EXECUTION VERSION
`
`UNIVERSITY ofPENNSYL VANIA
`
`PATENT LICENSE AGREEMENT
`
`This Patent License Agreement (this "Agreemenf') is between The Trustees of the
`University of Pennsylvania, a Pennsylvania nonprofit corporation ("Penn"), and Aegerion
`Pharmaceuticals, Inc, a Delaware corporation ("Company"). This Agreement is effective on
`May J..S_, 2006 (the "Effictive Date").
`
`BACKGROUND
`
`In 2003, Penn and Bristol-Myers Squibb Company ("EMS') entered into that certain
`Technology Donation Agreement (the "Original TDA") concerning a compound designated
`"BMS-201,038", whereby among other things BMS donated to Penn one patent claim that
`covered BMS-201,038, granted to Penn certain rights in and to related BMS know-how, and
`transferred to Penn quantities ofBMS-201,038 in the form of bulk drug substance (that
`substance as supplied to Penn by BMS, the "Penn Materials").
`
`Simultaneously with the execution of this Agreement, Penn and BMS are amending and
`restating the Original TDA, a complete copy of which as amended and restated is attached hereto
`as Exhibit A (the "TDA"). Under the TDA, among other things and in addition to the rights
`granted to Penn under the Original TDA, BMS is assigning certain additional patent rights to
`Penn related to BMS-201,038, and Penn is granting back to BMS rights in and to those patent
`rights pursuant to the "Grant-back Licenses" as defined in the TDA.
`
`Prior to the execution of this Agreement, Penn and Company have entered into one
`Clinical Trial Research Agreement, and soon after the execution of this Agreement, Penn and
`Company intend to enter into a second Clinical Trial Research Agreement (such two agreements,
`collectively, the "Clinical Research Agreements").
`
`Company desires to obtain an exclusiv~ license under those patent rights and other Penn
`patent rights and to use the Penn Materials.' Penn has determined that the exploitation of those
`rights and the use of the Penn Materials is in the best interest ofPenn and is consistent with its
`educational .and research missions and goals.
`
`In consideration of !lie mutual obligations contained in this Agreement, and intending to
`be legaHy bound, the parties agree as follows:
`
`1. LICENSE
`
`1.1
`License Grant. Penn hereby grants to Company an exclusive (even as to Penn but
`subject to Sections 1.3 and 1.4), world-wide license (the "License") to research, develop,
`commercialize, make, have made, use, import, offer for sale and sell (a) under the Penn Existing
`Patents and Penn New Patents, Licensed Products and Penn Materials in all fields during the
`Term, and (b) under the Assigned BMS Patents and Assigned BMS Technical Information, the
`Designated Compounds and Penn Materials in the Field of Use during the Term (as such terms
`may be defined in Sections 1.2 and 6.1 ). The License includes the right to sublicense as
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`PATENT LICENSE AGREEMENT
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`permitted by tl:lls Agreement. Except as expressly provided herein, no other rights or licenses are
`granted hereunder by Penn. Any intellectual property created or conceived during the
`performance of the Clinical Research Agreements or any Sponsored Research Agreement
`between Penn and Company (collectively, the "Other Agreements") will be governed by the
`terms of the applicable Other Agreement. For clarity, to the extent that any Penn Patent Rights is
`jointly owned with Company (optionally along with one or more tlllrd parties), the License shall
`apply to all of Penn's right, title and interest in and to the same notwithstanding Company's joint
`ownership interest therein.
`
`1.2
`
`Related Definitions.
`
`"Affiliate" means a legal entity that is controlling, controlled by or under
`(i)
`common control with Company and that has executed either a counterpart to this Agreement or a
`written joinder agreement agreeing to be bound by all of the terms and conditions of this
`Agreement. For purposes of this Section 1.2(i), the word "contror' means (x) the direct or
`indirect ownership of more than fifty percent (50%) of the outstanding voting securities of a
`legal entity, (y) the right to receive fifty percent (50%) or more of the profits or earnings of a
`legal entity, or (z) the right to determine the policy decisions of a legal entity.
