TECHNOLOGY APPLICATION AGREEMENT
THIS TECHNOLOGY APPLICATION AGREEMENT ('Agreement') is made the 29th day
of November, 1988, by and between MACROVISION CORPORATION, a California
Corporation ('Macrovision'), having its principal place of business at 10201
Torre Avenue, Suite 330, Cupertino, California 95014, and VICTOR COMPANY OF
JAPAN, LIMITED, ('Rights Owner'), having its principal place of business at
8-14, Nihonbashi-Honcho 4-Chome, Chuo-ku, Tokyo 103, Japan.
A. Macrovision has all right, title and interest in and to certain patent
applications and inventions relating to a certain video signal protection
process which is defined as the 'Macrovision Anticopy Process' in Section 1.1
B. Rights Owner has the exclusive right to manufacture and sell
prerecorded video cassettes of certain motion pictures and/or certain other
videographic materials which are defined as the 'Pictures' in Section 1.3
C. The parties desire to enter into this Agreement for the application of
the Macrovision Anticopy Process to prerecorded video cassettes of the
Pictures manufactured and distributed within the Territory (as defined in
Section 1.5 hereof).
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
convenants hereinafter set forth, the parties agree as follows:
For purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.1 'Macrovision Anticopy Process' shall mean the process of modifying a
video signal by the addition of a plurality of bipolar pulse pairs during
selected lines of the vertical blanking interval, which process has been
granted United States Patent Number 4,631,603 and is the subject of Japan
Patent Application Number 86-087236 filed April 17, 1986.
1.2 'Processor' shall mean the equipment including and containing the
electrical circuitry required to apply the Macrovision Anticopy Process to
1.3 'Pictures' shall mean motion pictures and other videographic materials
with respect to which Rights Owner holds the rights to manufacture and sell
prerecorded video cassettes and/or video discs within the Territory.
1.4 'Cassettes' shall mean prerecorded video cassettes of the Pictures.
1.5 'Territory' shall mean the Country of Japan
1.6 'Subsidiary' shall mean Victor Musical Industries, Inc., and/or any
other company or companies which 'Rights Owner'
owns outright or which owns more than 50% of the shares or other equity
representing a right to elect or designate directors.
2. APPLICATION OF MACROVISION ANTICOPY PROCESS
Subject to the terms and conditions of this Agreement, Macrovision
hereby agrees to cause the Macrovision Anticopy Process to be applied (on a
non-exclusive basis) within the Territory to Cassettes to be manufactured and
sold by Rights Owner within the Territory. Rights Owner agrees to have the
Macrovision Anticopy Process applied at its discretion to the prerecorded VHS
and Beta video cassettes Rights Owner manufactures and distributes (or causes
to be manufactured and distributed) within the Territory during the term of
this Agreement. Application of the Macrovision Anticopy Process to the
Cassettes shall be effected by one or more third party duplicators selected
by Rights Owner to manufacture the Cassettes, provided that any such
duplicator must have executed a Duplicator Agreement with Macrovision in form
and substance satisfactory to Macrovision. Rights Owner shall not have any
right to grant to anyone any rights in or to the Macrovision Anticopy
Process. In the event that any legal action relating to the Macrovision
Anticopy Process is brought against Macrovision or any threat thereof is
made, Macrovision shall have the right to discontinue the application of the
Macrovision Anticopy Process to Cassetts hereunder until such action or
threatened action is resolved to Macrovision's reasonable satisfaction.
3. MACROVISION ANTICOPY PROCESS APPLICATION FEE AND PAYMENT TERMS
3.1 Rights Owner shall pay to Macrovision an amount of Twenty cents ($.20)
per Cassette for the application of the Macrovision Anticopy Process. Such
amount will be due and payable in legal United States currency. Rights Owner
agrees to remit payment to Macrovision's principal place of business or its'
designated U.S. banking agent within 30 days of the end of each calendar
month. Any amount which is not timely paid, shall be increased by a late
charge imposed at the rate of 18% per annum, from the due date of such
payment until the date of actual payment. The Rights Owner shall provide
Macrovision with an executed copy of Relief from Japanese Income Tax on
Royalties as evidence that Macrovision Corporation has fulfilled its 10% tax
obligation to the Government of Japan.
