PATENT LICENSE AGREEMENT ("Agreement") with an Effective
Date of March 10, 1997 between INTERNATIONAL BUSINESS MACHINES CORPORATION,
a New York corporation ("IBM"), and UNIPHASE CORPORATION, a Delaware
Contemporaneously with the execution of this Agreement, the parties
have entered into a Technology License Agreement which includes, in part, a
license under certain technology owned by IBM to manufacture and sell
Royalty-Bearing Products (as defined in such Technology License Agreement).
The exercise of such technology license by LICENSEE may require a license
under the IBM patents listed in Exhibit 1 (the "Licensed Patents").
LICENSEE desires to acquire a nonexclusive license under the Licensed
Patents for such Royalty-Bearing Products.
In consideration of the premises and mutual covenants herein contained, IBM
and LICENSEE agree as follows:
Section 1. Definitions
1.1 "Patented Portion" shall mean that portion of a Product which:
(a)embodies or uses all the elements or steps recited in any one Claim of
one Licensed Patent; or
(b)is manufactured by use of all the steps recited in any one Claim of one
1.2 "Products" shall mean semiconductor laser chips other than Royalty-
Free Products (as defined in the Technology License Agreement).
1.3 "Selling Price" shall mean the actual selling price to unaffiliated
customers, and the greater of actual selling price or fair market value in
sales to affiliated customers; provided that in either case the Selling
Price shall be reduced for discounts, taxes, transportation fees and other
unreimbursed charges paid by LICENSEE or its Subsidiaries in connection
with the sale of Products.
1.4 "Subsidiary" shall mean a corporation, company or other entity:
(a)more than fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or
other managing authority) are, now or hereafter, owned or controlled,
directly or indirectly, by a party hereto, or
(b)which does not have outstanding shares or securities, as may be the case
in a partnership, joint venture or unincorporated association, but
more than fifty percent (50%) of whose ownership interest representing
the right to make the decisions for such corporation, company or other
entity is now or hereafter, owned or controlled, directly or
indirectly, by a party hereto, but such corporation, company or other
entity shall be deemed to be a Subsidiary only so long as such
ownership or control exists.
1.5 "Claim" shall mean an allowed claim under a Licensed Patent that has
not expired or been adjudicated invalid.
Section 2. License
2.1 IBM grants to LICENSEE and its Subsidiaries a nonexclusive license
under the Licensed Patents to make, use, import, offer to sell, sell and
otherwise transfer Products. The license as to any Subsidiary shall
terminate on the date such Subsidiary ceases to be a Subsidiary.
Additionally, subject to Section 2.4, IBM grants to LICENSEE and its
Subsidiaries a nonexclusive license under the Licensed Patents the right to
have LICENSEE's Products made by another manufacturer for the use and/or
lease, sale or other transfer only by LICENSEE and its Subsidiaries. Such
license shall further include the right to incorporate Products as
components, subassemblies or subsystems in other products manufactured
and/or sold by LICENSEE and its Subsidiaries.
2.2 No license is granted pursuant to Section 2.1 with respect to any
particular Product, unless:
(a)a Licensed Patent defines a Patented Portion of said Product;
(b)said Licensed Patent is identified in a report as covering said Product,
if required by Section 4.5; and
(c)either the royalty attributable to said Product is paid as required by
Section 4.2, or a late payment of said royalty is made and accepted by
IBM pursuant to Section 4.4.
2.3 No license, immunity or other right is granted under this Agreement,
either directly or by implication, estoppel, or otherwise:
(a)other than under the Licensed Patents;
(b)with respect to any item other than a Product notwithstanding that such
other item may incorporate one or more Products; or
(c)to parties acquiring any item from LICENSEE or its Subsidiaries for the
combination of such acquired item with any other item, including other
items provided by LICENSEE or its Subsidiaries, or for the use of any
such combination even if such acquired item has no substantial use
other than as part of such combination.
