CDMA Modem Card License Agreement - QUALCOMM Inc. and Techfaith Wireless Communication Technology Ltd.
CDMA MODEM CARD
LICENSE AGREEMENT
This CDMA Modem Card License Agreement (the "Agreement") is entered into on
March 9, 2004 by and between QUALCOMM Incorporated, a Delaware corporation, and
Techfaith Wireless Communication Technology Limited, a British Virgin Islands
corporation, with respect to the following facts:
RECITALS
WHEREAS, QUALCOMM has developed certain proprietary Code Division Multiple
Access ("CDMA") technology which may be useful in providing greater capacity and
improved quality and reliability compared to other cellular telephone
technologies, and QUALCOMM manufactures and sells CDMA components and equipment;
WHEREAS, LICENSEE desires to obtain a license of QUALCOMM's Intellectual
Property to manufacture and sell CDMA Modem Cards and QUALCOMM desires to grant
such license in exchange for the license fees, royalties and other provisions
hereof in accordance with the terms and conditions set forth in this Agreement;
and
WHEREAS, QUALCOMM desires to obtain a license of LICENSEE's Intellectual
Property to manufacture, use and sell Subscriber Units, CDMA Modem Cards and
Components, and LICENSEE desires to grant such license in accordance with the
terms and conditions set forth in this Agreement.
AGREEMENT
NOW THEREFORE, the Parties hereby agree as follows:
1. HEADINGS AND DEFINITIONS.
All headings used in this Agreement are inserted for convenience only and
are not intended to affect the meaning or interpretation of this Agreement or
any clause. Reference to "third party" or "third parties" shall not mean either
Party or their Affiliates. For the purpose of this Agreement, the following
definitions apply:
"Affiliates" means, as to a Party, any present or future Parent of the Party and
any present or future Subsidiary of the Party and/or its Parent, but only for so
long as the Parent remains the Parent of the Party and the Subsidiary remains a
Subsidiary of the Party and/or its Parent. The term "Parent" means any
corporation or other legal entity that owns or controls, directly or indirectly
(i) more than 50% of the shares or other securities of the Party entitled to
vote for
1
<PAGE>
election of directors (or other managing authority) of the Party or (ii) if such
Party does not have outstanding shares or securities, more than 50% of the
equity interest in such Party, but only for so long as such ownership or control
exists in (i) or (ii) above. The term "Subsidiary" of a party means any
corporation or other legal entity (i) the majority (more than 50%) of whose
shares or other securities entitled to vote for election of directors (or other
managing authority) is now or hereafter owned or controlled by such party either
directly or indirectly or (ii) which does not have outstanding shares or
securities but the majority (more than 50%) of the equity interest in which is
now or hereafter owned or controlled by such party either directly or
indirectly, but only for so long as such ownership or control exists in (i) or
(ii) above.
"Authorized Licensees" shall have the meaning described in Section 6.3 below.
"CDMA Applications" means all communication applications (regardless of the
transmission medium) that operate using code division multiple access ("CDMA")
technology, whether or not based on IS-95, cdma2000 or W-CDMA, and irrespective
of frequency band.
"CDMA ASIC" means QUALCOMM's mobile station modem (MSM) CDMA application
specific integrated circuit (including the hardware, firmware and/or associated
software that runs on the ASIC), and any revision, generation, modifications or
integration to or of the MSM, purchased by LICENSEE from QUALCOMM.
"CDMA Modem Card" means a complete CDMA only and/or Dual Mode CDMA modem card
which (i) incorporates all or any part of QUALCOMM's Intellectual Property, (ii)
complies with the CAI, and (iii) is for use with a "Communications Device,"
meaning either a telephone, personal computer, personal digital assistant,
facsimile machine, monitoring device, multi-media terminal, data entry terminal,
or point of sale terminal. The CDMA Modem Card must contain at a minimum a
printed circuit board, multiple individually packaged integrated circuit
devices, and all of the circuitry necessary for the Communications Device to
perform all of the CDMA reverse link modulation and CDMA forward link
demodulation, baseband processing, RF and IF filtering, upconversion,
downconversion, RF and IF shielding, and protocol stack messaging; provided that
a CDMA Modem Card shall not be capable of initiating and receiving Wireless
communications without being attached to the Communications Device.
"Chipset" means a CDMA ASIC and all companion application specific integrated
circuits designed and offered for sale by QUALCOMM for use with such CDMA ASIC
in a Subscriber Unit (and future evolutions, combinations or versions of any of
the foregoing) and which are purchased by LICENSEE from QUALCOMM.
2
<PAGE>
"Commercially Necessary IPR" means those Intellectual Property Rights which (i)
the Party or its Affiliates has the right to license to the other Party without
payment of royalties or any other consideration to any third party, (ii) are not
essential to the manufacture, use or sale of a usable Subscriber Unit, CDMA
Modem Card and/or Component that complies with the specifications of the CAI and
(iii) provide Subscriber Units, CDMA Modem Cards and/or Components with a
competitive advantage (e.g., cost, lead-time or quality advantages) or which add
to Subscriber Units, CDMA Modem Cards or Components a feature or other
characteristic which may be reasonably required by the market place; but the
term Commercially Necessary IPR does not include any trade name, trademark,
service mark, or similar symbols, abbreviation, contractions or simulations
identifying the Party and its Affiliates (except as set forth in Section 8, if
the Party is QUALCQMM).
"Common Air Interface" or "CAI" means only (i) the TIA's IS-95 digital cellular
standard and other CDMA standards which specify the same Physical Layer as IS-95
if approved by QUALCOMM and adopted by other international standards bodies
throughout the world, (ii) the ITU's cdma2000 digital cellular standards
(including only MC-CDMA 1xRTT and MC-CDMA 3xRTT) and other CDMA standards which
specify the same Physical Layer as 1xRTT and 3xRTT if approved by QUALCOMM and
adopted by other international standards bodies throughout the world, and (iii)
QUALCOMM's High Date Rate digital air interface standard (1xEV-DO, standardized
as IS-856).
"Complete CDMA Telephone" means a complete CDMA telephone, including but not
limited to mobile, transportable and portable telephones, which incorporates all
or any part of QUALCOMM's Intellectual Property and can be used, without any
additional equipment or components being attached thereto, to initiate and/or
receive Wireless telecommunications transmissions in accordance with the CAI
"Components" means application specific integrated circuits (ASICs), electronic
devices, integrated circuits, including firmware thereon and accompanying or
associated software, and/or families of devices for use in wireless
telecommunications equipment.
