMENT.
14.03 The provisions of this AGREEMENT are severable, and in the
event that any
provision of this AGREEMENT shall be determined to be
invalid or unenforceable under any controlling body of law
such determination shall not in any way affect the
validity or enforceability of the remaining provisions of
this AGREEMENT.
14.04 If either Party desires a modification to this AGREEMENT,
the Parties shall, upon reasonable notice of the proposed
modification by the Party desiring the change, confer in
good faith to determine the desirability of such
modification. No modification will be effecffve until a
written amendment is signed by the signatories to this
AGREEMENT or their designees.
14.05 The construction, validity, performance, and effect of
this AGREEMENT shall be governed by Federal law as applied
by the Federal courts in the District of Columbia.
14.06 All notices required or permitted by this AGREEMENT shall
be given by prepaid, first class, registered or certified
mail properly addressed to the other Party at the address
designated on the following Signature Page, or to such
other address as may be designated in writing by such
other Party, and shall be effective as of the date of the
postmark of such notice..
14.07 This AGREEMENT shall not be assigned by LICENSEE except a)
with the prior written consent of PHS, such consent not to
be withheld unreasonably; or b) as part of a sale or
transfer of substantially the entire business of LICENSEE
relating to operations which concern this Agreement.
LICENSEE shall notify PHS within ten (10) days of any
assignment of this Agreement by LICENSEE.
14.08 LICENSEE agrees in its use of any PHS-supplied materials
to comply with all applicable statutes, regulations, and
guidelines, including Public Health Service and National
Institutes of Health regulations and guidelines. LICENSEE
agrees not to use the materials for research involving
human subjects or clinical trials in the United States
without complying with 21 CFR Part 50 and 45 CFR Part 46.
Licensee agrees not to use the materials for research
involving human subjects or clinical trials outside of the
United States without notifying PHS, in writing, of such
research or trials and complying with the applicable
regulations of the appropriate national control
authorities.. Written notification to PHS of research
involving human subjects or clinical trials outside of the
United States shall be given no later than sixty (60) days
prior to commencement of such research or trials.
14.09 LICENSEE acknowledges that it is subject to and agrees to
abide by the United States laws and regulations (including
the Export Administration Act of 1979 and Arms Export
Control Act) controlling the export of technical data,
computer software, laboratory prototypes, biological
material, and other commodities. The transfer of such
items may require a license from the cognizant Agency of
the U.S. GOVERNMENT or written assurances by LICENSEE that
it shall not export such items to certain foreign
countries without prior approval of such agency. PHS
neither represents that a license is or is not required or
that, if required, it
shall be issued.
14.10 LICENSEE agrees to mark the LICENSED PRODUCTS or their
packaging sold in the United States with all applicable
U.S. patent numbers and similarly to indicate "Patent
Pending" status. All LICENSED PRODUCTS manufactured in,
shipped to, or sold in other countries shall be marked in
such a manner as to preserve PHS patent rights in such
countries.
14.11 By entering into this AGREEMENT, PHS does not directly or
indirectly endorse any product or service provided, or to
be provided, by LICENSEE whether directly or indirectly
related to this Agreement. LICENSEE shall not state or
imply that this AGREEMENT is an endorsement by the
GOVERNMENT, PHS, any other GOVERNMENT organizational unit,
or any GOVERNMENT employee. Additionally, LICENSEE shall
not use the names of NIH, CDC, PHS, or DHHS or the
GOVERNMENT or their employees in any advertising,
promotional, or sales literature without the prior written
consent of PHS.
14.12 The Parties agree to attempt to settle amicably any
controversy or claim arising under this Agreement or a
breach of this Agreement, except for appeals of
modifications or termination decisions provided for in
Article 13. LICENSEE agrees first to appeal any such
unsettled claims or controversies to the designated PHS
official, or designee, whose decision shall be considered
the final agency decision. Thereafter, LICENSEE may
exercise any administrative or judicial remedies that may
be available.