2.4 The license to have Products made granted in Section 2.1 to LICENSEE:
(a) shall only apply when the specifications for LICENSEE's Products were
created by LICENSEE (either solely or jointly with one or more third
(b) shall only be under Claims of Licensed Patents, the infringement of
which would be necessitated by compliance with such specifications;
(c) shall not be under Claims for a method or process unless such method
or process is based upon technology created by LICENSEE (either solely
or jointly with one or more third parties) or otherwise licensed by
IBM to LICENSEE; and
(d) shall not apply to any Products in the form manufactured or marketed
by said other manufacturer prior to LICENSEE furnishing said
Unless LICENSEE informs IBM to the contrary, LICENSEE shall be deemed
to have authorized said other manufacturer to make LICENSEE's Products
under the license granted to LICENSEE in Section 2.1 when the condition
specified in Section 2.4(a) is fulfilled. In response to a written request
identifying a Product and a manufacturer, LICENSEE shall in a timely manner
inform IBM of the quantity of such Product, if any, manufactured by such
manufacturer pursuant to the license granted in Section 2.1.
2.5 LICENSEE shall have the right to exercise any license rights granted
hereunder through any Subsidiary, and any reference in this Section 2 to
LICENSEE shall be deemed to refer to any Subsidiary through which LICENSEE
shall so exercise such license rights.
Section 3. Payment
3.1 LICENSEE, on behalf of itself and its Subsidiaries, shall pay a
royalty for each Product which contains a Patented Portion at a rate
computed at the following percentages of Selling Price of such Product:
Number of Licensed Patents Percentage of
Covering the Product Selling Price
5 or more 5%
For the purposes of this Section 3.1, a Licensed Patent and its
corresponding patents in other countries, listed in Exhibit 1, shall be
deemed to be one Licensed Patent.
Royalties shall only be payable on one occasion for each Product
manufactured and sold by LICENSEE or its Subsidiaries. To the extent a
Product consisting of a semiconductor laser chip, which is subject to
LICENSEE's royalty obligations pursuant to this Section 3.1, is
incorporated as a component, subassembly or subsystem in another product,
the Selling Price shall be determined based on the published list price (or
if no such published list price exists, the fair market value) of such
semiconductor laser chip exclusive of any other portion of the product that
does not contain Patented Portions.
3.2 Subject to Section 3.4, no royalties shall be paid by LICENSEE with
respect to Products which LICENSEE purchases from a third party licensed
under all of the Licensed Patents to sell such Products, and for which
Products a royalty or other consideration was paid to IBM.
3.3 If LICENSEE purchases from a third party portions of a Product and
combines such portions with each other and/or with other portions such that
the combination is itself a Product which includes a Patented Portion not
fully included in any individual purchased portion, then royalty shall be
due for the combination in accordance with this Section 3, whether or not
said third party is authorized by IBM to sell said purchased portions.
3.4 Any semiconductor laser chip that would otherwise be subject to
LICENSEE's royalty obligations pursuant to this Section 3 shall not be
subject to such royalty obligations if such chip is sold by LICENSEE (or
any Subsidiary of LICENSEE authorized to exercise LICENSEE's license rights
hereunder pursuant to Section 2.5 hereof) to a customer that is licensed by
IBM at the time of such sale as to the Patented Portion that would
otherwise give rise to such royalty obligation; provided such customer
notifies LICENSEE, in writing at or prior to the time of such sale, that it
is exercising its own "have made" rights as to such Patented Portion, and
LICENSEE notifies IBM, of its intention to excercise such exclusion from
its royalty obligation in the royalty report for such reporting period.
Section 4. Accruals, Records, Reports and Other Information
4.1 Royalties shall accrue when a Product, with respect to which royalty
payments are required by this Agreement, is first sold or otherwise
transferred (including, sold or otherwise transferred to IBM or any of its
Subsidiaries), or first used in each country of use, by or for LICENSEE or
any of its Subsidiaries.
4.2 LICENSEE's accounting period shall be semiannual and end on the last
day of each June and December during the term of this Agreement. Within
sixty (60) days after the end of each such period, LICENSEE shall furnish
to IBM a written report containing the information specified in Section 4.5
and shall pay to IBM all unpaid royalties accrued hereunder through the end
of each such period.