"Costs" as such term is used in the definition of "Net Selling Price" shall
include all actual labor, material and other direct costs, expenses and
associated burdens, including overheads and general and administrative expenses,
a reasonable amortization of associated research and development expenses, and
warranty costs, all as consistently applied in accordance with U.S. generally
accepted accounting principles (GAAP).
"Dual Mode CDMA" means, as applied to Subscriber Units or CDMA Modem Cards,
having a capability to operate with CDMA technology and existing
3
<PAGE>
analog FM cellular technology for backward compatibility with analog FM cellular
infrastructure and subscriber units.
"Effective Date" means the date first set forth above.
"Ericsson" means Telefonaktiebolaget LM Ericsson (publ), a Swedish corporation
and any of its subsidiaries in which it owns or controls fifty percent (50%) or
more of the voting power.
"Future Commercially Necessary IPR" means all claims of any patents (foreign and
domestic) which fall within the definition of Commercially Necessary IPR, but
which do not fall within the definition of Included Commercially Necessary IPR.
"Have Made" means the right of LICENSEE under Ericsson's Patents to have a third
party make a CDMA Modem Card for CDMA Applications for the use and benefit of
LICENSEE, provided that:
(i) LICENSEE owns and supplies the designs, or specifications, or
working drawings to such third party;
(ii) such designs, specifications, and working drawings are in sufficient
detail that no substantial additional design by such third party is
required;
(iii) such third party is not allowed to sell such CDMA Modem Card to
other third parties; and
(iv) each such CDMA Modem Card sold by LICENSEE shall bear the
trademarks, trade names, or other commercial indicia of LICENSEE,
although such CDMA Modem Cards may be co-branded with the
trademarks, trade names, or other commercial indicia of the reseller
or distributor of such CDMA Modem Cards. The requirements of this
subparagraph (iv) shall not apply where a customer requires that the
CDMA Modem Card bear only such customer's trademarks, trade names,
or other commercial indicia.
"Included Commercially Necessary IPR" means (1) with respect to the Intellectual
Property Rights being licensed by QUALCOMM, (a) all claims of any patents
(foreign and domestic) which were issued or applied for on or before the
Effective Date and which constitute Commercially Necessary IPR and (b) all
copyright, trade secret, know-how, technical assistance and other intellectual
property rights which constitute Commercially Necessary IPR and which may be
furnished by QUALCOMM to LICENSEE pursuant to and during the term of this
Agreement and (2) with respect to the Intellectual Property Rights being
licensed by LICENSEE, (a) all claims of any patents (foreign and domestic) which
are now issued or which are applied for on or before the Effective Date and
4
<PAGE>
which constitute Commercially Necessary IPR and (b) all copyright, trade
secrets, know-how, technical assistance and other intellectual property rights
which constitute Commercially Necessary IPR and which may be furnished by
LICENSEE to QUALCOMM pursuant to and during the term of this Agreement.
"Intellectual Property Rights" means patents, copyrights, trade secrets,
know-how and other intellectual property rights.
"InterDigital" means InterDigital Communications Corporation, InterDigital
Patents Corporation and/or InterDigital Technology Corporation.
"InterDigital's Excluded Patents" means those claims of each of InterDigital's
existing and future patents which cover (i) overlay, (ii) interference
cancellation, (iii) trellis, PASM and TASM coding/decoding and (iv) wireless
telephone debit card systems. As of November 2,1994, existing patents of
InterDigital which have claims covering the subject matter of (i), (ii), (iii)
and (iv) (and are therefore InterDigital's Excluded Patents) are U.S. Patent
Nos. 5,351,249; 4,849,974; 4,849,976; 5,359,182; 5,161,168; 5,333,191;
5,235,670; 5,072,308; 4,974,099; 4,953,197; 5,185,762; 5,228,053; 4,796,260 and
their foreign counterparts.
"InterDigital's Five Patents" means U.S. Patent Nos. 5,228,056; 5,166,951;
5,093,840; 5,119,375; and 5,179,571 and any continuation, continuation-in-part
and divisional application based on such patents, and any foreign counterparts
of such patents, continuations, continuations-in-part or divisional
applications.
"InterDigital Included Patents" means, with the exclusion of InterDigital's
Excluded Patents, (i) every patent issued on or before March 7, 1995 (including
utility models, but excluding design patents and design registrations) in the
world owned or licensable by InterDigital (including but not limited to
InterDigital's Five Patents), and (ii) any subsequently issued patent (including
utility models, but excluding design patents and design registrations) (whether
issued to InterDigital or a third party) in the world owned or licensable by
InterDigital which claims or discloses an invention contained in a patent
application filed or acquired by InterDigital anytime prior to March 8, 1995
("Subsequently Issued InterDigital Patents"), and any counterparts (foreign or
domestic) to any such Subsequently Issued InterDigital Patents whenever such
counterparts are applied for, and (iii) any continuation, continuation-in-part
or divisional application based on any patent falling within (i) or (ii) above,
whether such continuation, continuation-in-part or divisional application is
filed during or after March 8,1995. In the event of an acquisition of
InterDigital by a third party, InterDigital Included Patents shall not be
construed to cover any patents or patent applications owned by such third party
prior to the acquisition of InterDigital.
5
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
"InterDigital's Patents" means (i) with respect to those CDMA Modem Cards Sold
by LICENSEE which incorporate CDMA ASICs purchased from QUALCOMM, the
InterDigital Included Patents and (ii) with respect to those CDMA Modem Cards
Sold by LICENSEE which do not incorporate CDMA ASICs purchased from QUALCOMM,
InterDigital's Five Patents.
"IS-95 Related Systems" means IS-95 and any single carrier system with a
spreading bandwidth not greater than 1.25 MHz and based on or derived from
IS-95.
"Licensed Customer" means a person or entity (the "Other Licensee") that is 1)
licensed by QUALCOMM under any or all of QUALCOMM's Intellectual Property to
make and sell Subscriber Units and/or any Communications Device that comply with
or implement one or more of the air interface standards included in the CAI
(each such license agreement between QUALCOMM and a Licensed Customer shall
hereinafter be referred to as an "LC license Agreement"), and 2) is authorized
under such LC License Agreement to have LICENSEE make CDMA Modem Cards for such
Other Licensee.
