Pursuant to 17 CFR 240.24b-2, confidential information (indicated by [***]) has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.
PATENT LICENSE AND SETTLEMENT AGREEMENT
THIS PATENT LICENSE AND SETTLEMENT AGREEMENT (the “Agreement”), is entered into as of November 24, 2008 (the “Effective20Date”), by and among Samsung Electronics Co., Ltd., a corporation duly organized and existing under the laws of the Republic of Korea and having its principal office at 416 Maetan-3dong, Yeongtong-gu Suwon-si, Gyeonggi-do, 443-742, Korea (“Samsung”), and InterDigital Technology Corporation, Tantivy Communications, Inc., IPR Licensing, Inc., and InterDigital Patent Holdings, Inc., each Delaware corporations having a mailing address of Suite 105 Hagley Building, 3411 Silverside Road, Concord Plaza, Wilmington, Delaware 19810 (individually and together, “ITC”), and InterDigital Communications, LLC f/k/a InterDigital Communications Corporation, a limited liability company duly organized and existing under the laws of the Commonwealth of Pennsylvania and having its principal office at 781 Third Avenue, King of Prussia, PA, USA 19406 (“IDC”) (IDC and ITC are referred to herein individually and collectively as “InterDigital”). SEC, ITC, and IDC are herein individually referenced as “Party” and collectively as “Parties.” In relation to SEC, “other Party” refers to ITC and/or IDC, as context requires; in relation to ITC and IDC, “other Party” refers to SEC.
WHEREAS , Samsung and ITC are parties to that certain Binding Terms and Conditions for 2G/3G Settlement and Patent Licen se (“Term Sheet”) entered into on November 24, 2008 relating to the resolution and settlement of the Lawsuits and the grant by ITC of a patent license to Samsung, among other things, on the terms and conditions set forth herein.
WHEREAS , Samsung and ITC desire to enter into this Agreement in place of the Term Sheet.
NOW, THEREFORE , in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:
a. 2G License Grant : Without limitation, subject to Sections 6 and 7, effective and conditioned on timely receipt by ITC of the first installment of the License Fee, and continuing thereafter conditioned on receipt of the subsequent installments of the License Fee, ITC grants Samsung and its Affiliates a non-exclusive, non-transferable, worldwide license under the Licensed Patents for the life of such patents to develop, design, make, have made, use, import, offer to sell, sell, and otherwise distribute 2G Licensed Products. Upon receipt by ITC of all installments of the License Fee, all rights granted pursuant to this Section 1(a) shall be deemed paid up and irrevocable. The license does not extend to Components sold separately.
b. 3G License Grant : Without limitation, subject to Sections 6 and 7, effective and conditioned on timely receipt by ITC of the first installment of the License Fee, and continuing thereafter conditioned on receipt of the subsequent installments of the License Fee, ITC grants Samsung and its Affiliates a non-exclusive, non-transferable, worldwide, royalty-bearing license under the Licensed Patents to develop, design, make, have made, use, import, offer to sell, sell, and otherwise distribute 3G Licensed Products during the 3G Term. The license does not extend to Components sold separately.
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c. [***]: Without limitation, subject to Sections 6 and 7, and without limiting Section 4(c), [***] a 2G Licensed Standard or a 3G Licensed Standard. Except as specifically set forth in this Section and in Section [***], nothing shall be deemed as conferring, by implication, estoppel, or otherwise, any license, right [***], express or implied, under any patent or intellectual property right to develop, design, make, have made, use, import, offer to sell, sell, or otherwise distribute products [***].
d. Notwithstanding anything to the contrary, the licenses granted under Sections 1(a) and 1(b) exclude any license, express or implied, to develop, design, make, have made, use, import, sell, and otherwise distribute Components, except to the extent that such Components (i) are made by or have made for Samsung solely for use within the 2G Licensed Products or the 3G Licensed Products sold by Samsung and its Affiliates, or (ii) are sold on an non-integrated basis together with a 2G Licensed Product or 3G Li censed Product for integration by the operator (e.g., a SIM card sold in the box with a handset), or (iii) [***] (a) [***], and (b) [***].
a. License Fee : Samsung shall pay ITC a non-refundable, irrevocable License Fee of US $400 Million. Payment shall be made according to the following schedule:
US $100M on or before [***], 2009
US $100M on or before [***]
US $100M on or before [***]
US $100M on or before [***], 2010
SEC shall pay ITC the License Fee less the Tax Withheld by wire transfer to:
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[***]
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PNC Bank
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300 Delaware Avenue
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Wilmington, DE 19801
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[***]
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[***]
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,or pursuant to such other wire transfer instructions as may later be provided by InterDigital to SEC.