4.3 LICENSEE shall pay all royalties and other payments due hereunder in
US dollars. All royalties for an accounting period computed in other
currencies shall be converted into US dollars at the exchange rate for bank
transfers from such currency to US dollars as quoted by the head office of
Citibank N.A., New York, USA, at the close of banking on the last day of
such accounting period (or the first business day thereafter if such last
day is a non-business day).
4.4 IBM may accept a late payment provided such payment includes all
overdue royalties or other payment plus interest. The interest on any
overdue royalty or other payment shall be calculated commencing on the date
such royalty or other payment became due, using an annual rate which is the
greater of ten percent (10%) or one percentage point higher than the prime
interest rate as quoted by the head office of Citibank N.A., New York, USA
at the close of banking on such date, or on the first business day
thereafter if such date falls on a non-business day. If such interest rate
exceeds the maximum legal rate in the jurisdiction where a claim therefor
is being asserted, the interest rate shall be reduced to such maximum legal
4.5 LICENSEE's written report shall be certified by an officer of LICENSEE
and shall contain the following information:
(a)a description of each type of Product, the quantity sold or otherwise
transferred during the accounting period, and the sum of the Selling
Prices for such quantity;
(b)identification of each Licensed Patent covering each such Product.
However, if LICENSEE pays royalties for the use of five (5) or more
Licensed Patents, LICENSEE shall have no obligation to identify the
Licensed Patents for that Product;
(c)the amount of royalties due for each type of Product; and
(d)the aggregate amount of all royalties due.
In the event that any of Sections 4.5(a) through 4.5(d) does not apply to
an accounting period, LICENSEE shall so indicate. In the event no
royalties are due, LICENSEE's report shall so state.
4.6 For the purpose of determining obligations under IBM patents, LICENSEE
shall, within thirty (30) days of a written request by IBM:
(a)provide to or make available for inspection by IBM or its designee any
Product or a copy of any materials relevant to any Product identified
(b)sell, license or otherwise transfer and deliver to IBM any Product at
any time offered for sale or transferred by LICENSEE; and
(c)provide to IBM or its designee access to those manufacturing processes
used by LICENSEE in the manufacture of Products.
4.7 LICENSEE shall keep records in accordance with generally accepted
accounting principles and in sufficient detail to permit the determination
of royalties due to IBM. Such records shall include, but not be limited to,
detailed records supporting the information provided under Section 4.5.
Such records shall be kept for six (6) years following the submission of
the related report.
Upon written notice for an audit, LICENSEE shall permit auditors designated
by IBM, together with such legal and technical support as IBM deems
necessary, to examine, during ordinary business hours, records, materials,
and manufacturing processes of LICENSEE for the purpose of verifying
compliance with this Agreement.
Each party shall pay the costs that it incurs in the course of the audit.
However, in the event that the audit establishes underpayment greater than
five percent (5%) of the royalties due, LICENSEE shall reimburse IBM for
the cost of the audit; provided, however, such reimbursement shall not
exceed the amount of the underpayment.
4.8 IBM agrees that any statements or audit results furnished or otherwise
made available to or obtained by IBM pursuant to this Section 4.0 shall be
subject to equivalent confidentiality restrictions set forth in Section 3
of the Technology License Agreement and shall not be disclosed by IBM for a
period of three (3) years from the date of disclosure.
Section 5. Term; Termination
5.1 The license granted herein shall remain in effect for a period of five
(5) years from the Effective Date, unless earlier terminated under the
provisions of this Agreement.
5.2 LICENSEE may terminate the license granted herein, in whole or as to
any specified Licensed Patent by giving notice in writing to IBM; provided,
however, that termination of the license as to any specified Licensed
Patent shall include termination of the license as to all corresponding
Licensed Patents in other countries. Any such termination shall be
5.3 IBM shall have the right to terminate this Agreement, or the license
granted hereunder, if LICENSEE is more than fifty-thousand dollars
($50,000) in arrears in its payment obligations or if LICENSEE fails, at
any time to:
(a)maintain records which substantially meets the requirements of Section
(b)make a report which substantially meets the requirements of Section 4.5;
(c)permit an audit pursuant to Section 4.7; and
if LICENSEE does not cure such breach within sixty (60) days after mailing
of written notice from IBM to LICENSEE specifying the nature of such
breach; unless such breach is the subject of a good faith dispute between
IBM and LICENSEE. IBM's termination of this Agreement or of the license
shall be effective upon written notice.
