EXHIBIT 10.1
------------
PATENT LICENSE AGREEMENT
THIS AGREEMENT made and entered into and effective as of August 13,
2008, is by and between Network-1 Security Solutions, Inc., a Delaware
corporation (the "Licensor") and Microsemi Corporation, a California Corporation
(the "Licensee").
WHEREAS, Licensor is the beneficial owner of United States Patent No.
6,218,930 (the "'930 Patent");
WHEREAS, on June 30, 2008, Licensor commenced an industry-wide Special
Licensing Program for the '930 Patent to vendors of Power over Ethernet
equipment. The Special Licensing Program is of limited duration (through
December 31, 2008) and is being implemented on an industry-wide basis to offer
discounted running royalty rates and exceptions to Network-1's standard
licensing terms and conditions relating to the '930 Patent to PoE vendors who
are "early adopters" and enter into license agreements without delay and to
avoid litigation and higher royalties.
WHEREAS, Licensee desires to obtain a royalty-bearing, non-exclusive,
license under '930 Patent, and Licensor is willing to grant Licensee such
license subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter set forth, the parties hereby agree as follows:
1. Definitions.
------------
1.1 "Effective Date" of this Agreement shall mean the date first written
above.
1.2 "Expiration Date" means the date on which the Licensed Patent shall
expire. "Have Made" means the right to purchase a Licensed Product
from a third party (E.G., subsidiaries, suppliers and vendors) and/or
have a third party make a Licensed Product for the use by and/or sale
or transfer by Licensee, said third party operating under the license
grant to Licensee for the provision of Licensed Products to Licensee
and for no other purpose.
1.3 "Licensed Patent" shall mean the `930 Patent and any reissues and
reexaminations thereof.
1.4 "Licensed Product" shall mean a MSCC Midspan Product which infringes
any claim of an issued, unexpired Licensed Patent, which claim has not
invalidated by a final, non-appealable order of a court of competent
jurisdiction.
1.5 "Licensee Covenanted Party" shall mean Licensee, each of its
Subsidiaries, and each of their respective officers, directors,
employees and successors.
1.6 "Midspan PSE" means a particular type of PSE that is connected between
a switch and device(s) to be powered over Ethernet network cabling.
1.7 "MSCC Midspan Product" means standalone finished Midspan PSE products,
except Power over Ethernet Midspan PSE products that exclusively use
spare pairs for the transmission of operating power to network
devices, such as the products identified on Exhibit A hereto and
future variations thereof, each of which is or will be a Midspan PSE
originally designed by or for MSCC, and manufactured for or by, and
used or sold by MSCC and/or its Subsidiaries.
1.8 "Power over Ethernet" or "PoE" means the technology used to deliver
electrical power over Ethernet network cabling for the purpose of
supplying operating power to devices connected to an Ethernet network.
1.9 "Person" or "person" means an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person
(including, without limitation, a "person" as defined in Section
13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government.
1.10 "PSE" means any apparatus, device, equipment or product that supplies
power to other devices in a PoE implementation, including, but not
limited to, products complying with IEEE Standards 802.3af and
802.3at.
1.11 "Sales Price" means with respect to any Licensed Product sold by
Licensee or any of its Subsidiaries, on an arms-length basis to a
party that is not a Subsidiary of Licensee, in the United States, or
exported from the United States, the selling price actually invoiced
for such product. The calculation of "selling price" shall include
credits for the following items: (i) an exchange of replacement
products returned because of a systemic failure, and (ii) the payment
or credit for the difference in the invoice prices of exchanged
products, within twelve months of original sale, out of a
distributor's inventory, that is returned for such exchange. For the
avoidance of doubt, for royalty calculation purposes, any resale of a
returned product for which a credit was taken under (i) or (ii) above
shall be treated as a new sale.
1.12 "Spare Pair MSCC Midspan Product" means Power over Ethernet standalone
finished midspan products that exclusively use spare pairs for the
transmission of operating power, each of which is or will be a Midspan
PSE originally designed by or for MSCC, and manufactured for or by
MSCC and/or its Subsidiaries.
1.13 "Subsidiary" means as to Licensee (Licensor has no Subsidiaries) an
entity of which shares of stock having voting power to elect a
majority of the Board of Directors or other managers of such entity
are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries,
or both, by the Licensee.