A form invoice, acce ptable to both Parties, is attached as Exhibit “A” hereto.
b. Taxes: Samsung shall (i) [***] on account of withholding taxes that are required by Korean domestic law and pursuant to the [***] by Samsung (hereinafter “Tax Withheld”), (ii) promptly and timely pay to the appropriate Korean tax authorities all of such taxes that are required to be withheld and paid, and (iii) provide InterDigital, within a reasonable period thereafter, with all necessary documentation evidencing payment of such taxes. In case the Tax Withheld is later determined by the [***], the Parties agree that ITC and/or IDC, as applicable, [***] upon submission of documentation evidencing the same. In the event the Tax Withheld is later determined by the [***] as being greater than required, the Parties shall cooperate with each other to ensure that [***]. Provided the relevant government requires any such tax, SEC shall furnish InterDigital with appropriate documentation evidencing the payment of such tax as assessed by the appropriate authority of such government and such other documentation as reasonably requested by or responsive to the [***].
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c. Finality: The Parties further acknowledge that the License Fee is final, irrevocable, non-refundable, and not subject to any deductions, adjustments, set-offs, offsets, discounts, credits, or withholdings (other than tax withholding to the extent expressly provided above) for any reason.
3. Termination and Remedies.
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a.
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Notwithstanding anything to the contrary herein, in the event that Samsung breaches any of the payment obligations under this Agreement, and fails to cure such breach within [***] days (or with respect to the first installment of the License Fee, within [***] days) following written notice thereof from ITC, then ITC shall have the right, at its election either:
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i.
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to enforce the terms and conditions of this Agreement, and pursue all remedies available at law or equity, in which case (i) all remaining payments under this Agreement shall become immediately due and payable in full, (ii) all rights and duties of the Parties under this Agreement shall remain in effect, (iii) all unpaid amounts shall accrue interest at a rate equal to [***], and (iv) Samsung shall reimburse ITC for any and all costs incurred by ITC (including reasonable attorneys’ fees) in order to collect such amounts due; alternatively
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ii.
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to terminate this Agreement, and pursue all remedies available at law or equity. In the event this Agreement is terminated prior to ITC’s receipt of the first installment of the License Fee, (i) all licenses, rights [***] granted to Samsung and its Affiliates [***] and the Releases set forth in Sections 9(a) and (b) hereunder shall not take effect and shall be null and void, (ii) the Parties may thereafter proceed in the Lawsuits, and (iii) Samsung will not oppose any request by InterDigital to lift the stays in the Lawsuits, and will proceed according to any new schedule set in the Lawsuits. In the event this Agreement is terminated following receipt by ITC of the first installment of the License Fee, all licenses, rights [***] granted to Samsung and its Affiliates [***] and the Releases set forth in Sections 9(a) and (b) hereunder shall immediately terminate, be null and void and shall have no further force or effect from and after the date of such notice, provided that in such event Samsung shall be entitled to [***] to InterDigital or its Affiliates.
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b.