"LICENSEE" means Techfaith Wireless Communication Technology Limited, a British
Virgin Islands corporation.
"LICENSEE's Intellectual Property" means LICENSEE's Technically Necessary IPR
and LICENSEE's Included Commercially Necessary IPR.
"Masks" and "Mask Sets" mean the mask sets for Components and/or the computer
output data used to generate the mask sets for Components.
"Net Selling Price", with respect to each CDMA Modem Card Sold by LICENSEE,
shall mean one of the following, whichever is applicable:
(a) When Sold by LICENSEE to a Purchaser (a "Purchaser" being a person or
entity that does not control LICENSEE, is not controlled by LICENSEE or is not
in common control with LICENSEE; and the term "control" for the above purposes
shall mean the direct or indirect ownership or control of more than a twenty
five percent (25%) interest), the Net Selling Price shall be the Selling Price
charged by LICENSEE for CDMA Modem Cards Sold to such Purchaser, however, with
respect to CDMA Modem Cards Sold to a Purchaser for use on a CDMA network
operated by LICENSEE or a Related Carrier, the Net Selling Price shall be no
less than CONFIDENTIAL TREATMENT
(b) When Sold by LICENSEE to a Related Carrier or to a person or entity
that is not a Purchaser (in either case, a "Related Buyer"), the Net Selling
Price
6
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
shall be the Selling Price charged by the final vendee Related Buyer upon resale
by the final vendee Related Buyer of CDMA Modem Cards to a Purchaser but in no
event shall the Net Selling Price be less than the greater of (1) either (a) the
average Selling Price charged during the same or most recent calendar quarter by
LICENSEE for substantial quantities of equivalent CDMA Modem Cards (or if
substantial quantities of equivalent CDMA Modem Cards have not been Sold during
such calendar quarters, substantial quantities of substantially equivalent CDMA
Modem Cards) Sold by LICENSEE to any Purchaser or (b) if substantial quantities
of equivalent or substantially equivalent CDMA Modem Cards have not been Sold to
a Purchaser by LICENSEE during such calendar quarters, the Selling Price that
would be realized by LICENSEE in a Sale of equivalent CDMA Modem Cards to a
Purchaser transacting at arm's length, (2) the Selling Price charged by LICENSEE
for such CDMA Modem Cards Sold to such Related Buyer, or CONFIDENTIAL TREATMENT
(c) When retained by LICENSEE for its own use or lease, or when Sold by
LICENSEE to a Related Buyer for its own use or lease, the Net Selling Price
shall be the greater of (1) either (a) the average Selling Price charged during
the same or most recent calendar quarter by LICENSEE for substantial quantities
of equivalent CDMA Modem Cards (or if substantial quantities of equivalent CDMA
Modem Cards have not been Sold during such calendar quarters, substantial
quantities of substantially equivalent CDMA Modem Cards) Sold by LICENSEE to any
Purchaser or (b) if substantial quantities of equivalent or substantially
equivalent CDMA Modem Cards have not been Sold to a Purchaser by LICENSEE during
such calendar quarters, the Selling Price that would be realized by LICENSEE in
a Sale of equivalent CDMA Modem Cards to a Purchaser transacting at arm's
length, (2) the Selling Price charged by LICENSEE for such CDMA Modem Cards Sold
to such Related Buyer, or CONFIDENTIAL TREATMENT
"Non-Qualifying CDMA Modem Card" means a CDMA Modem Card that is not a
Qualifying CDMA Modem Card.
"Party" shall individually mean QUALCOMM or LICENSEE and the term "Parties"
shall collectively mean QUALCOMM and LICENSEE.
"Philips" shall mean Philips Electronics N.V., a company existing under the laws
of the Netherlands.
"Philips' CDMA Technically Necessary Patents" means claims of any patents which
Philips (or any of its Affiliates) own or have the right to license that are
essential or claimed by Philips or any of its Affiliates to be essential to the
manufacture, use or sale of Subscriber Units (i.e., must necessarily be
infringed
7
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
upon in order to comply with the CAI). Notwithstanding anything to the contrary
herein, the term "Philips CDMA Technically Necessary Patents" at a minimum
includes U.S. patent numbers: 4,633,509, 4,765,753, and 5,140,638, and their
foreign counterparts.
"Physical Layer" shall have the same meaning given to it in the TIA's IS-95
digital cellular standard.
"QUALCOMM" means QUALCOMM Incorporated, a Delaware corporation.
"QUALCOMM's Intellectual Property" means QUALCOMM's Technically Necessary IPR
and QUALCOMM's Included Commercially Necessary IPR and InterDigital's Patents;
provided that, notwithstanding the foregoing, the term "QUALCOMM's Intellectual
Property" shall not include any intellectual property, including but not limited
to patents, owned by SnapTrack, Inc.
"Qualifying CDMA Modem Card" means a CDMA Modem Card which contains and
incorporates a CDMA ASIC purchased by LICENSEE from QUALCOMM.
"Related Carrier" means a wireless communications system operator that (i) owns
or controls, either directly or indirectly, a Significant Interest in LICENSEE,
(ii) a Significant Interest of which is owned or controlled, either directly or
indirectly, by LICENSEE, or (iii) a Significant Interest of which is owned or
controlled, either directly or indirectly, by a third party that also owns or
controls, either directly or indirectly, a Significant Interest in LICENSEE; and
for purposes of this definition, the term "Significant Interest" shall mean the
direct or indirect ownership or control of more than a twenty percent (20%)
interest.
"Selling Price" means the gross selling price and/or value of other
consideration charged by the LICENSEE or its final vendee Related Buyer for each
CDMA Modem Card in the form in which it is Sold (whether or not assembled and
without excluding therefrom any Components or subassemblies thereof which are
included with such CDMA Modem Card) CONFIDENTIAL TREATMENT
If CDMA Modem Cards are Sold in combination with other separate and
distinct products or services (the "Other Products"), the Selling Price for such
CDMA Modem Cards (the "Combined Products") shall be the average Selling Price
which LICENSEE charged to Purchasers for CDMA Modem Cards (of the same or
substantially the same quality and quantity) that
8
<PAGE>
were Sold without being combined with other products or services in the most
recent calendar quarter in which Sales were made. If no such CDMA Modem Cards
have been Sold to a Purchaser in the same or any previous calendar quarter to
permit the fair determination of an arm's length price, then the Selling Price
for such Combined Products shall be the Selling Price charged by LICENSEE for
such Combined Products less only those actual direct manufacturing costs (or, if
acquired, direct cost of acquisition) of the Other Products that LICENSEE can
clearly and convincingly prove were not part of the consideration allocated to
the Sale of the CDMA Modem Card being combined with other products or services,
but in no case less than the fair market value of the CDMA Modem Card. For the
purpose of this definition, "Sold in combination with" shall mean that CDMA
Modem Cards and one or more Other Products are sold together (whether or not for
a single price) or substantially the same quantity of CDMA Modem Cards and Other
Products are sold to the same customer (whether or not such products are sold
together or with separate pricing), and provided that such Other Products and
the CDMA Modem Cards are not physically integrated into a single product.