2. License Grant.
--------------
2.1 Licensor hereby grants to the Licensee and its Subsidiaries a
personal, non-exclusive, non-transferable, royalty bearing license
under the Licensed Patent (i) to make, use, lease, sell, offer for
sale, import, design, Have Made and otherwise transfer Licensed
Products, including the right to procure or produce components
therefore, (ii) to practice a method or process involved in the
manufacture thereof, and (iii) practice any method or process involved
in the use thereof. To the extent that the Licensed Products are sold
or otherwise transferred by Licensee or its Subsidiaries to
distributors, private label resellers, channel partners, retailers,
customers and other "arm's length" customers and/or end users, the
license granted under this Section shall encompass such parties for
such Licensed Products. To the extent that a third party is operating
under the Have Made rights granted herein, the license granted under
this Section shall encompass said third party, but only as to such
third party's sales of Licensed
2
Products to Licensee or any Subsidiary and other licensed conduct for
Licensee and its Subsidiaries contemplated herein, and not for sales
to other parties.
2.2 If the Licensee or its Subsidiaries or its or their successors
initiates any action to challenge, directly or indirectly through
their acting officers, directors, employees, representatives, or
agents acting at Licensee's direction, the infringement or validity of
the Licensed Patent, or assist or cooperate in any action, related to
the non-infringement or invalidity of the Licensed Patent or any
declaratory judgment action under the Patent Act of the United States,
title 35, United States Code, the Declaratory Judgment Act, title 28,
United States Code, or otherwise (unless the Licensee is required to
do so pursuant to any applicable law, regulation, judicial or
administrative order or decree, or request by other regulatory
organization having authority pursuant to the law; PROVIDED, HOWEVER,
that in such case the applicable Licensee Party gives Licensor
reasonable advance notice of the same (so as to afford Licensor a
reasonable opportunity to appear, object and obtain appropriate relief
regarding such requirement)) the Licensee shall pay a royalty rate of
three percent (3%) of the Sales Price of a Licensed Product in lieu of
the royalties owed under Section 4.2 hereof on royalties payable after
the date it initiates any of the foregoing. This Section 2.2 shall not
apply where Licensee or its Subsidiary (a) is defending against an
action brought against it alleging that it is infringing the Licensed
Patent, or (b) is contractually or otherwise legally bound by statute
to hold harmless or indemnify a third party in a judicial proceeding
relating to the infringement of the Licensed Patent which obligation
exists (a) as of, and in connection with, the sale or other
disposition of a product or service by Licensee or its Subsidiary to
such third party; or (b) prior to the initiation of such judicial
proceeding against such third party . In such cases, for the avoidance
of doubt, Licensee or its Subsidiaries shall be free to assert or
assist any non-infringement and/or invalidity counterclaims and/or
defenses related to such action or proceeding under the Licensed
Patent without affecting the royalty rate hereunder.
2.3 Licensee is obligated to mark all Licensed Products with U.S. Patent
No. 6,218,930 in a font size large enough to be easily read and in a
manner reasonably required to satisfy 35 U.S. 287.
2.4 Licensor, on behalf of itself and any Subsidiary, and each of its
respective officers, directors, employees, shareholders,
representatives, agents and successors (collectively, the "Licensor
Covenanting Parties") hereby covenants not to sue any Licensee
Covenanted Party for any or all claims or liabilities for infringement
of the Licensed Patent, with respect to any Spare Pair MSCC Midspan
Product, PROVIDED, HOWEVER, for the avoidance of doubt, such covenant
shall not extend to any person other than a Licensee Covenanted Party.
3. Third Party Patents and Limitations on Liability.
-------------------------------------------------
3.1 Licensor hereby represents and warrants that: (a) it has the authority
to enter into this Agreement and grant the licenses herein; (b) this
Agreement is valid and binding and enforceable in accordance with its
terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors rights generally and general equitable principles;
(c) it has all right, title and interest in and to the Licensed
Patent; and (d) there are no patents or patent applications or foreign
counterparts related to the Licensed Patent, nor does Licensor or its
Subsidiaries own any patent or patent application claiming or
disclosing any PoE technology except the Licensed Patent. Licensor
makes no warranty or representation that the practice of the licenses
herein
3
granted to Licensee will not infringe any patent or patents of any
country which is or are owned by any party or parties other than
Licensor. The obligations of Licensee to Licensor shall be in no way
affected and no obligation of any character of Licensor to Licensee
shall be created by the fact that the practice of the licenses granted
hereunder infringes the patent of rights of others.