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In addition, either Party may terminate this Agreement prior to the expiration of the 3G Term, upon [***] days prior written notice to the other Party, if the other Party is in breach of any of its material obligations other than those addressed in Section 3(a) above and the breach is not cured within the [***] days after notice is received by the other Party. Such “other material obligations” shall be deemed to be any material failure to comply with [***] obligations. In the event of a termination of this Agreement by InterDigital under this Section 3(b), Samsung shall, without limiting any oth er right or remedy of InterDigital at law or in equity, immediately pay ITC all unpaid , installments of the License Fee and any other amounts accruing hereunder (in each case, whether or not then due), and all rights, licenses [***] granted to Samsung and its Affiliates [***] hereunder shall terminate unless (i) within [***] after the notice of such termination is received by Samsung, [***], (ii) [***] InterDigital and its Related Parties and their past and present officers, directors, shareholders, employees, and agents and their respective direct and indirect [***], and (iii) within [***] after the notice of such termination is received by Samsung, [***]. Further, any termination or expiration of this Agreement shall not prejudice InterDigital’s right to conduct a final audit under Section 23 herein. In the event of a termination of this Agreement by Samsung under this Section 3(b), [***] granted to InterDigital and its Related Parties hereunder shall terminate unless (i) [***] Samsung and its Affiliates and
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their past and present officers, directors, shareholders, employees, and agents [***], and (ii) within [***] after the notice of such termination is received by InterDigital, [***].
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&nbs p;
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c.
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Notwithstanding anything to the contrary, either Party’s enforcement of the terms and conditions of this Agreement, or ITC’s pursuit of all remedies available at law or equity pursuant to Section 3(a)(i) above, shall not constitute a breach of Sections 9 ([***]) or 10 ([***]).
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a.
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2G [***] Products: Without limitation, subject to Sections 4(e), 6 and 7, effective and conditioned on timely receipt by ITC of the first installment of the License Fee, and continuing thereafter conditioned on receipt of the subsequent installments of the License Fee, InterDigital and its Affiliates [***] (i) [***], and (ii) [***] (a) [***], or (b) [***]; provided and subject to, however, that Samsung and its Affiliates [***] (A) [***] or (B) [***]: (1) [***]; or (2) [***]. [***] to Samsung, its Affiliates or any third party, whet her by contract, by law, [***] or otherwise, [***].
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b.
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3G [***] Products: Without limitation, subject to Sections 4(e), 6 and 7, effective and conditioned on timely receipt by ITC of the first installment of the License Fee, and continuing the reafter conditioned on receipt of the subsequent installments of the License Fee, InterDigital and its Affiliates [***] (i) [***], and (ii) [***] (a) [***], or (b) [***]; provided and subject to, however, that Samsung and its Affiliates [***]: (A) [***]; or (B) [***]. [***] to Samsung, its Affiliates or any third party, whether by contract, by law, [***] or otherwise, [***].
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c.
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[***] . Without limitation, subject to Sections 4(e), 6 and 7, effective and conditioned on timely receipt by ITC of the first installment of the License Fee, and continuing thereafter conditioned on receipt of the subsequent installments of the License Fee, InterDigital and its Affiliates [***]. [***] to Samsung, its Affiliates or any third party, whether by contract, by law, [***] or otherwise, [***].
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d.
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[***] of InterDigital : Without limitation, subject to Sections 4(e), 6 and 7, Samsung and its Affiliates [***]. With respect to [***] InterDigital and its Related Parties and [***], whether by [***] or otherwise. With respect to [***], the foregoing [***] Samsung and its Affiliates shall [***].
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e.
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Conditions to [***] Without limiting Section 11, nothing in this Section (nor any payments made hereunder) shall be construed as (i) exhausting a Party’s rights to claim infringement or receive royalties or damages or other compensation with respect to any patent or product [***], (ii) creating or granting any express or implied license of any kind, or (iii) giving rise to [***] or any waiver or limitation of any kind with respect to actions against third parties, except as expressly set forth in [***]. The Parties hereby expressly waive the right to make any claim contrary to the foregoing. For clarity, the obligations of each Party [***], it being understood that (1) the foregoing does not limit or modify the terms of Section 4(a) and 4(b) addressing the rights of InterDigital [***], and (2) [***].
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5. Excluded Products: Without limiting anything in [***], no licenses, [***], releases, or other authorizations (except as expressly set fo rth herein) are granted to any portion of any product that complies with an Excluded Standard.