"Sold," "Sale," "Sell" means put into use, sold, leased or otherwise transferred
and a sale shall be deemed to have occurred upon first use, shipment or
invoicing, whichever shall first occur.
"Subscriber Unit" means a complete CDMA and/or Dual Mode CDMA telephone,
including but not limited to mobile, transportable and portable telephones,
which incorporates all or any part of QUALCOMM's Intellectual Property and can
be used, without any additional equipment or components being attached thereto,
to initiate and/or receive Wireless telecommunications transmissions in
accordance with the CAI.
"Technically Necessary IPR" means all claims of any patents (foreign and
domestic), issued on, prior to or after the Effective Date which (i) the Party
and/or its Affiliates has the right to license to the other Party without
payment of royalties or any other consideration to any third party and (ii) are
essential to the manufacture, use or sale of Subscriber Units, CDMA Modem Cards
and/or Components which comply with the specifications of the CAI (i.e., must be
infringed upon in order to comply with the CAI); but the term Technically
Necessary IPR does not include any trade name, trademark, service mark, or
similar symbols, abbreviation, contractions or simulations identifying the Party
and its Affiliates (except as set forth in Section 8, if the Party is QUALCOMM).
"Unlicensed Customer" means a person or entity that is not a Licensed Customer.
"Up-Front License Fee" means all of the up-front fees to be paid by LICENSEE in
accordance with Section 3 of this Agreement.
9
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
"Wireless" and "Wireless Applications" means terrestrial-based, land mobile,
wireless telecommunications applications which are based upon the CAI, including
but not limited to cellular, personal communications services (PCS), wireless
local loop and wireless PABX applications. Notwithstanding the foregoing, the
terms "Wireless" and/or "Wireless Applications" shall not include (i) satellite
applications (defined as any application which utilizes a direct connection
between any satellite and the (a) Subscriber Unit, (b) Communications Device
attached to a CDMA Modem Card , or (c) CDMA Modem Card attached to a
Communications Device), and/or (ii) Cordless Telephone Applications (defined as
applications not dependent on use of a switch, including but not limited to a
PABX switch, for interface to the public network).
2. TERM OF AGREEMENT.
This Agreement shall commence upon the Effective Date and, unless
otherwise terminated or canceled as provided herein, shall continue in full
force and effect thereafter.
3. LICENSE FEES TO QUALCOMM.
In partial consideration of the rights granted to LICENSEE under this
Agreement, Licensee shall pay to QUALCOMM an up-front fee CONFIDENTIAL TREATMENT
10
<PAGE>
4. TECHNICAL ASSISTANCE.
4.1 Technical Meetings and Assistance. Upon LICENSEE's reasonable
advance written request, QUALCOMM shall provide reasonable amounts of technical
assistance to LICENSEE on an as available basis and at QUALCOMM's then standard
rates for providing such technical assistance. In such event, QUALCOMM shall be
permitted to invoice LICENSEE for such charges on a biweekly basis. Payment by
LICENSEE with respect to such invoices shall be on a "net-30 day" basis after
the date of the invoice. QUALCOMM may terminate such additional technical
assistance at any time upon written notice to LICENSEE. This Agreement shall not
require QUALCOMM to provide any technical assistance relating to the design of
Components or any technical assistance not related to Subscriber Units.
4.2 Limitation on Deliverables. Nothing herein shall require the
delivery of any documentation, including but not limited to: (a) any Mask Sets
developed by QUALCOMM, (b) any micro-code for embedded processors or (c) any of
the detailed algorithms for the Components or the Subscriber Unit or the CDMA
Modem Card microprocessor.
4.3 Representations and Limitations on Furnished Information. QUALCOMM
shall use reasonable commercial efforts to verify the accuracy of the
information furnished by it hereunder, but QUALCOMM shall not be liable for
damages arising out of or resulting from anything made available hereunder or
the use thereof nor be liable to LICENSEE for consequential, special or
incidental damages under any circumstances. The sole obligation of QUALCOMM with
respect to such information shall, subject to the other provisions herein or in
other written agreements between the Parties, be to furnish it to LICENSEE.
QUALCOMM shall have no responsibility for the ability of LICENSEE to use such
information, the quality or performance of the products produced therefrom by
LICENSEE, or the claims of third parties arising from the use of such products
or information. QUALCOMM does not warrant and shall not be responsible for any
design, specification, drawing, blueprint, reproduced tracing, or other data or
information furnished by it to LICENSEE, except that it shall furnish such in
good faith to the best of QUALCOMM's knowledge and ability.
5. QUALCOMM LICENSE.
5.1 Grant of License From QUALCOMM. Subject to the terms and conditions
of this Agreement, including but not limited to timely payment of the license
fees and royalties set forth herein, QUALCOMM hereby grants to LICENSEE a
personal, nontransferable, worldwide and nonexclusive license under QUALCOMM's
Intellectual Property solely for Wireless Applications to (a) make (and have
made), import and use CDMA Modem Cards (provided such
11
<PAGE>
CDMA Modem Cards have been designed exclusively by or for LICENSEE and which
design is owned and used exclusively by LICENSEE), (b) Sell such CDMA Modem
Cards, but only to Unlicensed Customers (i.e., this provision does not grant
LICENSEE a license or any rights to directly or indirectly sell such CDMA Modem
Cards to a Licensed Customer), (c) to make (and have made) Components (provided
such Components have been designed exclusively by LICENSEE and which design is
owned and used exclusively by LICENSEE) and import, use and Sell such Components
but only if such Components are included as part of and within complete CDMA
Modem Cards Sold by LICENSEE in accordance with this Section 5.1 (or as
replacement parts for such CDMA Modem Cards previously sold by LICENSEE), and
(d) to make and use (but not to sell, lease, transfer or otherwise dispose of,
except as expressly provided in Section 5.2.1 below), solely for research and
development purposes, Complete CDMA Telephones that incorporate a CDMA Modem
Card designed and developed by LICENSEE. No other, further or different license
is hereby granted or implied. Notwithstanding anything in the foregoing,
LICENSEE's Sale of CDMA Modem Cards shall not convey to LICENSEE's customers any
right or license (express or implied) to any of QUALCOMM's Intellectual Property
that is not incorporated or implemented entirely within LICENSEE's CDMA Modem
Cards, including with respect to any claim in any QUALCOMM patent covering the
use of LICENSEE's CDMA Modem Cards in combination with any other product or
apparatus.
