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LICENSE AGREEMENT
THIS
AGREEMENT is between the UNIVERSITY OF SOUTHERN CALIFORNIA,
(hereinafter USC) a California nonprofit corporation with its
principal place of business at University Park, Los Angeles,
California 90089, and Derma Sciences Inc., a United States
corporation, with its principal place of business at 214 Carnegie
Center, Suite 100, Princeton, New Jersey (hereinafter
Licensee).
WHEREAS USC
warrants that it is the owner and that it has the right to
exclusively license those inventions which are the subject matter
of the patent applications listed in Appendix A and of which the
inventors are Gere S. diZerega & Kathleen E. Rodgers of USC
(hereinafter the “Inventors”);
WHEREAS
Licensee desires to obtain an exclusive license in the Field Of Use
to make, use, sell, offer for sell, and import products utilizing
the inventions as hereinafter defined;
WHEREAS, USC
is willing to grant a worldwide, exclusive license in the Field of
Use to Licensee subject to the terms, conditions, limitations, and
restrictions set forth below;
NOW,
THEREFORE, in consideration of the covenants herein contained, the
parties agree as follows:
For all
purposes of this Agreement the following terms shall have the
meanings specified below:
a. The term “Patent”
or “Patents” , unless otherwise specified, shall
mean any and all patents and patent applications listed in both
Appendix “A” and Appendix “B” hereto
(Appendix “A” and Appendix “B” may be added
to but not subtracted from without mutual consent from time to time
by USC and USC shall notify Licensee of any such additions), any
patent applications covering an Improvement, any and all patents
issued therefrom or any divisions, continuations,
continuations-in-part (only to the extent that valid claims in the
continuation in part applications are entirely supported in the
specification and entitled to the priority date of the parent
application division), reexaminations, extension or reissue thereof
and any and all foreign patents issuing from any application filed
which corresponds to claims contained in any of the foregoing
patents or applications. When referring to only the patents in
Appendix “A” or the patents in Appendix
“B”, the terms “Appendix A Patents” or
“Appendix B Patents” will be used.
b. “Product” or
“Products” shall mean any article, composition,
formulation, apparatus, substance, chemical, material, method or
service in the Field Of Use which is made, used, distributed or
sold by Licensee which:
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i. is covered in whole or in part by one or more pending
or unexpired claims contained in a Patent in the country in which
the Product(s) is made, used, distributed, imported, offered for
sale, or sold; |
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ii. is manufactured using a method or process which is
covered in whole or in part by |
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one or more pending or unexpired claims contained in a Patent
in the country in which (a) the Products(s) is made, used,
distributed, imported, offered for sale, or sold, or (b) the method
or process is used or sold; |
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iii. the use of which is covered in whole or in part by
one or more pending or unexpired claims contained in a Patent in
the country in which (a) the Product(s) is made, used, distributed,
imported, offered for sale, or sold, or (b) the method or process
is used or sold; or |
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iv. incorporates technology transferred to Licensee
pursuant to the confidential disclosure agreement between USC and
Licensee dated October 25, 2006. |
A Product is
covered by a pending or unexpired claim of a Patent if in the
course of manufacture, use, distribution or sale, it would, in the
absence of this Agreement, infringe one or more claims of the
Patent which has not been held invalid by a court, patent office,
or administrative tribunal from which no appeal can be
taken.
c. “Field Of Use”
shall mean:
Diagnosis,
prognosis, treatment, mitigation or prevention of the following
human or animal diseases for the following conditions (a) treatment
or minimization of dermal scar; (b) treatment or minimization of
acute and chronic wounds, including but not limited to diabetic
ulcer, venous stasis ulcer, and decubitus ulcer; (c) treatment or
minimization of skin injuries or lesions, including but not limited
to cuts and abrasions; (d) treatment related to the skin; (e)
treatment of burns; (f) any other dermal-related indications,
whether known now or subsequent to execution of the License
Agreement. For the avoidance of doubt, USC makes no representations
or warranties that the Patents cover all of the Field of
Use.
Not
withstanding the above, the following two fields shall be excluded
from the above-defined field-of-use:
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i. “Bone Field” is defined as the
healing, growth, grafting, regeneration, repair or augmentation of
bone, cartilage or skeletal tissue using peptides in the homoSer
Sub-Field. “homoSer Sub-Field” shall mean any
class of peptides that includes the homoSer amino acid at any
position in the peptide. |
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ii. “Hematopoiesis Field” is defined
as the healing, stimulation, mobilization or repair of bone marrow
or hematopoietic tissues and includes, but is not limited to,
A(1-7) and any fragment thereof. The peptide analogs claimed in
U.S. patent entitled “Wound Healing Compositions” U.S.