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6. Additional Limitations: Notwithstanding anything to the contrary, this Agreement (a) excludes the right to grant sublicenses, (b) shall not cover any products that Samsung or its Affiliates Acquire from or which are attributable to an Acquisition with one or more third parties [***] Terminal Units designed to operate in accordance with 2G Licensed Standards or 3G Licensed Standards (as the case may be) [***] Samsung and its Affiliates, and (c) shall not cover any products that InterDigital or its Related Parties Acquire from or which are attributable to an Acquisition with one or more third parties [***] Terminal Units, Wireless Modules, or Components designed to operate in accordance with 2G Licensed Standards or 3G Licensed Standards (as the case may be) [***] InterDigital and its Related Parties.
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a.
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All licenses and [***] granted hereunder shall survive the assignment or transfer (whether by merger, sale or otherwise) of any of the Licensed Patents or Samsung [***] Patents (as the case may be).
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b.
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Neither Party shall assign this Agreement or any rights or obligations hereunder. Notwithstanding the foregoing:
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i.
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Samsung may assign all of its and Affiliates’ rights and obligations under this Agreement (other than the [***] obligations and the releases hereunder) to any successor in interest to Samsung’s entire telecommunications business (whether by merger, asset sale or otherwise), provided that (i) either (A) Samsung makes payment in full of the remaining unpaid (whether or not then due) portion of the License Fee prior to such assignment, or (B) if any portion (whether or not then due) of the License Fee remains outstanding at the time of such assignment, Samsung shall remain liable to ITC for the timely payment of such outstanding portion of the License Fee by such successor, and (ii) the ultimate parent company of the successor agrees in writing to assume this Agreement and be bound hereby as if it were “Samsung” hereunder (including, without limitation, for purposes of the [***] granted by Samsung pursuant to Section 4(d) hereof), provided that , the licenses, [***] and other rights granted under this Agreement (including, without limitation, the obligations of InterDigital under Section 9(e) hereunder) to Samsung and its Affiliates shall be limited on a going-forward basis to sales of 2G Licensed Products and 3G Licensed Products in an amount not to exceed [***]. For example, [***] ([***] affiliates being defined comparatively to the successor as the definition of Affiliate is defined herein as to the Parties) sales of 2G Settlement Products and 3G Licensed Products would [***]. Notwithstanding, if the successor is already a party to a patent license with InterDigital, the successor’s existing agreement shall continue to apply to any products not constituting 2G Licensed Products and 3G Licensed Products in this Agreement, including without limitation the proportion not deemed covered by this Agreement described in this Section 7(b)(i) above.
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ii.
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[***], InterDigital may assign its rights and obligations under this Agreement in whole or in part to any InterDigital Related Party. InterDigital or any of its Related Parties may also assign all of its rights and obligations under this Agreement (other than the [***] obligations and the releases hereunder) to any successor in interest to InterDigital or such Related Party (whether by merger, asset sale or otherwise), provided that , (A) such successor shall assume all obligations of InterDigital hereunder and all rights, [***], and licenses granted by InterDigital to Samsung shall
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survive and remain in full force and effect, and (B) the [***] and other rights granted hereunder to InterDigital or such Related Parties shall be l imited on a going-forward basis to sales of products subject to the [***] set forth in Section 4(d) in an amount not to [***]. For example, [***].
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iii.
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In the event of any assignment covered by this Section 7, the assigning Party will provide notice to the other Party within a reasonable time following the assignment.
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iv.
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Notwithstanding anything to the contrary in this Section 7, the assignment of this Agreement in accordance with this Section 7 shall not convey a release to the assignee under Sections 9(a) through 9(d), which releases shall be personal to the Parties explicitly named in such releases as of the Effective Date.
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a. Termination of USITC Action . Upon receipt by ITC of the first installment of the License Fee, the Parties shall as soon as practicable cause their respective counsel to execute and file with the USITC a joint motion and proposed order, in the form attached as Exhibit “B” hereto, seeking to (1) terminate the USITC Action on the basis of settlement pursuant to 19 C.F.R. § 210.21(b); (2) take all other reasonable actions to terminate and stay such proceedings and orders; and (3) further extend the date for the Final Initial Determination, if necessary, to ensure that a Final Initial Determination does not issue.
b. Termination of InterDigital Delaware Action . Within seven (7) days of receipt by ITC of the first installment of the License Fee, the Parties shall cause their respective counsel to execute and file with the Court a joint stipulation, in the form attached as Exhibit “C” hereto, dismissing without prejudice the InterDigital Delaware Action, and take all other reasonable actions necessary to dismiss such proceeding.