5.1.1 Sales to Licensed Customers. Although LICENSEE is not licensed
by QUALCOMM hereunder to Sell CDMA Modem Cards to Licensed Customers, nothing in
this Agreement shall be construed to prohibit LICENSEE from making or Selling
CDMA Modem Cards to a Licensed Customer solely in accordance with the "have
made" rights of such Licensed Customer as set forth in such Licensed Customer's
LC License Agreement and no royalty shall be payable by LICENSEE hereunder for
such Sales. Notwithstanding anything in the foregoing, nothing herein is
intended to (a) modify or amend the terms and conditions of any LC License
Agreement, including but not limited to the scope of such Licensed Customer's
"have made" rights or the royalties payable thereunder or (b) imply that such
Licensed Customer may deduct the price or cost of any CDMA Modem Card acquired
by such Licensed Customer from the price upon which such Licensed Customer is
obligated to compute and pay royalties to QUALCOMM under its LC License
Agreement for a Subscriber Unit that incorporates such CDMA Modem Card. LICENSEE
hereby represents and warrants that LICENSEE will not engage in any
transaction(s) that facilitate the Sale, whether directly or indirectly, of any
CDMA Modem Cards to a Licensed Customer, except as expressly provided for in
this Section 5.1.1.
12
<PAGE>
5.1.2 InterDigital's Patents. The license granted by QUALCOMM under
Section 5.1 with respect to InterDigital's Patents is subject to all other
limitations set forth in this Agreement that are applicable to all of QUALCOMM's
Intellectual Property licensed hereunder and is also subject to the following
limitations:
a. No provision set forth herein shall be construed so as
to grant any right or license under InterDigital's Included Patents with respect
to time division multiple access (TDMA) technology; provided, however, that such
limitations shall not in any way limit any of the rights granted under this
Agreement to utilize InterDigital's Patents to implement the CDMA (or non-TDMA)
aspects of any CDMA Modem Cards, even if such CDMA Modem Cards include TDMA;
provided, however, in such case only the non-TDMA use of such CDMA Modem Card
will be licensed under InterDigital's Patents. By way of example, if a CDMA
Modem Card can operate in both IS-54 (TDMA) and IS-95 (CDMA) modes, the use of
such CDMA Modem Card in the IS-54 TDMA mode would not be licensed.
b. With respect to the Non-Qualifying CDMA Modem Cards
manufactured and Sold by LICENSEE, the license granted by QUALCOMM under
InterDigital's Patents may terminate in accordance with the provisions set forth
below:
i. After November 2, 1996. If, at any time after
November 2, 1996, LICENSEE (or its Affiliate) initiates a CDMA patent
infringement lawsuit against InterDigital or its affiliates (or their customers)
asserting that any product manufactured and sold by InterDigital for use in
non-IS-95 based wireless applications infringes any patents and LICENSEE (or its
Affiliate) does not prevail in such lawsuit, then the license under
InterDigital's Patents granted by QUALCOMM to LICENSEE under this Agreement,
with respect only to Non-Qualifying CDMA Modem Cards, shall immediately
terminate.
ii. CDMA Modem Cards that Contain QUALCOMM's CDMA
ASICs. Notwithstanding whether or not the license under InterDigital's Patents
terminates as to Non-Qualifying CDMA Modem Cards, as set forth in paragraph b.
i. above, CDMA Modem Cards manufactured and Sold by LICENSEE which do
incorporate CDMA ASICs purchased from QUALCOMM will remain licensed under
InterDigital's Patents pursuant to Section 5.1.
c. The license under InterDigital's Patents is limited to
use in Wireless Applications that spread the CDMA signal over not more than a
10 MHz bandwidth.
13
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
5.2 Royalties. In partial consideration for such license from QUALCOMM,
LICENSEE shall pay to QUALCOMM, no later than thirty (30) days after the end of
each calendar quarter during the term of the License Agreement, an amount
CONFIDENTIAL TREATMENT
Sold by LICENSEE to an Unlicensed Customer during
such calendar quarter. Royalties shall be payable on CDMA Modem Cards Sold by
LICENSEE to Unlicensed Customers regardless of whether the use or incorporation
of QUALCOMM's Intellectual Property arises from the use of one or more
Components from whomsoever purchased by LICENSEE. Notwithstanding the foregoing,
in no event shall the actual royalty payable for each CDMA Modem Card Sold by
LICENSEE to an Unlicensed Customer be an amount that is less than the "Minimum
Royalty" described in the following table:
CONFIDENTIAL TREATMENT
QUALCOMM will credit to LICENSEE the amount of any overpayment of royalties made
hereunder in error provided that such overpayment is identified and fully
explained in a written notice from LICENSEE to QUALCOMM delivered no later than
six (6) months after the due date of the payment which included such alleged
overpayment, provided further that QUALCOMM is able to verify to its own
satisfaction the existence and extent of such overpayment. The foregoing
procedure shall constitute the sole basis for LICENSEE to claim overpayments
under this Agreement and shall not be affected by any statement appearing on any
check, royalty report, cover letter, or other document, except to the extent
agreed upon by QUALCOMM in a writing signed by an authorized representative of
QUALCOMM.
5.2.1 Prototype Complete CDMA Telephones. LICENSEE may provide a small
number of Complete CDMA Telephones that incorporate a LICENSEE CDMA Modem Card
to its CDMA Modem Card customers, however, no more than one thousand (1000) of
such Complete CDMA Telephones may be provided to any one customer in any one
calendar year. In the event that LICENSEE Sells such Complete CDMA Telephones to
its customers for consideration other than free of charge, then LICENSEE shall
pay to QUALCOMM a royalty on the Net Selling Price of such Complete CDMA
Telephones in accordance with the royalty set forth in Section 5.2 hereof.