14.13 Nothing relating to the grant of a license, nor the grant
itself, shall be construed to confer upon any person any
immunity from or defenses under the antitrust laws or from
a charge of patent misuse, and acquisition and use of
rights pursuant to 37 CFR Part 404 shall not be immunized
from the operation of state or Federal law by reason of
the source of the grant.
14.14 Paragraphs 4.03, 8.01, 9.06-9.08, 12.01-12.05, 13.08,
13.09, and 14.12 of this AGREEMENT shall survive
termination of this AGREEMENT.
SIGNATURES BEGIN ON NEXT PAGE
PHS PATENT LICENSE AGREEMENT -- EXCLUSIVE
SIGNATURE PAGE
For PHS:
/s/ 9/23/97
Signature of Authorized PHS Official Date
Printed Name
Title
Mailing Address for Notices:
For LICENSEE (Upon, information and belief, the undersigned expressly certifies
or affirms that the contents of any statements of LICENSEE made or referred to
in this document are truthful and accurate.):
by:
/s/
Signature of Authorized Official Date
John N. Kapoor, Ph.D.
Printed Name
Chairman
Title
Mailing Address for Notices:
225 East Deerpath Rd.
Suite 250
Lake Forest, IL 60045
APPENDIX A -- PATENT(S) OR PATENT APPLICATION(S)
PATENT(s) OR PATENT APPLICATION(s) THAT ARE LICENSED PATENT RIGHTS:
U.S. Patent 5,614,191 issued March 25, 1997
USSN 08/821,840 (div of 08/404,685) filed March 21, 1997
PATENT(s) OR PATENT APPLICATION(s) THAT ARE BACKGROUND PATENT RIGHTS:
U.S. Patent 4,892,827 issued January 9, 1990
APPENDIX B -- LICENSED FIELDS OF USE AND TERRITORY
LICENSED FIELDS OF USE: Use of the chimeric molecule hIL-13-PE38QQR or
cphIL-13-PE38QQR to treat cancer.
LICENSED TERRITORY: World-wide
APPENDIX C -- ROYALTIES
ROYALTIES:
1. LICENSEE agrees to pay to PHS a noncreditable, nonrefundable license issue
royalty in the amount of seventy-five thousand dollars ($75,000).
2. LICENSEE agrees to pay to PHS a nonrefundable minimum annual royalty in the
amount of ten thousand dollars ($10,000) prior to the FIRST COMMERCIAL SALE or
twenty-five thousand dollars ($25,000.00) after the FIRST COMMERCIAL SALE.
3. LICENSEE agrees to pay PHS an earned royalty of four percent (4%) on NET
SALES; provided however that LICENSEE shall be entitled to a credit of one-half
percent (0.5%) against the earned royalty rate for each percent point in excess
of two percent (2.0%) that LICENSEE must pay to an unaffiliated licensor for the
manufacture and sale of LICENSED PRODUCTS. Said credit, however, shall not
reduce the earned royalty due to PHS for LICENSED PRODUCTS below two percent
(2.0%).
4. LICENSEE agrees to pay PHS benchmark royalties as follows:
1. Submission of first IND $ 25,000
2. Completion of first Phase I Clinical Trial $ 50,000
3. Completion of first Phase II Clinical Trial $ 75,000
4. Completion of each additional Phase II Clinical Trial $ 35,000
5. Completion of first Phase III Clinical Trial $100,000
6. Completion of each additional Phase III Clinical Trial $ 50,000
7. Approval of first BLA/ELA/PLA/NDA $300,000
8. Approval of each additional BLA/PLA/ELA/NDA $150,000
5. LICENSEE agrees to pay PHS sublicensing royalties as follows:
(a) Twenty-five percent (25%) of earned royalties paid by a
sublicensee on NET SALES or two percent of the NET SALES of a
sublicensee, whichever is greater; and
(b) Twenty percent (20%) of all non-creditable and non-refundable
consideration received for granting a sublicense, if the
technology is sublicensed on or before the one year
anniversary of this AGREEMENT; or ten percent (10%) of all
non-creditable and non-refundable consideration received in
granting a sublicense, if the technology is sublicensed after
the one year anniversary of this AGREEMENT. Fees paid
expressly for research and development of LICENSED PRODUCT and
LICENSED PROCESSES, such as clinical trial support, shall be
excluded.