Patent No. 7,022,675 and any related patent applications are
excluded from the Hematopoiesis Field and included in the Field of
Use. |
d. “Know How” shall
mean the information which are related to the Patents and are owned
or controlled by USC as of the Effective Date, including all
methods, processes, technical information, data, materials,
compositions, designs, drawings, systems, results of
experimentation, whether or not recorded in a tangible form,
software, prototypes, experiments, notebooks, records, biological,
chemical, pharmacological, toxicological, clinical, regulatory,
analytical, quality control and manufacturing data, as well as the
items specifically indicated in Section 6 of this
Agreement.
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e. “Net Revenues”
shall mean the gross revenue derived by Licensee or any Sublicensee
for the sale or distribution of any Product less the following
amounts actually paid by Licensee or Sublicensee
respectively:
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i. Normal trade, cash and quantity discounts allowed,
including charge backs; |
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ii. Credits, allowances or adjustments, including amounts
allowed for returned, recalled, or defective Products; |
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iii. transportation charges or allowances including
insurance; |
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iv. customs duties charges; |
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v. sales, transfer and other excise taxes or other
governmental charges levied on or measured by the sales but no
franchise or income tax of any kind whatsoever; |
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vi. rebates or reimbursements actually granted by
Licensee, or its affiliates to managed health care organizations,
federal, state, or local governments (or their agencies), including
Medicaid rebates with each of the deductions determined in
accordance with US GAAP consistently applied; and |
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vii. Transfer of a reasonable number of free samples of
the Product, and prior to marketing, any clinical trial materials
for which there is no charge. |
Every
commercial use or disposition of any Product, in addition to a bona
fide sale to a customer, shall be considered a sale of such
Product. The Net Revenues, in the case of a use or disposition
other than a bona fide sale, shall be equivalent to the fair market
value of any cash or non-cash consideration received by Licensee
for the use or disposition of such Product.
In the event
that any compensation is equity, the fair market equivalent to such
compensation will be payable in kind. Licensee will issue
USC’s portion of equity within ten (10) days of release of
any imposed restrictions on the sale of the stock.
f. “Sublicensee”
shall mean any third party licensed by Licensee or any Sublicensee
to make, use, offer for sale, sell, or import any Product in
accordance with sublicense rights granted pursuant to this
Agreement.
g. “Effective Date”
of this Agreement shall be the date when the last party has signed
this Agreement.
h. “Improvement”
means any invention the practice of which would infringe at least
one pending or unexpired claim within the Patents, which is owned
or controlled by USC and is disclosed to USC within three (3) years
of the Effective Date of this Agreement and which invention is made
in which Gere DiZerega and/or Kathy Rodgers are named as an
inventor or co-inventor with USC personnel under their supervision
on the patent application, including but not limited to those
enhancements and improvements relating to the efficacy, dosing,
formulation, manufacturing, or clinical trials related to the
Products. Patents covering Improvements to Appendix A Patents and
Appendix B Patents shall be considered Appendix A Patents and
Appendix B Patents respectively.
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a. In consideration of the license fee
and royalties, and subject to the terms and conditions set forth in
this Agreement, USC hereby grants to Licensee:
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i. an exclusive license under the Appendix A Patents to
make, have made, use, import, sell, have sold and offer for sale
Products in the Field Of Use throughout the world; |
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ii. a nonexclusive license under the Appendix B Patents
to make, have made, use, import, sell, have sold and offer for sale
Products in the Field Of Use throughout the world; and |
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iii. the right to grant sublicenses of the rights granted
in Sections 3.a.i. and 3.a.ii., provided that any Sublicensee
agrees to be bound by the terms and conditions of this Agreement
applicable to Sublicensees. All rights granted to Sublicensees will
terminate upon termination of this Agreement. |
b. All licenses pursuant to 3.a. and
3.b. to inventions conceived or first actually reduced to practice
during the course of research funded by a U.S. federal agency are
subject to the rights, conditions and limitations imposed by U.S.
law, including but not limited to the following:
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i. The words “exclusive license” as used
herein shall mean exclusive except for the royalty-free
non-exclusive license granted to the U.S. government by U.S.C.