Solely for the purposes of this Section, the definitions of "Selling Price" and
"Net
14
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
Selling Price" and Section 5.2 shall be deemed to read as though the term
"Complete CDMA Telephone" were substituted for "CDMA Modem Card".
5.2.2 Royalty Rate Discussions. At LICENSEE's reasonable request,
and no more than once annually, QUALCOMM agrees to meet or correspond with
LICENSEE to consider and discuss LICENSEE's proposals for new CDMA Modem Card
product categories, and the financial implications therefore (including royalty
rates and minimum royalty structures); provided that QUALCOMM shall have no
obligation to amend or modify this Agreement to incorporate any such proposals
or to modify or amend the terms of Section 5.2 of this Agreement.
5.3 Right To Sublicense Affiliates. LICENSEE shall have the right to
grant sublicenses only to Affiliates of LICENSEE with respect to any rights
conferred upon LICENSEE under this Agreement; provided, however, that (i)
LICENSEE shall not have the right to grant sublicenses to any Affiliate that is
not a wholly-owned subsidiary of LICENSEE without first obtaining QUALCOMM's
written approval, which approval shall be at QUALCOMM's sole discretion, and
(ii) any such sublicense shall be subject in all respects to the restrictions,
exceptions, royalty and other payment obligations, reports, termination
provisions, and other provisions contained in this Agreement. LICENSEE shall
also pay or cause its Affiliates to pay the same royalties on all CDMA Modem
Cards Sold by its Affiliates as if LICENSEE had Sold such CDMA Modem Cards.
LICENSEE shall report to QUALCOMM the Net Selling Price for all CDMA Modem Cards
Sold by each such Affiliate. LICENSEE, in addition to its Affiliates, shall be
responsible and liable to QUALCOMM in the event that any of its Affiliates fails
under any such sublicense to honor and comply with all obligations of LICENSEE
as though said obligations were made expressly applicable to the Affiliate. Any
sublicense by LICENSEE to an Affiliate of LICENSEE shall terminate immediately
if such Affiliate ceases to be an Affiliate of LICENSEE. Except as set forth
above, LICENSEE shall have no right to sublicense any of QUALCOMM's Intellectual
Property or any of the rights conferred upon LICENSEE under this Agreement.
5.4 Taxes. Any taxes, duties or imposts other than income or profits
taxes assessed or imposed upon the sums due hereunder in the United States,
shall be borne and discharged by LICENSEE and no part thereof shall be deducted
from the amounts payable to QUALCOMM under any clause of this Agreement, said
amounts to be net to QUALCOMM, free of any and all deductions. Notwithstanding
the foregoing, in the event sums payable under this Agreement (other than the
Up-Front License Fees payable under Section 3) become subject to income or
profits taxes under the tax laws of any country and applicable treaties between
the United States and such country, LICENSEE may, if and to the extent required
by law, withhold from each payment the amount of
15
<PAGE>
said income or profits taxes due and required to be withheld from each payment.
LICENSEE will furnish and make available to QUALCOMM relevant receipts regarding
the payment of any country taxes paid over to any country's government on behalf
of QUALCOMM. Such tax receipts will clearly indicate the amounts that have been
withheld from the gross amounts due to QUALCOMM. Any and all other taxes,
levies, charges or fees will be paid by LICENSEE for its own account.
5.5 Conversion to U.S. Dollars. Royalties shall be paid in U.S. dollars.
To the extent that the Net Selling Price for CDMA Modem Cards Sold by LICENSEE
outside of the United States is paid to LICENSEE other than in U.S. dollars,
LICENSEE shall convert the portion of the royalty payable to QUALCOMM from such
Net Selling Price into U.S. dollars at the official rate of exchange of the
currency of the country from which the Net Selling Price was paid, as quoted by
the U.S. Wall Street Journal (or the Chase Manhattan Bank or another agreed-upon
source if not quoted in the Wall Street Journal) for the last business day of
the calendar quarter in which such CDMA Modem Cards were Sold. If the transfer
of or the conversion into U.S. dollars is not lawful or possible, the payment of
such part of the royalties as is necessary shall be made by the deposit thereof,
in the currency of the country where the sale was made on which the royalty was
based to the credit and account of QUALCOMM or its nominee in any commercial
bank or trust company of QUALCOMM's choice located in that country, prompt
notice of which shall be given by LICENSEE to QUALCOMM.
5.6 Philips Covenant Not to Assert. QUALCOMM hereby represents and
warrants that Philips, on behalf of itself and its Affiliates, covenants that
Philips and its Affiliates will not assert any of the Philips' CDMA Technically
Necessary Patents against LICENSEE's (or, if sublicensed in accordance with
Section 5.3 of this Agreement, LICENSEE's Affiliates') manufacture, use, sale,
or importation of Qualifying CDMA Modem Cards solely for Wireless Applications;
provided, however, that Philips and/or its Affiliates may assert the Philips'
CDMA Technically Necessary Patents against LICENSEE if LICENSEE asserts any of
its patents against Philips or its Affiliates and any of their telephone
products or if LICENSEE initiates a declaratory judgment action, reexamination
proceedings or opposition proceedings challenging the validity of any of the
Philips' CDMA Technically Necessary Patents. Nothing in this Section 5.6 shall
prohibit, limit or covenant against Philips' rights to assert any of its patents
against LICENSEE or its Affiliates for infringement relating to any time
division multiple access (TDMA) equipment or system (including, without
limitation, GSM, IS-54, PCS-1800, and PCS-1900).
5.7 Ericsson Patents.
16
<PAGE>
5.7.1 Ericsson Patents Sublicensed. The term "Ericsson's Patents"
means all of the following patents which are owned or sublicenseable by Ericsson
without payment of any royalty or other consideration to a third party: (a)
Ericsson's patents which, but for the sublicenses granted under Section 5.7.2
below, would be infringed by the use of QUALCOMM's Chipset for their intended
purposes (the "Ericsson Chipset Patents"), and (b) Ericsson's Essential Patents
which are, or are claimed by Ericsson to be, essential to IS-95 Rev A or Rev B,
whether or not such Essential Patents are infringed by the use of QUALCOMM's
Chipset (the "Other Ericsson Patents"). For example, by incorporating QUALCOMM's
existing (as of the Effective Date) Chipset into a CDMA Modem Card Sold by
LICENSEE, the Ericsson's Patents sublicensed to LICENSEE would include, but not
necessarily be limited to all of the following patents that Ericsson asserted
against QUALCOMM in litigation: U.S. Patent Nos. 5,088,108 (RE 36,017),
5,209,528 (RE 36,079), 5,148,485, 5,193,140, 5,230,003, 5,239,557, 5,282,250,
5,327,577 (RE 36,078), 5,390,245, 5,430,760, and 5,551,073, and their foreign
counterparts, reissuances, divisionals, continuations and continuations in part.
