printer-friendly

Sample Business Contracts

Patent License Agreement - Netcentives Inc. and MyPoints.com Inc.

Sponsored Links

                            PATENT LICENSE AGREEMENT
                     NETCENTIVES INC. AND MYPOINTS.COM, INC.


Effective this 31st day of March, 1999, (the "Effective Date") Netcentives Inc,
a corporation organized under the laws of California (hereafter "Netcentives"),
having a principal place of business at 690 Fifth Street, San Francisco, Ca.
94107, and MyPoints.com, Inc., a corporation organized under the laws of
Delaware (hereafter "MyPoints.com"), having a principal place of business at 565
Commercial Street, San Francisco, Ca. 94111, agree as follows:


ARTICLE I--PURPOSE OF THE AGREEMENT

1.1  Netcentives has an issued patent relating to Online Incentive and Loyalty
Systems.

1.2  The parties have jointly concluded that their respective needs and
interests will be served by the grant of a patent license from Netcentives to
MyPoints.com, in consideration for which MyPoints.com will make payment of
royalties to Netcentives, all under the conditions stated in the Articles of
this Agreement.

1.3  MyPoints.com has filed an action for declaratory relief as to whether it
has infringed or currently infringes the Netcentives patent referenced above.
MyPoints.com agrees to dismiss the complaint in that action, as well as any
other legal proceedings filed against Netcentives, within two days of the
Effective Date of this License Agreement. Nothing in this Agreement shall be
deemed to be an admission by either party as to infringement by that party of
any patent, or as to the validity of any patent, or as to the validity of any
claims set forth in the action for declaratory relief.


ARTICLE II--DEFINITIONS

2.1  IN-HOUSE PROGRAMs means: Any online incentives or rewards program or
system, or portion thereof, which:

     2.1.1 Contains a product catalog, an awards catalog, and an account
     information database; and 

     2.1.2 Is branded solely with MyPoints.com's owned or licensed trademarks,
     (including, but not limited to, the MyPoints Program); and

     2.1.3 Is not run, operated, maintained, licensed, set up, implemented or
     serviced by MyPoints.com or a MyPoints.com Agent for a Third Party or on
     behalf of a Third Party.

     2.1.4 The parties acknowledge that email-based programs which do not
     contain all three elements set forth in Section 2.1.1 (such as the
     email-based program run by MyPoints.com under the brand "Bonus Mail" in the
     form that such program exists as of the Effective Date) do not fall within
     the definition of In-house Programs.


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
    THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
    THE OMITTED PORTIONS.


CONFIDENTIAL                     March 31, 1999                     Page 1 of 10

<PAGE>   2


2.2  LICENSED TERRITORy means: The United States and its Territories, as well as
any jurisdiction in which Netcentives has filed and received rights to practice,
or rights to exclude others from practicing, the inventions claimed in the
Patent. The extent of the Licensed Territory may expand from time to time, as
patent rights are granted in new jurisdictions.

2.3  MEDIAN POINT VALUE (OR MPV) means: During any fiscal quarter, the median
dollar value of single unit of Points in the entire Redemption Catalog of an
In-house Program or a Third Party Program. It is calculated using the
approximate retail value of items, services, or benefits in the Redemption
Catalog, divided by the number of Points required to redeem such items. (For
example, the [*] costs [*] MyPoints, and the dollar value is [*], which means
that for this item, the value of a MyPoint is [*]). The MPV will be calculated
by calculating this value for each item in the catalog, and taking the median of
the values. MPV will be determined based on catalog dollar values in effect 30
calendar days before the close of each fiscal Quarter, provided, however, that
MyPoints.com shall not alter the Redemption Catalog in such a manner that such
MPV is materially different from the MPV in the immediately preceding or
subsequent week.

2.4  MYPOINTS.COM AGENT means: a company or individual who is retained by
MyPoints.com to perform specific functions on behalf of MyPoints.com and under
MyPoints.com's direction or control, but does not include Third Parties for whom
MyPoints.com runs, operates, maintains, licenses, sets up, or implements a Third
Party Program. The MyPoints.com Agent does not receive any license rights under
Article III of this Agreement independent of the license granted to
MyPoints.com, and is not a sublicensee of the Patent or a beneficiary of any
rights thereto, except in the capacity of performing the specific functions on
behalf of MyPoints.com.