pursuant to 35 U.S.C. Section 202(c)(4) for any Patent claiming an
invention subject to 35 U.S.C Section 201 and except for the rights
of U.S.C. and Inventors as set forth in Section 7. |
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ii. Licensee agrees that Products used or sold in the
United States shall be manufactured substantially in the United
States, unless a written waiver is obtained in advance from the
relevant U.S. federal agency. |
c. For the rights and privileges granted
under this Agreement, and subject to the terms and conditions of
this Agreement, Licensee will pay an initial license fee of eight
hundred forty thousand dollars ($840,000) to or on behalf of USC as
follows:
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i. Within ten (10) days of the Effective Date, the sum of
eighty three thousand, three hundred and forty-eight dollars and
twenty-five cents ($83,348.25)) to Livingston Research Institute,
P.O. Box 31339, Los Angeles, CA 90031, Attn: Gere S. diZerega,
M.D.. The payment obligation to USC of the sum paid to Livingston
Research Institute shall be deemed satisfied upon confirmed receipt
of this payment by Livingston Research Institute.; |
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ii. Within ten (10) days of the Effective Date, the sum
of four hundred fifty six thousand dollars ($456,000) to USC
Stevens Institute for Innovation, University of Southern
California, Hughes Center, Suite EEB 131, 3740 McClintock Avenue,
Los Angeles CA, 90089-2561, Attn: Director; and |
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iii. Within thirty (30) days of Licensee’s receipt
of the Know How specified in Section 6, the sum of three hundred
thousand dollars ($300,000) to U.S. Biotest, 231 Bonetti Drive,
Suite 240, San Luis Obispo, CA 93401-7310, Attn: Gere S. diZerega,
M.D. The payment |
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obligation to USC of the sum paid to U.S. Biotest shall be
deemed satisfied upon confirmed receipt of this payment by U.S.
Biotest. |
d. The Termsheet entered between the
parties on May 17, 2007 is completely superseded by this License
Agreement.
| 4. |
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ROYALTY AND ROYALTY TERM |
a. On all sales of Products anywhere in
the world by Licensee or any Sublicensee, Licensee shall pay USC a
royalty on the annual aggregate of such Net Revenue. The annual Net
Revenue tiers listed below are based on 2007 dollars and will be
annually adjusted to account for inflation based on the Consumer
Price Index.
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| Annual
Aggregate Net Revenues Received |
Royalty Rate |
| Portion of
annual aggregate Net Revenues less than $100,000,000 |
6.5% |
| Portion of
annual aggregate Net Revenues equal to or greater than
$100,000,000 |
8.5% |
b. Royalties are due on revenues in
countries for as long as the Patent is not held invalid or
unenforceable in the relevant country or region or, save as
otherwise provided in Section 17 hereof, until this Agreement is
terminated.
c. Licensee shall pay such royalties to
USC on a calendar quarter basis. With each quarterly payment,
Licensee shall deliver to USC a full and accurate accounting to
include at least the following information:
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i. Quantity of each Product sold
(by country) by Licensee and its Sublicensees; |
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ii. Total receipts for each
Product (by country); |
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iii. Quantities of each Product
used by Licensee and its Sublicensees; |
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iv. Names and addresses of
Sublicensees of Licensee; |
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v. Total number of Products
manufactured (by country); and |
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vi. Total royalties payable to
USC. |
d. In each year the amount of royalty
due shall be calculated quarterly as of March 31, June 30,
September 30 and December 31 and shall be paid quarterly within the
next sixty (60) days following such date. Every such payment shall
be supported by the accounting prescribed in Section 4.c. and shall
be made in United States currency. Whenever for the purpose of
calculating royalties conversion from foreign currency shall be
required, such conversion shall be at the rate of exchange
thereafter published in the Wall Street Journal for the last
business day of the applicable quarter.
e. The royalty payments due under this
Agreement shall, if overdue, bear interest until payment at a per
annum rate equal to one and a half percent (1.5%) above the prime
rate in effect in the United States on the due date, not to exceed
the maximum permitted by law. The payments of such
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interest
shall not preclude USC from exercising any other rights it may have
as a consequence of the lateness of any royalty payment.
f. The obligation to pay a royalty
under this Agreement on the Net Revenues of a Product will be
imposed only once with respect to the same unit of the Product
regardless of the number of Patents, or the number of claims within
the Patents, that cover the Product.