The term "Essential Patents" means those patents (in any country of the
world) as to which it is, or is claimed by the patent owner to be, not possible
on technical (but not commercial) grounds, taking into account normal technical
practice and the state of the art generally available at the time of adoption or
publication of the relevant standard for CDMA Applications, to make, sell,
lease, otherwise dispose of, repair, use or operate equipment or methods which
comply with such standard without infringing such patent.
5.7.2 Sublicense Under Ericsson's Patents. The following sublicense
is granted subject to the terms and conditions of this Agreement (including but
not limited to the payment of royalties hereunder in accordance with Section
5.2) and Section 5.7.3 below: With respect only to those CDMA Modem Cards Sold
by LICENSEE and its Affiliates that contain QUALCOMM's Chipset, QUALCOMM hereby
grants to LICENSEE a sublicense under all of the Ericsson Chipset Patents solely
for CDMA Applications and under all of the Other Ericsson Patents solely for
IS-95 Related Systems to make (and Have Made), use, sell, offer for sale, lease
or otherwise dispose of, and import CDMA Modem Cards into which QUALCOMM's
Chipset is incorporated. Notwithstanding the foregoing, no right or sublicense
is being granted for or may be extended under patents that apply to the portion
of any product that implements an air interface other than CDMA or analog (e.g.,
no rights and sublicenses are granted for or may be extended under patents that
apply to the GSM part of any product).
5.7.3 Non-Assertion Against Ericsson. The sublicense granted to
LICENSEE under Section 5.7.2 above shall continue only so long as LICENSEE
17
<PAGE>
and its Affiliates do not assert, either in litigation or by a direct
communication, any Essential Patents for CDMA Applications against Ericsson's
CDMA subscriber, infrastructure or test equipment products, or if in the case of
such litigation or assertion LICENSEE dismisses such litigation or withdraws
such assertion or offers a royalty-free license under such patents within thirty
(30) days after QUALCOMM's receipt of notice from Ericsson of such litigation or
communication.
6. LICENSEE'S LICENSE.
6.1 Grant of License from LICENSEE. Subject to the terms and conditions
of this Agreement, LICENSEE hereby grants to (a) QUALCOMM a personal,
nontransferable, worldwide, nonexclusive, fully-paid and royalty free license
under LICENSEE's Intellectual Property to make (and have made), import, use and
sell, lease or otherwise dispose of Subscriber Units and CDMA Modem Cards, and
(b) QUALCOMM and a Successor (as defined below) a personal, nontransferable,
worldwide, nonexclusive, fully-paid and royalty free license under LICENSEE's
Intellectual Property to make (and have made), import, use, sell, lease or
otherwise dispose of Components. No other, further or different license is
hereby granted or implied. For purposes of this Section 6, a "Successor" means
any successor (by purchase, divestiture, merger or otherwise) to all or
substantially all of QUALCOMM's Components business.
6.2 Right To Sublicense Affiliates. In addition to Section 6.3, QUALCOMM
and the Successor shall have the right to grant sublicenses only to Affiliates
of QUALCOMM or the Successor, respectively, with respect to any rights conferred
upon QUALCOMM or the Successor under this Agreement; provided, however, that any
such sublicense shall be subject in all respects to the restrictions,
exceptions, termination provisions, and other provisions contained in this
Agreement. QUALCOMM (or the Successor), in addition to its Affiliates, shall be
responsible and liable to LICENSEE in the event that any of its Affiliates fails
under any such sublicense to honor and comply with all obligations of QUALCOMM
(or the Successor) as though said obligations were made expressly applicable to
the Affiliate. Except as set forth above, QUALCOMM and the Successor shall have
no right to sublicense any of LICENSEE's Intellectual Property. Any sublicense
by QUALCOMM or the Successor to an Affiliate of QUALCOMM or the Successor shall
terminate immediately if such Affiliate ceases to be an Affiliate of QUALCOMM or
the Successor, as the case may be.
6.3 Covenant Not to Assert. LICENSEE hereby covenants that neither it
nor its Affiliates will assert any of LICENSEE's or its Affiliates rights in
Technically Necessary IPR against any of QUALCOMM's other Subscriber Unit, CDMA
Modem Card or ASIC licensees (the "Authorized Licensees") which (a) use any of
LICENSEE's Technically Necessary IPR to make, use and sell Subscriber Units,
CDMA Modem Cards and/or Components for Wireless
18
<PAGE>
Applications and (b) have agreed with QUALCOMM to a similar undertaking not to
assert claims against LICENSEE and its Affiliates. LICENSEE does not by this
Section 6.3 agree, on behalf of itself or its Affiliates, to waive its rights to
assert any of its rights against any Authorized Licensee for using any of
LICENSEE's Commercially Necessary IPR. Any Authorized Licensee that has agreed
with QUALCOMM to a similar undertaking not to assert claims shall be regarded as
a third party beneficiary of this Section 6.3. QUALCOMM will promptly notify
LICENSEE of any Authorized Licensees that have agreed to such a similar
undertaking.
6.4 License Of Future Commercially Necessary IPR. Each Party agrees
that, to the extent it makes licenses of Future Commercially Necessary IPR
generally available to third parties, it will, if requested by the other Party,
offer such licenses to the other Party on commercially reasonable terms and
conditions.
6.5 LICENSEE Representation and Warranty. LICENSEE hereby represents and
warrants that LICENSEE has the authority on its own behalf and on behalf of
LICENSEE's Affiliates to grant the licenses and covenants provided under this
Section 6.
7. BEST EFFORTS TO MARKET AND SELL.
LICENSEE shall use its best efforts to market, promote and sell CDMA Modem
Cards on a worldwide basis.