3.2 In case Macrovision shall enter into an agreement with any third party
or adjust the rate of Macrovision Anticopy Process Application Fee in an
existing agreement in any way which will authorize such party to have the
Macrovision Anticopy Process applied to the prerecorded VHS and Beta video
cassettes under the same scope of the authorization as permitted herein at
rates of Macrovision Anticopy Process Application Fee lower than those
provided for in Article 3 hereof. Macrovision will
promptly notify Rights Owner in writing of the permittance of such
authorization or the adjustment of such rate of Macrovision Anticopy Process
Fee and Rights Owner shall have the option, at any time within sixty (60)
days after such notification, to enter into such a similar agreement with
Macrovision, and to substitute the same in place of this Agreement.
4. PROTECTION NOTICE
Rights Owner may place or cause to be placed in a prominent position on
each Cassette, or on the packaging for each Cassette, to which the
Macrovision Anticopy Process is applied a notice in form and substance agreed
to by Macrovision stating that the Cassette is protected by an anticopying
process and including a trademark or tradename applicable to such process.
Rights Owner shall place or cause to be placed the patent number(s) for the
Macrovision Anticopy Process on each Cassette, or on the packaging for each
Cassette, to which the Macrovision Anticopy Process is applied.
5. QUALITY CONTROL
Macrovision shall advise each third party duplicator to employ
reasonable manufacturing and quality standards with respect to the
application of the Macrovision Anticopy Process to the Cassettes. Rights
Owner shall authorize the duplicator to perform regular quality control
checks of Cassettes to determine the adequacy of the recorded signal and the
playability of the Cassettes. In addition, as and when reasonably requested
by Macrovision, Rights Owner shall furnish to Macrovision random samples of
the Cassettes being manufactured and sold by Rights Owner at any given time.
6. WARRANTY AND DISCLAIMER OF WARRANTIES AND LIABILITY
6.1 (A) Cassettes to which the Macrovision Anticopy Process is applied
will not produce any significant distortion resulting from the application of
the Macrovision Anticopy Process when played on substantially all
combinations of makes and models of video cassette recorders and television
(B) Macrovision will, at its expense, replace any defective
cassette in which the defect is shown to have been caused by the Macrovision
Anticopy Process and is not the result of faulty manufacture or an effect
caused by improperly maintained consumer VCR/TV equipment.
(C) A duplicated copy made from a Cassette to which the Macrovision
Anticopy Process has been applied will cause significant distortion when the
copy is played on most combinations of consumer video cassette recorders and
consumer television sets. However, there may be certain combinations of
consumer video cassette recorders (on which the Cassette to which the
Macrovision Anticopy Process has been applied is played, on which the copy
is recorded, and on which the copy is played) and consumer television sets
with respect to which the copy will not cause significant distortion when
Additionally, Rights Owner understands that technological changes in video
cassette recorders or television sets could adversely affect the
effectiveness of the Macrovision Anticopy Process.
(D) Macrovision shall not be responsible for correcting
playability problems or any Cassettes unless Rights Owner notifies Macrovision
in writing of such playability problems not later than ten (10) days after
Rights Owner is first informed of the possibility of a playability problem
for such Cassette.
(E) Macrovision indemnifies the Rights Owner against all liability
arising from any and all patent infringement claims made against Rights Owner
resulting from the use of the Macrovision Anticopy Process which was applied
during the term of this Agreement.
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHERS, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OR MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
6.2 Except as expressly provided in this Section 6, Macrovision shall
not be liable for damages arising out of or resulting from the application of
the Macrovision Anticopy Process to Cassettes, nor shall it be liable to
Rights Owner for consequential damages under any circumstances. Rights Owner
agrees to assume all financial obligations for Cassettes manufactured and
sold by it and to indemnify and hold
Macrovision harmless from and against any and all liabilities, costs, damages
(including reasonable attorneys' fees and litigation costs, regardless of
outcome) arising out of or relating to the manufacture, sale and use of
Cassettes to which the Macrovision Anticopy Process is applied.