&nbs p; c. Termination of Samsung Delaware Action . Within seven (7) days of receipt by ITC of the first installment of the License Fee, the Parties shall cause their respective counsel to execute and file with the Court a joint stipulation, in the form attached as Exhibit “D” hereto, dismissing with prejudice Samsung’s claims in the Samsung Delaware Action based on conduct occurring before the date of dismissal of the Samsung Delaware Action, dismissing without prejudice InterDigital’s counterclaims, and take all other reasonable actions necessary to dismiss such proceeding.
d. Termination of 2G Arbitrations and Litigation. Within seven (7) days of the receipt by InterDigital of the first installment of the License Fee, the Parties shall jointly through their respective counsel move to dismiss with prejudice and finally resolve, or jointly request administrative closure of, if applicable, the Samsung II Enforcement Action, the Samsung II Appeal, and the Samsung III Arbitration with each Party bearing its own costs and fees. Further, within three (3) business days after the receipt by InterDigital of the first installment of the License Fee, InterDigital shall execute those commercially reasonable documents — that are necessary to effect the release of any and all rights InterDigital may have und er that bond — including both (i) a commercially reasonable release drafted by the surety for the bond filed in InterDigital Communications, LLC v. Samsung Electronics Co., Ltd., No. 06 Civ. 6833 (RJS) in the Southern District of New York (Appeal Bond No. CGB8796870), in the Form attached as Exhibit “E” hereto and, (ii) a satisfaction of judgment to be filed in the Samsung II Enforcement Action in the form attached as Exhibit “F” hereto.
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a. Release by InterDigital . Provided InterDigital does not terminate this Agreement based on nonpayment of the first installment of the License Fee, contingent upon the actual and timely payment of the remaining installments of t he License Fee, and effective upon receipt by ITC of the first installment of the License Fee, InterDigital and its Affiliates hereby fully, finally and forever acquit, release and discharge Samsung, its Affiliates, and their past and present officers, directors, shareholders, employees, and agents from any and all claims, losses, and liabilities that InterDigital, its Affiliates, and their past and present officers, directors, shareholders, employees, and agents ever had, now have, or hereafter can, shall or may have, for, upon, or by reason of acts or omissions existing prior to the Effective Date of this Agreement arising out of or relating to the [***].
b. Release by InterDigital [***] . Provided InterDigital does not terminate this Agreement based on nonpayment of the first installment of the License Fee, contingent upon the actual and timely payment of the remaining installments of the License Fee, and effective upon receipt by ITC of the first installment of the License Fee, InterDigital and its Affiliates hereby fully, finally and forever acquit, release and discharge Samsung and its Affiliates, and their past and present officers, directors, shareholders, [***], employees, and agents from any and all claims, losses, and liabilities that InterDigital, its Affiliates, and their past and present officers, directors, shareholders, employees, [***],=2 0and agents ever had, now have, or hereafter can, shall or may have, for, upon, or by reason of [***] (i) [***], and (ii) [***] (a) [***], or (b) [***].
c. Limitations on InterDigital’s Releases. Notwithstanding anything to the contrary, the releases described in Sections (a) and (b) above (i) do not include a release with respect to subject matter other than that set forth in Sections (a) and (b) above, (ii) do not extend, by implication or otherwise, to any third party, or to any third party product even when used in combination with products sold by Samsung or any of its Affiliates, [***], and (iii) do not extend to any act by which Samsung or its Affiliates or any of their respective attorneys or agents granted a sublicense under any Licensed Patent to any person or purported to do so.
d. Release by Samsung . Provided InterDigital does not terminate this Agreement for lack of timely receipt by ITC of the first installment of the License Fee, and effective January 31, 2009, Samsung and its Affiliates hereby fully, finally and forever acquit, release and discharge InterDigital and its Related Parties, and their past and present officers, directors, shareholders, employees, and agents from any and all claims, losses, and liabilities that Samsung, its Affiliates, and their past and present officers, directors, shareholders, employees, and agents ever had, now have, or hereafter can, shall or may have, for, upon, or by reason of acts or omissions existing prior to the Effective Date of this Agreement arising out of or relating to the [***].