`
`"Assigned BMS Patents" means both (1) (a) the patents and patent
`(ii)
`applications listed on Exhibit B-1, (b) all direct and indirect divisionals and continuations of any
`such patent applications, and (c) all patents issuing on any such patent applications, together with
`all reissues, re examinations, renewals, supplemental protection certificates and extensions of
`any of the foregoing in this clause (a) (collectively, the "Composition Patents"), and (2) the
`patent listed on Exhibit B-2, together with all reissues, reexaminations, renewals, supplemental
`protection certificates and extensions of any of the foregoing in tllls clause (b) (collectively,
`the "Combination Patents").
`
`"Assigned BMS Technical Information" means all technology, know-how,
`(iii)
`information, results, data and regulatory filings and other correspondences donated to Penn by
`BMS pursuant to the TDA, but not including the Assigned BMS Patents.
`
`"Designated Compound'' means: (a) BMS-201,038; (b) prodrugs or
`(iv)
`metabolites ofBMS-201,038, to the extent any such prodrug or metabolite is covered by a
`composition claim in a Composition Patent; and (c) stereoisomers, hydrates, anhydrides,
`solvates, salt forms, or polymorphs ofBMS-201,038 or any compounds covered by the foregoing
`clause (b) or this clause (c); furthermore, in the case of a pro drug or metabolite as referred to
`under clause (b) above, the compound in question will constitute a "Designated Compound"
`hereunder only if the making, use or sale of such compound is necessary for or results from the
`making, use and sale ofBMS-210,038 within the Field ofUse.
`
`"Field of Use" means: (a) monotherapy or in combination with other
`(v)
`dyslipidemic therapies for treatment of patients with homozygous familial hypercholesterolemia;
`(b) monotherapy or in combination with other dyslipidemic therapies for treatment of patients
`with severe hypercholesterolemia of any etiology unable to come witllln 15% ofNCEP LDL
`cholesterol goal on maximal tolerated oral therapy, as determined by the patient's prescribing
`physician; (c) monotherapy or in combination with other dyslipidemic therapies for treatment of
`
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`patients with severe combined hyperlipidemia of any etiology unable to come within 15% of
`NCEP non-HDL cholesterol goal on maximal tolerated oral therapy, as determined by the
`patient's prescribing physician; and (d) monotherapy or in combination with other dyslipidernic
`therapies for treatment of patients with severe hypertriglyceridemia unable to reduce TG<l 000
`on maximal tolerated therapy.
`
`"Licensed Products" means: (a) Designated Compounds, and (b) products
`(vi)
`that are made, made for, used or sold by Company or its Affiliates or sublicensees and that
`(i) would infringe at least one Valid Claim of Penn Existing Patents or Penn New Patents in the
`absence of the License, or (ii) use a method covered by at least one Valid Claim of Penn Existing
`Patents or Penn New Patents (provided that the proviso contained in clause (b) of the definition
`of Valid Claim shall not apply to the two foregoing uses of such term). For the avoidance of
`doubt, "Licensed Products" include the combination of any of the Licensed Products identified
`in clauses (a) and (b) with other component(s) which is active alone or in a combination.
`
`"Penn Existing Patents" means: all patent rights contained in Perm
`(vii)
`Dockets Q3474 and/or otherwise related to BMS-201,038 and represented by: (a) the patents and
`patent applications listed on Exhibit B-3; (b) all divisionals, continuations, continuations-in-part
`(but excluding new matter) thereof or any other patent application claiming priority directly or
`indirectly to any of the patents or patent applications from clause (a); and (c) all patents issuing
`on any of the foregoing, and any foreign counterparts thereof, together with all reissues, re(cid:173)
`examinations, renewals, supplemental protection certificates and extensions of any of the
`foregoing, and any foreign counterparts thereof.
`
`(viii) "Penn New Patents" means: (a) the patents and patent applications (if any)
`added to this Agreement in accordance with the terms of any Other Agreements; (b) all patents
`and patent applications disclosing or claiming any Improvements that become subject to this
`Agreement pursuant to Section 1.8; (c) all divisionals, continuations, continuations-in-part (but
`excluding new matter) thereof or any other patent application claiming priority directly or
`indirectly to any of the patents or patent applications from clause (a) or (b); and (d) all patents
`issuing on any of the foregoing, and any foreign counterparts thereof, together with all reissues,
`re-examinations, renewals, supplemental protection certificates and extensions of any of the
`foregoing, and any foreign counterparts thereof.