3.2 EXCEPT AS EXPRESSLY SET FORTH ABOVE IN SECTION 3.1, LICENSOR MAKES NO
WARRANTY, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. UNDER NO
CIRCUMSTANCES SHALL LICENSOR BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL
OR OTHER DAMAGES FROM ALLEGED NEGLIGENCE, BREACH OR WARRANTY, STRICT
LIABILITY, TORT, CONTRACT, OR ANY OTHER LEGAL THEORY ARISING OUT OF
THE USE OR HANDLING OF THE LICENSED PRODUCT.
4
4. Consideration, Royalty Payments and Royalty Reporting.
------------------------------------------------------
4.1 In partial consideration for the license granted herein, Licensee
shall provide the assistance set out in the letter agreement by and
between the parties dated June , 2008 and Licensor has agreed to offer
Licensee an "early adopter" reduced royalty rate and to reduce its
license initiation fees to $25,000 which shall be paid upon execution
of this Agreement.
4.2 In further consideration of the license granted herein, Licensee
agrees to pay Licensor a royalty of two percent (2%) of the Sales
Price of Licensed Product.
4.3 Only one royalty will be paid by Licensee for the sale of a Licensed
Product subject to royalty hereunder; PROVIDED that the Sales Price
for such sales shall be that of the final sale by Licensee or any
Subsidiary.
4.4 Licensee shall make all payments to Licensor in performance of any
obligation of Licensee defined in this Agreement in U.S. Dollars at
such account as Licensor shall designate.
4.5 Licensee shall make running royalty payments within thirty (30) days
after the end of each calendar quarter which any Licensed Product
subject to royalty hereunder was sold. Royalties shall be calculated
in the currency in which sales are made and, in the case of sales made
in currency other that U.S. Dollars, for equivalent amount of the U.S.
Dollars for any royalties payable hereunder will be determined on the
basis of the rate of exchange quoted by The Wall Street Journal as of
the due date of the royalty payment. Royalties shall be submitted with
a Monthly Royalty Report, in the form of Exhibit B, showing all
Licensed Products sold by Licensee in the immediately preceding month.
The Royalty Report will also list any additional products that fall
within the scope of Licensed Products and that are to be added to
Exhibit A.
4.6 Licensee assumes responsibility for any payment due but not made by
any Subsidiary.
4.7 Licensee shall submit to Licensor a semi-annual royalty report
("Royalty Report") in the form of Exhibit B hereto within thirty (30)
days after the end of every six month anniversary of the Effective
Date of the Agreement. The Royalty Report shall be certified by an
appropriate responsible employee of Licensee setting forth the amount
of the royalties and calculation thereof for the reported period
regardless of whether or not any payment is due. The Royalty Report
will also list any additional products that fall within the scope of
Licensed Products and that are to be added to Exhibit A4.8
Irrespective of any ruling of a court, administrative body or arbitral
tribunal, no royalties paid by Licensee shall be subject to refund
except overpayments made in error and identified by Licensee within
twelve (12) months of actual or constructive notice of erroneous
payment, whichever is later. Any refund that Licensee may be entitled
to pursuant to this Section shall be taken as a credit in a subsequent
Monthly Royalty Report; provided, HOWEVER that if no further royalties
are due under this Agreement Licensee shall receive a refund instead
of a credit.
4.8 Payments when provided for in this Agreement shall, when overdue, bear
interest compounded monthly (prorated for periods of time less than
one month) at an annualized rate of five percent (5%) over the prime
rate quoted by the Wall Street Journal, in New York, on the date that
the payment is due, for each month during the delinquency. If the
amount of such charge exceeds the maximum permitted by law, such
charge shall be reduced to such maximum.4.10 Licensee shall keep books
and records adequate to accurately determine the payments under this
Agreement, and retain such books and records for at least three (3)
years
5
after the delivery of the Royalty Report to which they relate.
Licensor shall have the right, no more than twice per calendar year,
to have an independent certified public accountant inspect all
relevant books and records of Licensee on thirty (30) days' prior
written notice and during regular business hours to verify the reports
and payments required to be made hereunder. Such independent certified
public accountant shall be selected by Licensor. The auditor shall
enter into an appropriate nondisclosure agreement with Licensee, and
shall disclose no more information than is reasonably necessary to
determine the payments owed hereunder. Should an underpayment in
excess of five percent (5%) be discovered, Licensee shall reimburse
Licensor for the cost of the audit. In any event, Licensee shall
promptly pay any underpayment together with interest at the compounded
annual rate quoted by Citibank N.A. in New York City or its reference
rate on the last day of each month during the period of the
delinquency.