6.3 Rights Owner agrees to give Macrovision prompt notice of every
complaint, claim or lawsuit concerning Cassettes to which the Macrovision
Anticopy Process is applied, and thereafter to keep Macrovision fully
informed of the status thereof. Rights Owner agrees to keep a record of all
complaints received with respect to Cassettes to which the Macrovision
Anticopy Process is applied and to give Macrovision reasonable access to all
7. TERM AND TERMINATION
7.1 The Term of this Agreement commenced on NOVEMBER 29, 1988 and,
subject to earlier termination as provided in this Section 7, this Agreement
shall continue in full force and effect for a period of one (1) year from
such date, and automatically renewed for one year unless there is a
three-month prior notice in writing from either party for the termination or
revision to the other.
7.2 In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement,
the other party shall have the right to give written notice to the defaulting
party advising such party of
the specific default involved and if within ten (10) days after such notice
(or, if the default cannot reasonably be remedied within ten (10) days,
within thirty (30) days after such notice), the defaulting party shall not
have remedied such default, the other party shall have the right, in addition
to any other rights and remedies it may have, to terminate this Agreement
immediately upon written notice to the defaulting party.
7.3 Upon any termination of this Agreement:
(a) All rights granted to Rights Owner under this Agreement
immediately shall revert to, and vest in, Macrovision and absolutely no
interest whatsoever in any of such rights shall thereafter remain in Rights
Owner or any of its successors; and
(b) The Macrovision Anticopy Process shall not be applied to any
Cassettes after such termination. (However, Rights Owner shall have the right
to sell any units of the Cassettes to which the Macrovision Anticopy Process
is applied prior to termination of this Agreement and which are unsold at the
time of such termination.)
7.4 No termination of this Agreement shall in any manner whatsoever
release, or be construed as releasing, Rights Owner from its obligations to
make payments for application of the Macrovision Anticopy Process to
Cassettes prior to such termination, or either party from any liability to
the other arising out of or in connection with a party's breach of, or
failure to perform, any covenant, agreement, duty or obligation contained
8. MAINTENANCE AND INSPECTION OF BOOKS AND RECORDS
8.1 Rights Owner shall maintain books and records reflecting the number
of Cassettes to which the Macrovision Anticopy Process is applied, the
amounts paid and payable under this Agreement with respect to the Cassettes,
and such other information as Macrovision may from time-to-time reasonably
request with respect to the use of the Macrovision Anticopy Process.
8.2 During normal business hours, Rights Owner shall make available to
Macrovision for inspection, review, audit and copying any and all of its
books and records which contain entries pertaining to the use of the
Macrovision Anticopy Process, including such information as is required to be
maintained pursuant to Section 8.1 hereof.
8.3 If requested by Macrovision, Rights Owner shall require any third
party duplicator to maintain books and records reflecting the number of
Cassettes to which the Macrovision Anticopy Process is applied and such other
information as Macrovision may from time-to-time reasonably request with
respect to the use of the Macrovision Anticopy Process. Rights Owner shall
authorize and direct duplicator to furnish to Macrovision monthly reports
setting forth the number of Cassettes manufactured with respect to each
Owner agrees to authorize and direct each duplicator to permit Macrovision to
inspect, review, audit, and copy any and all of the duplicator's books and
records which contain entries pertaining to the use of the Macrovision
Anticopy Process, on reasonable prior notice during normal business hours.
8.4 Macrovision shall use all reasonable efforts to hold confidential
all information obtained pursuant to this Section 8 and to confine knowledge
and use of such information to the employees, consultants and agents of
Macrovision who require knowledge and use thereof in the ordinary course and
scope of their employment by Macrovision, except to the extent that broader
disclosure of such information is necessary to the exercise and/or protection
of any right or interest of Macrovision under this Agreement.
Any Subsidiary shall be deemed to be a party hereof on condition
that Rights Owner is held responsible for the performance by respective
Subsidiary of each and every provision of this Agreement, mutatis mutandis.'
10. MISCELLANEOUS PROVISIONS
10.1 GOVERNING LAW This Agreement shall be governed by and interpreted
in accordance with the laws of the United States and particularly the State
of California, without regard to
California's or any other jurisdiction's choice of law principles.