`
`"Penn Patent Rights" means the Assigned BMS Patents, Penn Existing
`(ix)
`Patents and Penn New Patents.
`
`"Valid Claim" means a claim of(a) an issued and unexpired patent, which
`(x)
`claim has not been revoked or held invalid or unenforceable by a court or other government
`agency of competent jurisdiction from which no appeal can be or has been taken and has not
`been held or admitted to be invalid or unenforceable through re-examination or disclaimer,
`reissue, opposition procedure, nullity suit or otherwise, or (b) a pending patent application that
`has not been cancelled, withdrawn or abandoned, provided that if a claim of a pending patent
`application shall not have issued within five (5) years (or in Japan, seven (7) years) after the
`earliest filing date from which such claim takes priority, such claim shall not constitute a Valid
`Claim for the purposes of this Agreement unless and until a patent issues with such claim.
`
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`PATENT LICENSE AGREEMENT
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`Reservation of Rights by Penn. Penn reserves the right to use, and to permit other
`1.3
`non-commercial entities to use, the Penn Patent Rights and Assigned BMS Technical
`Information for non-exclusive, non-commercial educational and research purposes (but not when
`sponsored by any commercial entity other than Company).
`
`U.S. Government Rights. The parties acknowledge that the United States
`1.4
`government retains rights in intellectual property funded under any grant or similar contract with
`a Federal agency. The License is expressly subject to all applicable United States government
`rights, including any applicable requirement that products, which result from such intellectual
`property and are sold in the United States, must be substantially manufactured in the United
`States. The parties acknowledge and agree that none of the Assigned BMS Patents or the
`Assigned BMS Technical Information is subject to this Section 1.4.
`
`Affiliates and Sublicensing. Affiliates of Company may obtain rights under this
`1.5
`Agreement as if they were Company (including as a licensee under the License) by agreeing in
`writing to be bound by the terms of this Agreement by executing a counterpart to this Agreement
`or a written joinder agreement. Company's right (and its sublicensee(s)'s right) to sublicense
`granted by Penn under the License is subject to each of the following conditions:
`
`In each sublicense agreement, Company (and each Company sublicensee)
`(i)
`will require the sublicensee to comply with the terms and conditions of this Agreement.
`
`(ii) Within thirty (30) days after Company or its sublicensee enters into a
`sublicense agreement, Company will deliver to Penn a complete and accurate copy of the entire
`sublicense agreement written in the English language. Penn's receipt of the sublicense
`agreement, however, will constitute neither an approval of the sublicense nor a waiver of any
`right of Penn or obligation of Company under this Agreement. All such sublicense agreements
`will be treated as Confidential Information of Company and will be subject to Section 5.2.
`
`(iii) Upon a Trigger Event (as defined in Section 6.5) but subject to
`Section 6.8, all payments due to Company·from its sublicensees under the applicable sublicense
`agreement, but only to the extent such payment would be owed to Penn under the terms hereof,
`will, upon notice from Penn to such sublicensee, become payable directly to Penn for the account
`of Company.
`
`Company's execution of a sublicense agreement will not relieve Company
`(iv)
`of any of its obligations under this Agreement. Company is primarily liable to Penn for any act
`or omission of an Affiliate or sublicensee of Company that would be a breach of this Agreement
`if performed or omitted by Company, and Company will be deemed to be in breach of this
`Agreement as a result of such act or omission.
`
`Updating Penn Patent Rights. At Company's reasonable request during the Term,
`1.6
`Penn will provide Company with an updated Exhibit B, which update shall include without
`limitation any patents or patent applications that have become Penn New Patents. Once both
`parties are satisfied that the updated Exhibit B is accurate and complete, the parties will execute
`an amendment to this Agreement, which will replace the then current Exhibit B with the updated
`Exhibit B.