5. Confidentiality. The terms of this Agreement (and the royalty reports and
data contained therein) as well as any audit data provided per Section 4
are confidential information of Licensee except (i) if such information is
generally available to the public through no action of Licensor, (ii) to
the extent necessary to comply with any Court order, law, rule or
regulation of any federal or state agency or administrative body (including
the Securities and Exchange Commission and the U.S. securities laws based
on the advice of counsel) or contractual obligation of any party's
insurance carrier. If necessary, Licensor may utilize this confidential
information in litigation against Licensee relating to royalty payments
under this agreement; however, the information must remain confidential
(E.G., under the provisions of a suitable protective order and/or filing
under seal).
6. SEC Filings and Press Releases. Licensee understands that following the
Effective Date, Licensor will be required to file a Form 8-K with the SEC
that will include as an exhibit this Agreement (with exhibits) as well as
issue a press release. Licensee further understands that Licensor will be
required to disclose in certain of its SEC filings and press releases,
among other things set forth in this Agreement, the amount of royalty
revenue received from Licensee pursuant to this Agreement in an aggregated
form that does not reveal royalty revenues specifically attributable to
Licensee hereunder unless otherwise required by the U.S. securities laws
based on the advice of counsel. In addition, Licensor will not disclose in
its SEC filings or press releases any other data contained in the monthly
or semi-annual reports or audit data referenced in Section 4 above unless
otherwise required by the U.S. securities laws based on the advice of
counsel .
7. Term and Termination.
---------------------
7.1 This Agreement will commence on the Effective Date and will remain in
force and effect until the Expiration Date unless earlier terminated
or in the event the Licensed Patent is found to be invalid by a final
non-appealable order of a court of competent jurisdiction. Other than
as provided for in Section 7.2, the parties hereto may terminate this
Agreement only by mutual written agreement.
7.2 In the event a party to this Agreement breaches any provision hereof
and fails to cure such breach within forty-five (45) days of receipt
of written notice thereof, the other party hereto may terminate the
Agreement upon written notice to the other party hereto.
7.3 If Licensee fails to make royalty payments hereunder and fails to
remedy such breach in accordance with Section 7.2, all royalty
payments subsequent to said breach and all remedial
6
payments for outstanding payments shall be calculated at a royalty
rate of three percent (3%) instead of the two percent (2%) royalty
rate set forth in Section 4.2.
7.4 Termination of this Agreement by mutual written agreement of the
parties hereto shall not, unless otherwise agreed by the parties, have
the effect of terminating, revoking or withdrawing rights and
obligations set forth herein with respect to matters after the
Effective Date and up through and including the effective date of
termination hereunder. Notwithstanding the foregoing, the termination
of this Agreement for any reason other than by mutual agreement of the
parties hereto, shall not terminate the license granted hereunder for
any Licensed Product sold prior to the termination date but only if
the applicable royalty due hereunder with respect to such product is
paid by licensee
8. Release.
--------
Licensor on behalf of itself and its respective Subsidiaries, successors
and assigns hereby irrevocably releases Licensee and its Subsidiaries (but
only as to sales of Licensed Products to, from, or on behalf of Licensee)
officers, directors, employees, representatives, agents, successors and
assigns, customers, and suppliers, including any suppliers and customers in
the chain of possession of Licensed Products, from any and all causes of
action, known or unknown, in any way related to the acts, omissions,
transactions, and occurrences related to a claim of infringement of the
Licensed Patent, with respect to any MSCC Midspan Product manufactured,
used, leased, sold, offered for sale, imported, or otherwise transferred by
Licensee before the Effective Date of this Agreement.
9. Miscellaneous.
--------------
9.1 If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as
if such illegal, invalid or unenforceable provision had never
comprised a part hereof and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be
affected by the illegal, invalid or unenforceable provision or by its
severance herefrom.
9.2 Any and all notices, consents, or demands permitted or required to be
made or given under this Agreement shall be in writing, signed by the
individual giving such notice, consent, or demand and shall be
delivered personally or sent by registered or certified mail, return
receipt requested, to the other party at its address set forth below:
To Licensor: Network-1 Security Solutions, Inc.
445 Park Avenue, Suite 1028
New York, NY 10022
Attention: Corey M. Horowitz, Chairman and CEO
Telephone: (212) 829-5770
Facsimile: (212) 829-5771
With a copy to: Clifford Chance US LLP
31 West 52nd Street
New York, NY 10019-6131
Attention: Victor Siber
Telephone: (212) 878-8429
Facsimile: (212) 878-8375
7
To Licensee: Microsemi Corporation,
2381 Morse Avenue, Irvine, CA 92614
Attention: Legal Department
With a copy to: O'Melveny & Meyers, LLP
2765 Sand Hill Road
Menlo Park, CA 94025
Attention: Will Chuang
Telephone: (650) 473-2600
Facsimile: (650) 473-2601
9.3 This Agreement may not be assigned by either party without the express
prior written consent of the other party, except in connection with a
merger, acquisition, reorganization or sale of all or substantially
all of such party's assets or equity. This Agreement is binding upon
and inures to the benefit of the parties hereto, and their permitted
assigns.