10.2 ARBITRATION Any controversy or claim arising out of or relating to
this Agreement or the breach thereof should be settled by mutual agreement of
the parties. If such mutual agreement should not be reached within a
reasonable period of time, all disputes arising from or in connection with
this Agreement shall be finally settled under the Commercial Arbitration
Rules of the American Arbitration Association by three arbitrators appointed
in accordance with the said rules. The place of arbitration shall be New
York, New York, U.S.A.
10.3 RIGHTS CUMULATIVE Each and all of the various rights, powers and
remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of breach of any of the terms of this
Agreement. The exercise or partial exercise of any right, power or remedy
shall neither constitute the exclusive election thereof nor the waiver of any
other right, power or remedy available to such party.
10.4 NOTICES All notices, consents or demands of any kind which either
party to this Agreement may be required or may desire to serve on the other
party in connection with this Agreement shall be in writing and may be
delivered by personal service or by registered or certified mail, return
receipt requested, deposited in the United States mail with postage thereon
fully prepaid, addressed to the party as follows:
If to Macrovision:
10201 Torre Ave., Suite 330
Cupertino, California 95014
Attention: Chief Operating Officer
cc: David W. Herbst, Esq.
Holtzmann, Wise & Shepard
600 Hansen Way, Suite 200
Palo Alto, California
If to Rights Owner:
Victor Company of Japan, Ltd.
8-14, Nihonbashi-Honcho 4-Chome
Chuo-Ku, Tokyo 103, Japan
Attention: Mr. Hideo Suzuki, General Manager
Service of any such notice or demand so made by mail shall be deemed
complete on the date of actual delivery as shown by the addressee's registry
or certification receipt or at the expiration of the third (3rd) business day
after the date of mailing, whichever is earlier in time. Either party hereto
may from time-to-time, by notice in writing served upon the other as
aforesaid, designate a different mailing address or a different person to
which such notices or demands are thereafter to be addressed or delivered.
If any of the provisions of this Agreement are held to be void or
unenforceable, the parties agree that such determination shall not result in
the nullity or unenforceability of the remaining portions of this Agreement.
The parties further agree to replace such void or unenforceable provisions of
this Agreement with valid and enforceable provisions which will achieve, to
the extent possible, the economic, business and other purposes of the void or
This Agreement may be executed in separate counterparts, each of
which shall be deemed as an original, and
when executed, separately or together, shall constitute a single original
instrument, effective in the same manner as if the parties had executed one
and the same instrument.
No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be
deemed to be, or be construed as, a further or continuing waiver of any such
term, provision or condition or as a waiver of any other term, provision or
condition of this Agreement.
10.8 ENTIRE AGREEMENT
This agreement, and any terms and conditions agreed to pursuant to
this agreement, is intended by parties to be the final expression of their
agreement and constitutes and embodies the entire agreement and understanding
between the parties hereto and constitutes a complete and exclusive statement
of the terms and conditions thereof, and shall supersede any and all prior
correspondence, conversations, negotiations, agreements or understanding
relating to the same subject matter.
No change in, modification of or addition to the terms and
conditions contained herein shall be valid as between the parties unless set
forth in a writing which is signed by authorized representatives of both the
parties and which specifically states that it constitutes an amendment to
Rights Owner shall not assign its rights or obligations under this
Agreement to any other person without the prior written approval of
Macrovision, and any such attempt at assignment without such prior written
approval shall be void.
10.11 BINDING ON SUCCESSORS AND ASSIGNS
Subject to the restrictions of Section 9.9, this Agreement and all
of its terms, conditions and covenants are intended to be fully effective and
binding, to the extent
permitted by law, on the successors and permitted assigns of the parties
Captions are provided herein for convenience only and they form no
part of this Agreement and are not to serve as a basis for interpretation of
construction of this Agreement, nor as evidence of the intention of the
10.13 DISCLAIMER OF AGENCY
Nothing contained in this Agreement is intended or shall be
construed so as to constitute Macrovision and Rights Owner as partners or
joint ventures or as agents of each other. Neither party shall have any
express or implied right or authority to assume or create any obligations on
behalf or or in the name of the other party or to bind the other party in any
contract, agreement or undertaking with any third party.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the day and year first above written.
By /s/ Eugene Eidenberg Date 12/8/88
Eugene Eidenberg, President
VICTOR COMPANY OF JAPAN, LIMITED
By /s/ Kunio Kakigi Date DEC. 27, 1988