`
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`PATENT LICENSE AGREEMENT
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`Penn Materials. All right, title and interest Penn has in and to the Penn Materials
`I. 7
`is hereby transferred to Company. Penn will use the Penn Materials only in collaboration with
`Company pursuant to any Other Agreements and will not use any of the Penn Materials for any
`other purpose. Penn will not provide the Penn Materials to any person at Penn, other than any
`individual working in collaboration with Company pursuant to such Other Agreements, or to any
`other person or entity. Penn will hold or will at Company's expense transfer the Penn Materials
`as Company may reasonably direct. Penn acknowledges that, for purposes of this Agreement, all
`Designated Compound in Penn's possession as of the Effective Date will be treated as "Penn
`Materials" hereunder.
`
`1.8
`
`Improvements and New Developments.
`
`Improvements. Penn hereby grants to Company the first option to license
`(i)
`exclusively each Improvement (as defined below) and related patent rights for six (6) months
`after Company has been notified of the existence of each such Improvement. Within sixty ( 60)
`days after Penn's Center for Technology Transfer receives written disclosure of any
`Improvement, Penn will notify Company in writing pf such Improvement, furnishing Company a
`copy of any invention disclosure and any related patent applications on a confidential basis. At
`Company's request, Penn will provide such additional information regarding such Improvement
`as Company may reasonably request. Penn will take reasonable steps, consistent with its
`customary and usual practices, to ensure that any such notification to Company is made
`reasonably before the occurrence of any disclosure or other activity that might impair any
`patentability of such Improvement. By written notice to Penn, within six (6) months after receipt
`of such notice from Penn, Company may exercise the option to license such Improvement and
`related patent rights, whereupon the parties will promptly amend this Agreement to add such
`Improvements to the License as Penn New Patents, without the payment of any incremental
`consideration to Penn, other than reimbursement of patent prosecution and maintenance costs
`under Article 7 and possible extension or expansion of any royalties or sublicense fees under
`Article 3 as a result of any Penn New Patents. Penn shall not grant any license or other rights in
`or to any Improvement or any related patent rights until Penn has complied with this
`Section l.&(i). For purposes of this AgreemeJ?.t, "Improvement'' means (I) any invention or
`further improvement to the Penn Patent Rights that (i) is developed, discovered or reduced to
`practice by, or under the direction of Dr. Rader in the Field of Use during the three (3) year
`perio<;l after the Effective Date, (ii) is dominated by the Penn Patent Rights, (iii) is in Penn's full
`control (e.g., not arising from research funded by third party commercial entities), and (iv) is not
`covered by an Other Agreement, and (2) any invention arising from or otherwise attributable to
`the use of any Penn Materials that is not solely owned by Company under any Other Agreement.
`
`New Developments. Penn hereby grants to Company the fust option to
`(ii)
`negotiate an exclusive license to each New Development (as defmed below) and related patent
`rights. Within sixty (60) days after Penn's Center for Technology Transfer receives written
`disclosure of any New Development, Penn will notify Company in writmg of such New
`Development, furnishing Company a copy of the invention disclosure and any related patent
`applications on a confidential basis. At Company's request, Penn will provide such additional
`information regarding such New Development as Company may reasonably request. Penn will
`take reasonable steps, consistent with its customary and usual practices, to ensure that any such
`notification to Company is made reasonably before the occurrence of any disclosure or other
`
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`activity that might impair the patentability of such New Development. By written notice to
`Penn, Company may exercise the option to negotiate a license to such New Development within
`ninety (90) days after receipt of such notice from Penn, whereupon the parties shall negotiate in
`good faith for up to six (6) months to agree on commercially reasonable terms for such license.
`Any amounts payable to Penn pursuant to any such license shall be subject to Sections 3.7(ii),
`3.7(iii) and 3.7(iv). Penn shall not grant any license or other rights in or to any New
`Development or any related patent rights until Penn has complied with this Section 1.8(ii). For
`purposes of this Agreement, "New Development" means any invention or further improvement to
`the Penn Patent Rights that (i) is developed, discovered or reduced to practice by, or under the
`direction of Dr. Rader in the Field of Use during the three (3) year period after the Effective
`Date, (ii) is not dominated by the Penn Patent Rights, (iii) is in Penn's full control, (iv) is not
`covered by an Other Agreement and (v) is not an Improvement.