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MILESTONE PAYMENTS AND SUBLICENSE
FEES |
a. With respect to the first Product
claimed by the Patents that is developed or sold for the treatment
of the first indication in the Field, Licensee will pay to USC the
milestone payments upon achievement of the corresponding milestone
events set forth in the table below:
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| Milestone |
Payment Due |
| 1.
2 months after FDA approval of first application for
1st indication |
$US 1,125,000 |
| 2.
1 month after product for first indication achieves its
first $25,000,000 in Net Revenue worldwide |
$US 2,250,000 |
| 3.
2 months after FDA approval of first application for
2nd indication |
$US 500,000 |
| 4.
2 months after first EU regulatory approval for 2nd
indication |
$US 250,000 |
| 5.
2 months after first Japanese regulatory approval for
2nd indication |
$US 500,000 |
| 6.
2 months after FDA approval of first application for
3rd and subsequent indications |
$US 500,000 |
| 7.
2 months after first EU regulatory approval for 3rd and
subsequent indications |
$US 250,000 |
| 8.
2 months after first Japanese regulatory approval for
3rd and subsequent indications |
$US 250,000 |
| 9.
1 months following completion of first calendar year
where annual aggregate Net Revenues worldwide exceed $US
100,000,000 |
$US 4,000,000 |
b. Licensee will spend at least one
million two hundred thousand dollars ($1,250,000) on direct
marketing of a Product within 12 months of FDA approval for the
first indication for that Licensed Product.
Within
seventy-five (75) days after the Effective Date of the License
Agreement, USC will grant the Licensee access to IND 71,204 and
provide Licensee with copies of all of the materials, information
and data regarding Product that USC owns or controls,
including:
a. All regulatory filings and
correspondence with the FDA and other local, state, or federal
regulatory authorities;
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b. All pre-clinical and clinical
protocols, data, and reports (including toxicology reports,
clinical case report forms and other raw data);
c. All Quality Assessment/Quality
Control procedures, assays and associated materials;
d. Manufacturing processes for all
formulations and related documentation, batch records, and
technical reports; and
e. Documentation related to all
subcontractors, including any evaluations of potential contract
manufacturers.
The cost for
reproduction of documents requested by Licensee shall be paid by
Licensee, and shall not exceed seven (7) cents per page.
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RIGHTS RETAINED BY UNIVERSITY |
Notwithstanding the exclusive license granted in Section 3.a.,
USC and Inventors will have the absolute, nontransferable right to
use the technology covered by the Patents thereof, for conducting
non-commercial research and educational purposes only, but shall
not grant any sublicenses or otherwise permit any third parties to
do so.
a. USC shall file, prosecute and
maintain the Patents during the term of this Agreement. Should
Licensee require the filing of foreign patents, USC shall take
responsibility for filing, prosecuting and maintaining said foreign
patents. The filing, prosecution, and maintenance of the Patents
shall be USC’s primary responsibility, but USC shall provide
Licensee with reasonable and timely opportunity to advise USC in
such filing, prosecution, and maintenance.
b. Licensee shall reimburse all
reasonable legal expenses incurred by USC in filing, prosecuting
and maintaining the U.S. and foreign Appendix A Patents. These
legal expenses shall include the reasonable attorneys’ and
agents’ fees, foreign filing fees and out-of-pocket costs
associated with responding to office actions and any other fees and
costs directly related to obtaining and/or maintaining the Appendix
A Patents. Licensee shall remit reimbursement payments within
thirty (30) days of a written request by USC, and of Licensee
receiving, from USC, supporting documentation outlining the legal
expenses incurred in respect of the Appendix A Patents.
c. Licensee shall pay all patent costs
incurred after the Effective Date of Appendix B Patents and its
foreign counterparts on a pro-rata basis with other licensees, not
to exceed five thousand dollars ($5,000) per year, during the term
of this License Agreement.