9.4 This Agreement constitutes the entire agreement between the parties to
this Agreement with respect to the subject matter hereof and
supersedes all previous and contemporaneous negotiations, commitments
and agreements, both written and oral, between the parties with
respect to such subject matter. For avoidance of doubt, the Settlement
Agreement, as supplemented by the Amendment, shall remain in full
effect in accordance with its terms. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or
give to any Person, other than the parties to this Agreement and their
respective successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
9.5 This Agreement may be executed in separate counterparts, each of which
shall be considered an original but all of which will constitute one
agreement.
9.6 THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK. LICENSOR AND LICENSEE HEREBY
IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY COURT OF
THE STATE OF NEW YORK LOCATED IN THE COUNTY
8
OF NEW YORK IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING BROUGHT BY
LICENSOR OR LICENSEE TO ENFORCE THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION, SUIT OR PROCEEDING BROUGHT BY A PARTY TO THIS AGREEMENT
SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN);
PROVIDED, HOWEVER, THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE
PURPOSE REFERRED TO IN THIS SECTION 8.6 AND SHALL NOT BE DEEMED TO BE
A GENERAL SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN THE
STATE OF NEW YORK OTHER THAN FOR SUCH PURPOSE AND SHALL NOT APPLY WITH
RESPECT TO, OR BE DEEMED TO INDICATE THE INTENT OF ANY PARTY HERETO
WITH RESPECT TO, ANY ACTION BROUGHT BY OR AGAINST ANY PERSON(S) EACH
OF WHOM IS NOT A PARTY TO THIS AGREEMENT. Any and all process may be
served in any action, suit or proceeding arising in connection with
this Agreement by complying with the provisions of Section 8.2. Such
service of process shall have the same effect as if the party being
served were a resident in the State of New York and had been lawfully
served with such process in such jurisdiction. The parties hereby
waive all claims of error by reason of such service. Nothing herein
shall affect the right of any party to service process in any other
manner permitted by law or to commence legal proceedings or otherwise
proceed against the other in any other jurisdiction to enforce
judgments or rulings of the aforementioned courts.
9
IN WITNESS WHEREOF, each of the parties has caused two original copies
of this Agreement to be executed on its behalf by its duly authorized
officer as of the Effective Date.
NETWORK-1 SECURITY SOLUTIONS, INC.
By: /s/ Corey M. Horowitz
------------------------------------
Corey M. Horowitz
Chairman and Chief Executive Officer
MICROSEMI CORPORATION
By: /s/ Ralph Brandi
------------------------------------
Ralph Brandi
Chief Operating Officer
EXHIBIT A
POWERDSINE MIDSPAN PRODUCTS
----------------------- ---------------------------------------------------
PRODUCT/PRODUCT FAMILY DESCRIPTION
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
PD6000G
----------------------- ---------------------------------------------------
PD7000G
----------------------- ---------------------------------------------------
PD8000G
----------------------- ---------------------------------------------------
PD9000G
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
A-1
EXHIBIT B
ROYALTY REPORT
The undersigned official of Licensee is providing the following information
to Network-1 pursuant to that License Agreement dated [o] entered into between
Network-1 and Licensee. All capitalized terms used in this Report have the
definitions ascribed to them in the Agreement. This Report reflects the
Royalties payable by Licensee for the month [semi-annual] period ending________.
- ------------------------ --------- --------------------- ----------- --------------------------------------
LICENSED PRODUCT MODEL UNITS SELLING PRICE CHARGED
NO., NAME & DESCRIPTION SOLD TO UNRELATED BUYER RETURNS CALCULATION OF ROYALTIES
- ------------------------ --------- --------------------- ----------- --------------------------------------
Net Selling Price Royalty % Amount
of
Royalty
----------------- --------- --------
- -----------------------------------------------------------------------------------------------------------
Due & Total Royalties
Payable $________________
The undersigned hereby certifies the foregoing an accurate and complete record of all royalties due and
payable by Licensee for the period ___________.
Signature: ______________________________ Date:
______________________________
Name: ______________________________
Title: ______________________________