`
`For each Improvement or New Development, If Penn does not receive
`(iii)
`written notice from Company of its desire to exercise an option under Sections 1.8(i) or (ii)
`during the applicable option period, or if no amendment or license is thereafter executed as
`provided in such Sections (provided that Penn has complied in full with all its obligations under
`those Sections), then the option will expire automatically and Penn will be free to negotiate and
`enter into a license agreement with a third party and will have no further obligations, finllllcial or
`otherwise, to Company with respect to the applicable Improvement or New Development, as the
`case may be.
`
`Relationship to Other Agreements. This Section 1.8 shall apply to any
`(iv)
`invention, technology, know-how, information, results, data and regulatory filings and other
`correspondences (whether or not ultimately patentable) in which Penn has an ownership interest
`and which do not arise from the performance of or otherwise in connection with any Other
`Agreement.
`
`Joint Ownership. To the extent that any Improvements or New
`(v)
`Developments or any related patent rights are-jointly owned by Penn and Company (optionally
`along with one or more third parties), this. Section 1.8 shall apply to all of Penn's right, title and
`interest in and to the same notwithstanding, Company's joint ownership interest therein.
`
`1.9
`
`Penn and the TDA. During the Term:
`
`Penn will take all reasonable steps necessary to maintain in full force and
`(i)
`effect the TDA. Penn will provide Company with prompt notice (and in any event substantially
`before the end of any applicable cure period under the TDA) of any claim of a material breach of
`the TDA. Penn will provide Company with copies of all notices and other documents Penn
`receives pursuant to the TDA (includin'g all sublicense agreements received by Penn pursuant to
`Article 3.3(d) of the TDA). Absent Company's prior written consent, Penn will not remove
`Company as a noticed party pursuant to Article 15.7 ofthe TDA.
`
`Penn will not amend, restate, alter, waive or otherwise change any of the
`(ii)
`terms and conditions of the TDA in effect as of the Effective Date, nor will Penn enter into any
`other agreement or understanding with BMS or any of its Affiliates (as defined in the TDA) or
`any ofBMS's sublicens'ees under the Grant-back licenses relating to the Designated Compounds
`
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`or the Assigned BMS Patents or the BMS Know-how, that in either case, would have a material
`impact on Company's rights under this Agreement without the prior written consent of
`Company, which consent will not be unreasonably withheld or delayed, provided that Penn will
`in all instances notify Company in writing reasonably in advance of taking any such action
`whether material or not.
`
`Penn will not terminate the TDA without the prior written consent of
`(iii)
`Company, and Penn will provide Company with prompt notice of termination of the TDA.
`
`Penn will not enforce any rights under the TDA without the prior written
`(iv)
`consent of Company, which consent will not be unreasonably withheld or delayed. At
`Company's written request, Penn will timely enforce (a) Article 4 of the TDA as it applies to
`Company and its Affiliates and sublicensees and their assigns, suppliers, vendors and customers,
`and Penn will provide Company with prompt notice of any breach of such Article 4,
`(b) Article 5.1 of the TDA against BMS and the other parties subject thereto, and Penn will
`provide Company with prompt notice of any breach of such Article 5.1, and (c) Penn's rights
`under Article 7 of the TDA, provided that in each such case at Penn's request, Company will
`indemnify Penn from and against any award, fees or expenses incurred by Penn by reason of
`Penn enforcing those rights under the TDA, subject to off-set for any amounts recovered by Penn
`under the TDA as part of such enforcement activities. Each party will cooperate with the other
`in any such enforcement activities by the other party, including Penn agreeing to be a named
`party in any action or other litigation reasonably recommended by Company under the TDA
`concerning such rights following Company's written re-commitment to indemnify Penn in
`accordance with this Agreement.
`
`. Upon written notic~ from Company, Penn will work with Company in
`(v)
`approaching BMS in order to seek a limitation on the field of use in the Grant-back Licenses
`with respect to the Assigned BMS Patents and Assigned BMS Technical Information as part of
`Company negotiating an expansion of the Field of Use under this Agreement.