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i.
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< SPAN style="FONT-SIZE: 10pt; COLOR: black">For a period commencing as of the Effective Date and continuing up to and including the end of the 3G Term (hereafter the “[***]”), InterDigital and Samsung each covenants and agrees, on behalf of itself and its respective Related Parties, not to [***] with respect to any product of the other Party or its Related Parties, in each case, to the extent such [***] under this Agreement. Notwithstanding anything in this paragraph, in the event that a Party or its Related Parties [***] the other Party or its Related Parties, the obligation of the such other Party and its Related Parties under this Section 9(e) shall unconditionally terminate and have no further force or effect, unless and until (A) within [***] after the notice of such breach is received by such Party, such Party [***], and (B) such Party [***], in which case the obligations of the other Party (and its Related Parties) that was subject to such claim or action shall be reinstated.
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ii.
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The [***] for any claims or causes of action that a Party or its Related Parties covered by [***] in Section 9(e)(i) above shall be, and hereby are, [***]. After the end of [***], the Parties or their Related Parties shall have such [***], as is available as of the Effective Date, under all applicable [***]. Each Party agrees that the [***] o f this Agreement shall be excluded from the [***]. The Parties and their Related Parties expressly reserve the right to seek and collect damages, including but not limited to royalties, for patent infringement by the other Party or its Related Parties arising [***], to the fullest extent permitted under law, subject to the [***], rights, licenses and releases granted under this Agreement.
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iii.
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The right and obligations of the parties under this Section 9 are personal and may not be assigned or transferred to any third party. Nothing in this provision shall constitute or be deemed to constitute the grant of any express or implied rights of any kind under any intellectual property or proprietary right. Nothing in this provision shall prevent either Party or its Related Parties from seeking [***].
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a.
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Except for the [***] as provided in the last sentence of Section 9(e)(i), Samsung and its Affiliates shall not directly or indirectly institute or participate as an adverse party, or procure or voluntarily assist any other party to directly or indirectly institute or participate as an adverse party, in any action (legal, administrative, regulatory or otherwise), prior to the expiration of the 3G Term (except with respect to subsection (a)(i) below, which shall extend for the life of the relevant patents), anywhere in the world that (a) [***] (i) [***], or (ii) [***], (b) [***]; (c) [***]; or (d) [***]. The foregoing obligations shall not [***] or its Affiliates.
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b.
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Except for the [***] as provided in the last sentence of Section 9(e)(i), InterDigital and its Affiliates shall not directly or indirectly institute or participate as an adverse party, or procure or voluntarily assist any other party to directly or indirectly institute or participate as an adverse party, in any action (legal, administrative, regulatory or otherwise), prior to the expiration of the 3G Term (except with respect to subsection (a)(i) below, which shall extend for the life of the relevant patents), anywhere in the world that (a) [***], (b) [***]; (c) [***]; or (d) [***]. The foregoing obligations shall not [***] or its Affiliates.
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c.
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Notwithstanding anything in this Section 10, in the event that a Party or its Related Parties takes any action against the other Party or its Related Parties in violation of Section 9(e) or this Section 10, the obligation of the such other Party and its Related Parties under this Section 10 shall unconditionally terminate and have no further force or effect, subject to the same cure and withdrawal rights relating to the [***] obligations as set forth in Section 9(e).
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11. No Further Rights. Nothi ng in this Agreement shall be construed as:
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a.
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conferring (by implication, estoppel, exhaustion or otherwise) any license, [***] or other right to use the Samsung [***] Patents or the Licensed Patents (including without limitation any [***]) except under the licenses, [***] and rights specifically and expressly granted hereunder, or
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b.
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conferring a right to use or sell any product that is expressly licensed for sale hereunder (or entitled to [***] hereunder) in a manne
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