d. Licensee may, in its sole discretion
but no less than ninety days prior to a bar or other known event
causing loss of rights, elect not to pursue or to terminate the
prosecution or maintenance of an Appendix A Patent, and in such
event, Licensee shall have no further obligation to pay for any
expenses or fees associated with said Patent after providing USC
notice thereof. If the Licensee elects (i) not to pursue a Patent
or (ii) to terminate the prosecution or maintenance of a Patent in
any country, then Licensee surrenders its right to make, use or
sell Products covered by the non-elected
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Patent in
that particular country and shall back grant to USC the exclusive
rights previously granted to Licensee, without limitation, for that
country. Licensee agrees to execute all reasonably necessary
documents to carry out this grant back of rights to USC. Payments
due and owing referred to in Section 8.c. shall not be refunded
upon such non-election or termination. USC may, in its soled
discretion but no less than ninety days prior to a bar or other
known event causing loss of rights, elect not to pursue or to
terminate the prosecution or maintenance of an Appendix B
Patent.
e. USC shall promptly provide Licensee
with copies of all Patent prosecution files. The attorney
representing USC with respect to the Patents, shall provide
Licensee with copies of any correspondence to and from patent
offices relating to the Patents in order to give Licensee an
opportunity to review and provide input on all actions to be taken,
including but not limited to responses to Restriction Requirements,
Office Actions, and other such substantive actions. If USC decides
to transfer the prosecution of the Patents from the attorney
representing USC as of the date of the agreement to another
attorney or firm, USC shall have the right to select such other
attorney or firm, subject to the approval of Licensee not to be
unreasonably withheld.
a. Defensive Controversy
The parties
shall promptly notify each other of all claims, allegations and
notifications that the Licensed Products infringe the patent rights
of third party patents. Except for the placing in escrow of a
portion of royalties as referred to hereinafter, USC shall have no
obligation or liability in the event that legal action is brought
against Licensee for patent infringement, except as set out herein.
Such obligations and liability shall be borne by licensee. Licensee
may choose legal counsel and defend the patent infringement
lawsuit. Licensee shall have the first option to decide whether and
what steps should be taken to defend, prevent or terminate any
alleged infringement, and shall have the right to settle any such
claims. No settlement, consent judgment, or other voluntary final
disposition of the matter may be entered into without USC’s
consent, which shall not be unreasonably withheld. USC shall
cooperate with Licensee and shall provide all reasonable assistance
to Licensee in connection with such an infringement
claim.
In the event
that an infringement lawsuit is brought by a third party, Licensee
shall place all of the royalties derived from sales of the Product
in the country where such lawsuit is pending in an interest-bearing
escrow account. The escrow account shall be established in a bank
mutually acceptable to both parties under escrow instructions
insulating the funds from claims of any creditor. Upon settlement
or other termination of the lawsuit, one-half (1/2) of any judgment
amount, reasonable attorneys’ fees and costs, may be paid
from this escrow account. Should the settlement of any such patent
infringement lawsuit involve payment of royalties by Licensee to a
third party for the continued right to manufacture, use, sell,
offer for sell, or import the Product, then funds in the escrow
account and royalties payable to USC may be applied against up to
one-half (1/2) of such royalties to a third party. Any funds
thereafter remaining in the escrow shall be paid to USC. The above
shall constitute USC’s sole liability and responsibility to
Licensee in the event of such action. Royalties paid to third
parties as provided for above shall be included when determining
whether the minimum royalty provided for in this Agreement has been
paid in a given year. During the patent infringement lawsuit both
parties shall keep each other informed in writing of significant
developments in the lawsuit. No settlement, consent judgment, or
other voluntary final disposition
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of the
matter may be entered into without Licensee’s consent, which
shall not be unreasonably withheld.
b. Offensive
Controversy
The parties
shall promptly notify each other of any potential infringement of a
Patent in the Field of Use. In the event that a third party
infringes on a Patent in the Field of Use, Licensee shall have the
first option, but not an obligation, to bring legal action to
enforce any such patent. If Licensee exercises such right, Licensee
shall select legal counsel and pay all reasonable legal fees and
costs of prosecution of such action. In such a case, Licensee shall
have the sole right to control the litigation strategy of the
action, and USC shall provide all reasonable assistance to Licensee
in bringing and prosecuting such an action, including consent to be
named and joined as a real party in interest, necessary party, or
indispensable party in any such lawsuit. In the event that Licensee
shall choose not to take such action, USC shall have the right, at
its option and at its own expense, to prosecute any action to
enjoin such infringement or to prosecute any claim for damages. The
party prosecuting any such action shall be entitled to retain any
funds received as a result of settlement or judgment of such
action. The parties may also agree in writing to jointly pursue
infringers. After deduction and payment to the parties of their
respective costs and fees (including without limitation
reasonabl
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