`
`In addition and without limitation to any other provisions of this
`(vi)
`Agreement, Penn will cooperate with Company (including enforcing the terms of the TDA) to
`allow Company to enjoy the benefits of the other rights of Penn under the TDA not expressly
`addressed in this Section 1.9 to the extent both (a) such action is permitted by the TDA and
`(b) such rights relate to the subject matter ofthis Agreement (including the License, the
`Designated Compounds and the Assigned BMS Patents).
`
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`2. DILIGENCE
`
`2.1 Development Plan. Company will deliver to Penn, within one hundred-eighty
`( 180) days after the Effective Date, a copy of an initial development plan for the Penn Patent
`Rights (the "Development Plan"). Thereafter, Company will deliver to Penn an annual updated
`Development Plan no later than December 1 of each year during the Term. The Development
`Plan will include, at a minimum, the information listed in Exhibit C. The Development Plan will
`be treated as Confidential Information of Company and will be subject to Section 5.2.
`
`2.2
`Companv's Efforts. During the Term, Company will use conunercially
`reasonable efforts to develop, commercialize, market and sell one or more Licensed Products in a
`manner consistent with the Development Plan.
`
`3. FEES AND ROYAL TIES
`
`3.1
`License Initiation Fee. In partial consideration of the License, Company will pay
`to Penn withip. thirty (30) days of the Effective Date a non-refundable, non-creditable license
`initiation fee of $75,000, provided that twenty-five percent (25%) of all cash payments made by
`Company to DSS Partners as such payment will be creditable against such $75,000, except that
`in no event will the payment due to Penn under this Section 3.1 be less than $56,250.
`
`3.2 Milestone Payments. In partial consideration of the License, Company will pay to
`Penn the applicable milestone payment listed in the table below after achievement of each
`milestone event. Company will provide Penn with written notice within forty-five (45) days
`after achieving each milestone. For the first Designated Compound covered by a Valid Claim of
`the Assigned BMS Patents that is licensed to Company under the License:
`
`Where the indication is limited to "homozygous familial
`(i)
`hypercholesterolemia" or "severe refractory hypercholesterolemia":
`I
`
`Filing of U.S. NDA limited to such indication
`Approval ofU.S. NDA limited to. s~ch indication
`
`50,000
`$
`$ 100,000
`
`. . .
`
`(ii) Where the indication is not so limited but falls within the Field of Use:
`
`Initiation ofU.S. Phase III Clinical Trials
`Filing of U.S. NDA
`Approval ofU.S. NDA
`
`$ 300,000
`$ 750,000
`$1,500,000
`
`Each such milestone payment shall be payable by Company only once. In the event that
`any milestone payments are made by the Company under the foregoing clause (ii), then no
`milestone payments shall thereafter be due under the foregoing clause (i). Any milestone
`payments already made by Company under such clause (i) shall be fully creditable against
`milestone payments owed under such clause (ii).
`
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`Earned Rovalties. In partial consideration of the License and subject to
`3.3
`Sections 3.7 and 3.8, Company will pay to Penn:
`
`a graduated royalty as set forth in the table below based upon worldwide
`(i)
`annual Net Sales made by Company and its Affiliates (but not sublicensees) of any Designated
`Compound Sold for use in the Field of Use while covered in the country of Sale of expected use
`by a Valid Claim of the Assigned BMS Patents that is licensed to Company under the License
`(but no other Licensed Product):
`
`Annual Net Sales by Company and its Affiliates
`<$500 million
`>$500 million but <$750 million
`>$750 million but <$1 billion
`>$1 billion
`
`Royalty Rate
`5.0%
`6.0%
`7.0%
`8.0%
`
`By way of example, in a given year, if such worldwide annual Net Sales is $1 .2 billion, the
`following royalty payment would be payable under this Section 3.3 (subject to reduction as
`provided in Sections 3.7 and 3.8): (5% x $500 million)+ (6% x ($750 million- $500 million, or
`$250 million)+ (7% x ($1 billion- $750 million, or $250 million)+ (8% x ($1.2 billion- $1
`billion, or $200 million)= $73.5 million.