2.5  NETCENTIVES PATENT (OR PATENT) means: U.S. Patent No. 5,774,870 and
continuations, continuations-in-part, divisionals and foreign counterparts
thereof.

2.6  POINTS means: The units of value which end-users receive or accrue in an
In-house or Third Party Program.

2.7  REDEMPTION CATALOG means: The list of goods, services, or other benefits in
exchange for which end-users can redeem Points.

2.8  THIRD PARTY means: Any entity that is not MyPoints.com or Netcentives.
THIRD PARTY PROGRAMS means: Any online incentives or rewards program or system,
or portion thereof (but not including programs or systems that are solely e-mail
based), which:

     2.9.1 contains a product catalog, a redemption catalog, and an account
     information database; and
 
     2.9.2 is run, operated, maintained, licensed, set up, or implemented by
     MyPoints.com, with or without the assistance of a MyPoints.com Agent, for a
     Third Party or on behalf of a Third Party (including, but not limited to,
     MyPoints by GTE, and Prodigy Points).

     2.1.4 The parties acknowledge that email-based programs which do not
     contain all three


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
    THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
    THE OMITTED PORTIONS.


CONFIDENTIAL                     March 31, 1999                     Page 2 of 10

<PAGE>   3

     elements set forth in Section 2.9.1 (such as the email-based program run by
     MyPoints.com under the brand "Bonus Mail" in the form that such program
     exists as of the Effective Date) do not fall within the definition of Third
     Party Programs.


ARTICLE III--LICENSE GRANT

3.1  IN-HOUSE PROGRAMS. Netcentives will grant to MyPoints.com a
non-transferable (except as provided in Article VI), non-sublicensable,
non-exclusive license under the Patent, in the Licensed Territory, to make, use,
reproduce, market, display, operate, and offer In-House Programs through
MyPoints.com Agents and MyPoints.com's employees.

3.2  THIRD PARTY PROGRAMS. Netcentives will grant to MyPoints.com a
non-transferable (except as provided in Article VI), non-sublicensable (subject
to Article 3.2.1), non-exclusive license under the Patent, in the Licensed
Territory, to make, use, reproduce, market, display, operate, and offer Third
Party Programs through MyPoints.com Agents and MyPoints.com's employees.

3.2.1 LICENSE NOTICE. MyPoints.com may run, operate, maintain, license, set up,
or implement Third Party Programs, provided however, that MyPoints.com must
include in its contract with each such Third Party for the operation of the
Third Party Program a provision stating that such Third Party Program is being
operated by MyPoints.com under a license for the Patent from Netcentives, and
that such Third Party will have no license under the License Agreement in the
event that MyPoints.com no longer provides such services to the Third Party.
MyPoints.com agrees that it will not run, sell, participate in, implement,
license, set up or maintain any such Third Party Program without requiring the
Third Party to sign such contractual term prior to implementation of such Third
Party Program. MyPoints.com will provide Netcentives with prompt notice of
termination of contracts with Third Parties for Third Party Programs, which
notice will in no event be provided more than 30 days after such termination.


ARTICLE IV--ROYALTIES, REPORTS, PAYMENT, AND AUDIT

4.1  ROYALTY OBLIGATION. In consideration of the licenses set forth in Article 3
above, MyPoints.com agrees to pay royalties to Netcentives as set forth in this
Article and in Exhibit A to this Agreement (or, if applicable, as set forth in
Article VI).

4.1.1 PRE AGREEMENT PERIOD ROYALTIES. For the period from the issuance of the
Patent to the Effective Date of this Agreement (the "Pre-Agreement Period")
MyPoints.com will pay royalties for Points distributed in the Licensed Territory
to end users pursuant to any In House or Third Party Programs to Netcentives
based on the schedule attached as Exhibit A to this Term Sheet. The
Pre-Agreement Period Points distributed will be included in the calculation of
the Points beginning at the first level of royalties on the schedule of Exhibit
A. This payment will be made within fifteen (15) days of signing of the License
Agreement.


CONFIDENTIAL                     March 31, 1999                     Page 3 of 10

<PAGE>   4

4.1.2 RUNNING ROYALTY. MyPoints.com will pay Netcentives royalties consisting of
a percentage of the product of the MPV and all Points distributed in the
Licensed Territory to end users pursuant to any In House or Third Party
Programs. The royalty schedule is set forth on Schedule A to this Term Sheet.