5.4 No termination of this Agreement or the license granted hereunder
shall relieve LICENSEE of any obligation or liability accrued hereunder
prior to such termination.
Section 6. Option Granted
6.1 LICENSEE grants to IBM, the right to obtain a license to make, use,
import, offer to sell, sell and otherwise transfer any information handling
system product. Said license shall be on terms, including royalty rates,
no less favorable than those granted to LICENSEE herein or in any amendment
hereto. Said right shall bewith respect to any patent under which LICENSEE
or any of its Subsidiaries has the right to grant licenses to unaffiliated
third parties at any time on or before the Effective Date and shall be
limited to a number equivalent to the number of Licensed Patents licensed
Section 7. Means of Payment and Communication
7.1 Payment shall be made by electronic funds transfer. Payments shall be
deemed to be made on the date credited to the following account:
IBM, Director of Licensing
The Bank of New York
48 Wall Street
New York, New York 10286
United States of America
Credit Account No.890-0209-674
ABA No. 0210-0001-8
7.2 Notices and other communications shall be sent by facsimile or by
registered or certified mail to the following address and shall be
effective upon mailing:
For IBM: For LICENSEE:
Director of Licensing Director, Intellectual Property
IBM Corporation Uniphase Corporation
500 Columbus Avenue 163 Baypointe Parkway
Thornwood, New York 10594 San Jose, CA 95134
Facsimile: (914) 742-6737 (408) 954-0540
Section 8. Miscellaneous
8.1 LICENSEE shall not assign this Agreement, assign or sublicense any
rights under it, nor delegate any of its obligations. Any attempt to do so
shall be void.
8.2 Both parties agree not to use or refer to this Agreement or any of its
provisions in any promotional activity.
8.3 IBM shall not have any obligation hereunder to institute any action or
suit against third parties for infringement of any Licensed Patents or to
defend any action or suit brought by a third party which challenges or
concerns the validity of Licensed Patents. LICENSEE shall not have any
right to institute any action or suit against third parties for
infringement of any Licensed Patents.
8.4 IBM represents and warrants that it has the full right and power to
grant the license set forth in Section 2. IBM MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, NOR SHALL IBM HAVE ANY LIABILITY, IN
RESPECT OF ANY INFRINGEMENT OF PATENTS OR OTHER RIGHTS OF THIRD PARTIES DUE
TO LICENSEE'S OPERATION UNDER THE LICENSE HEREIN GRANTED.
8.5 This Agreement shall not be binding upon the parties until it has been
signed hereinbelow by or on behalf of each party. No amendment or
modification hereof shall be valid or binding upon the parties unless made
in writing and signed as aforesaid.
8.6 If any section of this Agreement is found by competent authority to be
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such section in every other
respect and the remainder of this Agreement shall continue in effect so
long as the Agreement still expresses the intent of the parties. However,
if the intent of the parties cannot be preserved, this Agreement shall be
either renegotiated or terminated.
8.7 This Agreement shall be construed, and the legal relations between the
parties hereto shall be determined, in accordance with the law of the State
of New York, USA, as such law applies to contracts signed and fully
performed in such State.
8.8 The headings of sections are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
This Agreement, including its Exhibit, and the Technology License Agreement
of even date herewith, embody the entire understanding of the parties with
respect to the Licensed Patents, and replaces any prior oral or written
communications between them.
Agreed to: Agreed to:
UNIPHASE CORPORATION INTERNATIONAL BUSINESSMACHINES
By: \s\ Danny E. Pettit By: \s\ Suzanne C. Lewis
Name: Danny E. Pettit Name: Suzanne C. Lewis
Title: Vice President, Finance Title: Business Development
and CFO Consultant
"Licensed Patents" shall mean the following patents, patents issuing from
the following applications, and all patents which are reissues, divisions,
continuations, or extensions of any of the following patents:
Patent/Application Issue or File