`
`a royalty of two percent (2%) ofNet Sales made by Company and its
`(ii)
`Affiliates (but not sublicensees) for all Licensed Products that qualify as "Licensed Products"
`hereunder based on clause (b) of that definition and Sold while covered in the country of Sale of
`expected use by a Valid Claim of the Penn Existing Patents or Penn New Patents; provided that,
`notwithstanding any credits provided for in Section 3. 7 but subject in all events to Section 3.8,
`royalties payable by Company for such Net Sales for such Licensed Products shall not be less
`than one and 'l4 percent (1.25%).
`
`Only one royalty shall be due hereunder on the Sale of the same unit of Licensed Product. If a
`royalty accrues to a Sale of a Licensed Product under both clause (i) and (ii) above, then the
`.
`.
`higher rate of clause (i) shall apply. Only qne· royalty shall be due hereunder on the Sale of a
`Licensed Product even if the manufacture, use, sale, offer for sale or importation of such
`Licensed Product infringes more than one Valid Claim of the Penn Patent Rights.
`
`Related Defmitions. The term "Sale" means any bona fide transaction for which
`3.4
`amounts are received by Company or its Affiliate or sublicensee for the sale, use, transfer or
`other disposition of a Licensed Product to an unrelated third party. A Sale is deemed completed
`at the time that Company or its Affiliate receives payment or other consideration for a Licensed
`Product. The term "Quarter" means each three-month period beginning on January I , April 1,
`July I and October 1. Subject to Section 3.8(iii) for certain Licensed Products, the term "Net
`Sales" means the amounts or the fair market value attributable to each Sale actually received by
`Company or its Affiliates, less Qualifying Costs that are directly attributable to a Sale,
`specifically identified on an invoice or other documentation and actually borne by Company or
`its Affiliates. For purposes of determining Net Sales, the words ''fair market value" mean the
`cash consideration that Company or its Affiliates would realize from an unrelated buyer in an
`arms length sale of an identical item sold in the same quantity and at the time and place of the
`
`9
`
`Page 9 of 54
`
`PENN EX. 2001
`CFAD V. UPENN
`IPR2015-01836
`
`

`
`PATENT LICENSE AGREEMENT
`
`transaction. No Net Sales or royalties shall accrue on the Sale of Licensed Product in reasonable
`quantities by Company or its Affiliates for promotional or marketing purposes, as part of an
`expanded access program, as part of clinical trials or as donations to non-profit institutions or
`government agencies for non-commercial purposes. Net Sales shall not include any payments
`between any of Company, its Affiliates and sublicensees. The term "Qualifying Costs" means:
`(a) customary discounts and rebates in the trade for quantity purchased, for prompt payment or to
`purchasers, wholesalers and distributors; (b) credits or refunds for price adjustments, recalls,
`claims or returns that do not exceed the original received amount; (c) outbound transportation,
`handling and shipping expenses and transportation insurance premiums; (d) sales and use taxes
`and other fees imposed by a governmental agency; and (e) charge back payments and/or rebates
`provided to managed health care organizations, international organizations, or governmental
`agencies (including in the United States, Medicare and Medicaid).
`
`Sublicense Fees. In partial consideration of the License and subject to
`3.5
`Sections 3.7 and 3.8, Company will pay to Penn:
`
`(i)
`twenty-five percent (25%) of.sublicensing royalties actually received by
`Company and its Affiliates in consideration of sublicenses of the License for Licensed Products
`Sold by sublicensees for use in the Field of Use while covered in the country of Sale of expected
`use by a Valid Claim of the Penn Patent Rights that is licensed to Company under the License,
`provided that, such amounts payable to Penn with respect to such sublicensing royalties for such
`Sales of such Licensed Products shall not be less than one and Y4 percent (1.25%) ofNet Sales of
`such Licensed Products made by sublicensees (as such Net Sales definition is applied to
`sublicensees, and applying Section 3.8 to such sublicensees' Net Sales); and
`
`fifteen percent (15%) of all other sublicensing fees and payments and
`(ii)
`other consideration actually received by Company in consideration of sublicenses under the
`License granted by Company or its Affiliates, excluding for this clause (ii) (1) sublicensing
`royalties addressed by clause (i) above, (2) equity investments to the extent not in excess of fair
`market value made by sublicensees in Company or its Affiliates, (3) payments by sublicensees to
`C