4.2  REPORTS, PAYMENT AND AUDIT

4.2.1 TIMING OF REPORTS. MyPoints.com will make written reports to Netcentives
quarterly within thirty (30) calendar days after the first close of each fiscal
quarter. The first such report shall include the period of time between the
Effective Date of this Agreement and the close of the first fiscal quarter
occurring after the Effective Date.

4.2.2 CONTENT OF REPORTS. Each report shall state the number of Points
distributed during the preceding three calendar months, the MPV for that same
time period, and the product of the number of Points distributed and MPV, and
details on which the MPV calculations rely (list of goods in Redemption Catalog,
approximate retail value of such goods, number of Points required to redeem for
such goods) for the period of the preceding three calendar months. With each
report, MyPoints.com will provide the certification from one of its officers
that the calculations are correct and have been executed in compliance with this
License Agreement.

4.2.3 PAYMENTS. Concurrently with the making of each report required under this
Article, MyPoints.com will pay to Netcentives royalties at the rate specified in
this Article IV.

4.2.4 ROYALTY ACCOUNTING RECORDS. MyPoints.com will keep records showing the
Points distributed and MPV, such records to be in sufficient detail to enable
the royalties payable to Netcentives to be determined. MyPoints.com will also
permit its books and records to be examined from time to time as provided in
Article 4.2.5 to the extent necessary to verify the reports provided for in
Article 4.2.1 and 4.2.2, such examination to be made at the expense of
Netcentives by an independent auditor appointed by Netcentives who shall report
to Netcentives thereupon as provided in Article 4.2.5. In the event that the
royalties due are determined by the independent auditor to be more than 5%
greater than the royalties paid under Article 4.2.3 for any fiscal quarter,
MyPoints.com will have the option of remitting the difference and promptly
reimbursing Netcentives for the costs of the audit or submitting the matter to
arbitration pursuant to Article 9.3. If MyPoints.com elects to submit the matter
to arbitration and Netcentives elects to pursue the matter in arbitration, then
the losing party in the arbitration will pay for the auditors of both parties
and pay for the arbitration. Upon termination of this Agreement for any reason,
Netcentives shall have the right to have a final audit as provided in Article
4.2.5 conducted by an independent auditor appointed by Netcentives and paid by
Netcentives.

4.2.5 AUDIT PROCEDURES. Netcentives will have the right, at its own expense and
at any reasonable time or times, to cause a third party independent auditor not
engaged on a contingency basis and approved by MyPoints.com (not to be
unreasonably withheld) to inspect and audit the books and records of
MyPoints.com in order to verify the contents of the reports of Article 4.2.2
above. Any such audit (i) shall be conducted after reasonable prior notice,
during


CONFIDENTIAL                     March 31, 1999                     Page 4 of 10

<PAGE>   5

normal business hours and at the location(s) where such books and records are
normally kept and (ii) may not be conducted more than once in any given twelve
(12) month period. Notwithstanding the foregoing, in the event that any such
audit results in a correcting payment (as provided in Section 4.2.4),
Netcentives shall have the right to conduct up to two (2) such audits in the
subsequent year. Such audit and the results thereof shall be confidential
(except for use, subject to reasonable protective orders to which the parties
shall stipulate, in connection with proceedings to compel a correcting payment
as set forth in Article 4.2.4), and MyPoints.com reserves the right to require
the auditor to execute an appropriate non-disclosure agreement before permitting
the inspection and audit to proceed. The auditor shall only report to
Netcentives the amount, if any, of royalties that MyPoints.com has overpaid or
underpaid under subparagraph (c) above and shall not disclose to Netcentives
either the detailed or underlying information supporting such conclusion or any
of such auditor's work papers. The auditor shall provide a copy of such report
to MyPoints.com concurrently with reporting to Netcentives.


ARTICLE V--REPRESENTATIONS AND WARRANTIES; LIMITATIONS

5.1  REPRESENTATIONS AND WARRANTIES. Each party represents and warrants that it
is a corporation in good standing under the laws of the state of its
incorporation; that it has the authority to enter into this Agreement; that it
has obtained all corporate approvals necessary to enter into this Agreement; and
that this Agreement is valid and binding and enforceable in accordance with its
terms. Netcentives further represents and warrants that it has all right, title,
and interest in the Patent.