6. In the event that Licensee shall transfer, in a separate and distinct
transaction, that aspect of its business involving this AGREEMENT, Licensee
agres to pay PHS an assignment royalty of fifteen-percent (15%) of any cash
consideration received as part of such sale or transfer, provided, however, that
no such royalty shall be owned to PHS in the event that the foregoing transfer
is part of or results from a merger, consolidation or other reorganization of
the LICENSEE or from a sale, exchange or other transfer of all or substantially
all of its assets.
APPENDIX D -- BENCHMARKS AND PERFORMANCE
LICENSEE agrees to the following BENCHMARKS, for its performance under this
AGREEMENT and, within ten (10) days of achieving a BENCHMARK, shall notify PHTS
that the BENCHMARK has been achieved.
BENCHMARK DEADLINE
--------- --------
1. Pilot Scale Up Production 1. within one year of executing
this Agreement but no
later than August 1, 1998
2. Initiation of In Vivo Efficacy Studies 2. December 1, 1998
3 Completion of In Vivo Efficacy Studies 3. October 1, 1999
4 Initiation of Toxicological end 4. April 1, 2000
Pharmacological Studies
5. Completion of Toxicological and 5. April 1, 2001
Pharmacological Studies
6. IND Submission 6. November 1, 2001
7 Initiation of Phase I Clinical Trial 7. March 1, 2002
8 Completion of Phase I Clinical Trial 8. March 1, 2003
9. Initiation of Small Phase II Clinical 9. September 1, 2003
Trials for Renal Cell Carcinoma
(use 20 patients)
10. Completion of Small Phase II Clinical 10. March 1, 2004
Trial in patients with Renal Cell
Carcinoma
11. Initiation of Large Phase II Clinical 11. September, 2004
Trials in Renal Cell Carcinoma (use
at least 150 patients)
12. Election of 2nd cancer type* for 12. March, 2005
development
13. Initiation of Small Phase II Clinical 13. September, 2005
Trial on 2nd Cancer type to be
developed
14. Completion of Large Phase II in 14. March, 2006
patients with Renal Cell Carcinoma
15. Completion of Small Phase II Clinical 15. June, 2006
Trial on 2nd Cancer to be developed
16. Initiation of Phase III Clinical 16. September, 2006
Trial for Renal Cell Cancer
17. Initiation of Large Phase II Clinical 17. January, 2007
Trial for 2nd Cancer type to be
developed
18. Submission of a Revised Development 18. June, 2007
Plan which includes election of 3rd
indication to be developed and
benchmarks for development
19. Completion of Large Phase II Clinical 19. June, 2008
Trial for 2nd Cancer type to be
developed
20. Completion of Phase III Clinical 20. September, 2008
Trial Renal Cell Cancer
21. Initiation of Phase III Clinical 21. January, 2009
Trial for 2nd Cancer type to be
developed
22 BLA Submission for Renal Cell Cancer 22. March, 2009
23 Product Launch for Renal Cell Cancer 23. March, 2010
24. Completion of Phase III Clinical Trial 24. January, 2011
for 2nd Cancer type in development
25 BLA Submission for 2nd Cancer Type 25. June, 2011
Developed
26 Product Launch for 2nd Cancer Type
Developed 26. June, 2012
* The next therapy to be developed will treat either brain, pancreatic, ovarian,
prostate, breast or colon cancer or Karposi's sarcoma.
APPENDIX E -- COMMERCIAL DEVELOPMENT PLAN
SEE ATTACHED