5.2. LIMITATIONS. Nothing in this Agreement shall be construed as a warranty or
representation by either party as to the validity or scope of any patent; a
warranty or representation that anything made, used, sold, or otherwise disposed
of under any license granted in this Agreement is or will be free from
infringement of patents of third persons; a requirement that either party shall
file any patent application, secure any patent, or maintain any patent in force;
an obligation to bring or prosecute actions or suits against third parties for
infringement of any patent; an obligation to furnish any manufacturing or
technical information, or any information concerning pending patent
applications; conferring a right to use in advertising, publicity, or otherwise
any trademark or trade name of the party from which a license is received under
the Agreement; or granting by implication, estoppel, or otherwise any licenses
or rights under patents other than the Patent. Netcentives disclaims and
MyPoints.com accepts such disclaimer of any indemnity under this Agreement or by
operation of law.

ARTICLE VI--TRANSFERABILITY OF RIGHTS AND OBLIGATIONS

6.1  This Agreement may not be assigned or transferred by any party to a third
party without the prior written consent of the other party, unless the
assignment or transfer of this Agreement is part of an assignment or transfer of
all or substantially all of the assets of the party ("Change of Control"). In
the event of such a Change of Control of Netcentives (or any other transfer of
ownership of the Patent), all terms of this Agreement will remain in effect and
be binding on the assignee/transferee. In the event of such a Change of Control
of MyPoints.com, all terms of the


CONFIDENTIAL                     March 31, 1999                     Page 5 of 10

<PAGE>   6

Agreement will remain in effect and be binding on the assignee/transferee,
including the royalty schedule set forth in Exhibit A for Points distributed;
provided, however, that if the Change of Control of MyPoints.com takes place
within three (3) years of the Effective Date, then the following royalty
schedule will apply from the later of (a) [*], or (b) the date on which the
Change of Control becomes effective:

year 1, [*] for all Points distributed; 
year 2, [*] for all Points distributed;
year 3, [*] for all Points distributed; and
years 4 and later, [*] on all Points distributed thereafter.

ARTICLE VII--LICENSEE COOPERATION

7.1  PATENT MARKING. MyPoints.com agrees to observe the reasonable requirements
of Netcentives with respect to marking Third Party or In-house Programs under
license herein with the word "Patent", followed by the number 5,774,870, which
reasonable requirement will be satisfied by one such reference at one web page
(which page is reasonably accessible to a user seeking such notice) of each
Third Party Program or In-house Program in the Licensed Territory.

ARTICLE VIII--CONFIDENTIALITY.

8.1  TERMS CONFIDENTIAL. Except as set forth below in Article 8.2 of this
Agreement, the terms of this Agreement shall be confidential and shall not be
disclosed to any person or entity not a party to this Agreement, except the
disclosing party's attorneys, accountants, and investors who are bound by the
confidentiality provisions set forth herein, unless prior written consent is
obtained from the other party, or unless a court or administrative agency of the
United States or a state thereof orders such disclosure, provided, however, that
in the event that such disclosure is required, the parties will use good faith
efforts to maintain the confidentiality of any terms of this Agreement which are
not so required to be disclosed. Furthermore, the parties will not publicize or
disclose the pleadings and documents, and contents thereof, prepared in
connection with the litigation filed by MyPoints.com in this matter.

8.2  PUBLIC STATEMENT. The parties will not issue a press release announcing the
License Agreement or make other formal announcements primarily focused on or
highlighting the License Agreement, but may disclose the existence of this
Agreement, and may issue statements which are materially similar to the
statement set forth in Exhibit B to this Agreement, and may disclose the terms
set out in that statement.

8.3  EMPLOYEE INSTRUCTION. Netcentives will instruct its employees that they
should not represent that the existence of a license indicates that Netcentives'
technology is superior to that of MyPoints.com, or that MyPoints.com's
technology is inferior to that Netcentives. MyPoints.com will instruct its
employees that they should not represent that the existence of a license
indicates that MyPoints.com's technology is superior to that of Netcentives or
that Netcentives' technology is inferior to that of MyPoints.com.


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
    THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
    THE OMITTED PORTIONS.


CONFIDENTIAL                     March 31, 1999                     Page 6 of 10

<PAGE>   7

ARTICLE IX--GENERAL

9.1  NOTICES. Any notice, report, or payment provided for in this Agreement
shall be deemed sufficiently given when sent by certified or registered mail
addressed to the party for whom intended at the address given at the outset of
this Agreement or at such changed address as the party shall have specified by
written notice.

9.2  APPLICABLE LAW. This Agreement shall be construed, interpreted, and applied
in accordance with the laws of the State of California.

9.3  ARBITRATION. Any controversy or claim arising under or related to this
Agreement shall be settled by confidential arbitration in accordance with the
Patent Arbitration Rules of the American Arbitration Association before a single
arbitrator selected in accordance with those rules, and judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

9.4  INTEGRATION. This instrument contains the entire and only Agreement between
the parties and supersedes all preexisting Agreements between them respecting
its subject matter. Any representation, promise, or condition in connection with
such subject matter that is not incorporated in this Agreement shall not be
binding on either party. No modification, renewal, extension, waiver, or
termination of this Agreement or any of its provisions shall be binding on the
party against whom enforcement of such modification, renewal, extension, waiver,
or termination is sought, unless made in writing and signed on behalf of such
party by one of its executive officers.

ARTICLE X--TERM AND TERMINATION

10.1 TERM. Unless otherwise terminated as provided in this Article, this
Agreement shall run to the end of the life of the Patent and shall thereupon
terminate.

10.2 TERMINATION FOR BREACH. Netcentives may terminate this Agreement at any
time in the event of a default by MyPoints.com in the due observance or
performance of any covenant, condition, or limitation of this License Agreement
required to be performed by MyPoints.com, but only if MyPoints.com shall not
have remedied its default within thirty (30) days after receipt from Netcentives
of written notice specifying such default in reasonable detail.

10.3 EFFECT OF INVALIDATION. In the event that the Patent is invalidated by a
final judgment of a court of proper jurisdiction royalties will cease for that
jurisdiction, but no refunds of royalties paid under the License Agreement prior
to the date of invalidation will be due. In the event that MyPoints.com
commences any litigation or other legal proceeding relating to this Patent
against Netcentives during the term of this Agreement, the license conferred in
Article III will be null and void as of the date of the filing of the Complaint
or other document commencing such proceeding.

10.4 SURVIVAL OF TERMS. The following terms shall survive any termination of
this


CONFIDENTIAL                     March 31, 1999                     Page 7 of 10

<PAGE>   8

Agreement: Articles 1.3, 2, 4.1.2 (to the extent that royalty payments are due
for Points distributed prior to termination of this Agreement), 4.2, 5, 8.1,
9.2, 9.3, 10.3 and 10.4.

     IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed and duly sealed in duplicate originals by its duly authorized
representative.


DATE: March 31, 1999                   Netcentives Inc.

                                       By: /s/ J.F. Longtinotti
                                           -------------------------------------
                                       Name: J.F. Longtinotti
                                       Title: SVP/ CFO



DATE: March 31, 1999                   MyPoints.com

                                       By: /s/ Robert C. Hoyler
                                           -------------------------------------
                                       Name:  Robert C. Hoyler
                                       Title:  President and COO


CONFIDENTIAL                     March 31, 1999                     Page 8 of 10

<PAGE>   9

                                    EXHIBIT A

                             ROYALTY SCHEDULE SCALE



o    Payment of a [*] royalty on the first [*] dollars of Points distributed.

o    Payment of a [*] royalty on the next [*] dollars of Points distributed.
 
o    Payment of a [*] royalty on the next [*] dollars of Points distributed.

o    Payment of a [*] royalty on the next [*] dollars of Points distributed.

o    Payment of a [*] royalty thereafter on Points distributed.


[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
    THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
    THE OMITTED PORTIONS.


CONFIDENTIAL                     March 31, 1999                     Page 9 of 10

<PAGE>   10


                                    EXHIBIT B

                                PUBLIC STATEMENT

Netcentives and MyPoints.com have entered in a Patent License Agreement, in
which MyPoints.com has received a nonexclusive license to practice U.S. Patent
No. 5,774,870 and continuations, continuations-in-part, divisionals and foreign
counterparts thereof for the life of such patent.



CONFIDENTIAL                     March 31, 1999                    Page 10 of 10