8. MARKING; LABEL.
8.1 Patent Markings. LICENSEE agrees to affix to the exterior of each
CDMA Modem Card and the package containing such CDMA Modem Card a legible notice
reading: "Licensed by QUALCOMM Incorporated under one or more of the following
Patents," followed by a list of applicable patent numbers taken from the list of
QUALCOMM's patents or as may otherwise be instructed by QUALCOMM.
8.2 Logo. Attached hereto as Exhibit A is the CDMA designated logo (the
"Logo"). The Parties agree that QUALCOMM is the owner of the Logo. QUALCOMM
claims all common law trademarks in the Logo and has filed, or will file,
applications to obtain trademark registration for the Logo. If, for whatever
reason, registrations are not granted or use of the Logo is deemed by QUALCOMM
to be inadvisable, QUALCOMM shall have the right to either designate a new logo,
subject to LICENSEE's approval, which approval shall not be unreasonably
withheld, or terminate LICENSEE's right to use the Logo, or continue LICENSEE's
right to use the Logo under QUALCOMM's common law rights. Until the Logo is
properly registered, LICENSEE shall acknowledge
19
<PAGE>
QUALCOMM's ownership of same by displaying a superscript "TM" to the Logo (e.g.,
Logo (TM)), or stating that "the Logo is a trademark of QUALCOMM Incorporated.
8.3 Logo Display. Unless otherwise notified by QUALCOMM as set forth in
Section 8.2 above, LICENSEE shall prominently display the Logo on the exterior
of each CDMA Modem Card Sold by it. The exact exterior location and size shall
be subject to LICENSEE's reasonable discretion, provided that the Logo shall be
readable and shall be permanently affixed. The Logo shall be designed to remain
visibly displayed on the exterior of the CDMA Modem Card.
8.4 Trademark Limitation. LICENSEE does not hereby acquire, and shall
not attempt to acquire, by registration, use or otherwise, the Logo, or any
confusingly similar mark, or any other trademark, service mark or trade name of
or used by QUALCOMM, or any confusingly similar mark.
9. QUALITY CONTROL.
9.1 General Quality of CDMA Modem Cards. Throughout the term of this
Agreement, LICENSEE shall maintain, for the CDMA Modem Cards manufactured or
Sold by it, at least the same manufacturing, servicing and quality standards
currently utilized by LICENSEE in connection with its analog subscriber units,
modem cards or other comparable products.
9.2 Standards Compliance Testing. LICENSEE represents and warrants that
the CDMA Modem Cards and Components that it makes or has made will adhere with
and conform to, in all respects, the specifications contained in the CAI and
that LICENSEE shall comply with the rules, regulations or other requirements set
by such authorized standards body. LICENSEE shall, at QUALCOMM's reasonable
written request, permit QUALCOMM or entities designated by QUALCOMM and accepted
by LICENSEE, which acceptance shall not be unreasonably withheld or delayed, to
perform tests of LICENSEE's CDMA Modem Cards to ensure compliance and conformity
with the CAI. If such tests indicate material noncompliance or nonconformity
therewith, such tests shall be at LICENSEE's cost and LICENSEE shall reimburse
QUALCOMM for any such reasonable tests performed by QUALCOMM at QUALCOMM's then
standard rates for such services; provided that the total fees for each such
test performed shall not exceed $10,000 for each test. Nonconforming CDMA Modem
Cards, if any, shall not be sold or marketed by LICENSEE until the nonconformity
is corrected.
10. INFORMATION.
10.1 Restrictions on Disclosure and Use. All documentation and technical
and business information and intellectual property in whatever form
20
<PAGE>
recorded that a Party does not wish to disclose without restriction
("Information") shall remain the property of the furnishing Party and may be
used by the receiving Party only as follows. Such Information (a) shall not be
reproduced or copied, in whole or part, except for use as expressly authorized
in this Agreement; and (b) shall, together with any full or partial copies
thereof, be returned or destroyed when no longer needed or upon any termination
of this Agreement, and (c) shall be disclosed only to employees or agents of a
Party with a need to know. Moreover, such Information shall be used by the
receiving Party only for the purpose of performing under this Agreement or in
the exercise of its rights it may receive under the provisions of this
Agreement. Unless the furnishing Party consents in this Agreement or otherwise
in writing, such Information shall be held in strict confidence by the receiving
Party. The receiving Party may disclose such Information to other persons, upon
the furnishing Party's prior written authorization, but solely to perform acts
which this clause expressly authorizes the receiving Party to perform itself and
further provided such other person agrees in writing (a copy of which writing
will be provided to the furnishing Party at its request) to the same conditions
respecting use of Information contained in this clause and to any other
reasonable conditions requested by the furnishing Party. These restrictions on
the use or disclosure of Information shall not apply to any Information: (i)
which can be proven to be or have been independently developed by the receiving
Party or lawfully received free of restriction from another source having the
right to so furnish such Information; or (ii) after it has become generally
known to the public without breach of this Agreement by the receiving Party; or
(iii) which at the time of disclosure to the receiving Party was known to such
Party free of restriction and clearly evidenced by documentation in such Party's
possession; or (iv) which the disclosing Party agrees in writing is free of such
restrictions; or (v) which is the subject of a subpoena or other legal or
administrative demand for disclosure or is disclosed in response to a valid
order of a court or other governmental body, but only to the extent of and for
the purposes of such demand or order; provided, however, that such receiving
Party shall first notify the furnishing Party in writing of the demand or order
and permit and cooperate with the furnishing party in seeking an appropriate
protective order (or an equivalent mechanism for protecting such Information in
the relevant jurisdictions).
10.2 Scope of Information. Information is subject to this Section 10
whether delivered orally or in tangible form and without regard to whether it
has been identified or marked as confidential or otherwise subject to this
Section 10. Each Party agrees to use its best efforts to mark or otherwise
identify proprietary all Information they desire to be subject to the terms of
this clause before furnishing it to the other Party. And, upon request, a Party
shall promptly identify whether specified information must be held by the
requesting Party subject to this clause.
21
<PAGE>
10.3 Furnishing Information to Third Parties. Nothing herein shall be
deemed to bar disclosure of Information by a receiving Party to third parties,
with written consent of the furnishing Party, if such disclosure is reasonably
necessary for enjoyment of the disclosing Party's rights to use Intellectual
Property Rights licensed under this Agreement, and provided that each such third
party agrees in writing to protect the Information under terms and conditions
comparable, in all material respects, to the terms contained in this Section 10
and Section 18 with respect to survivability.
11. DISCLAIMER/LIMITATION OF LIABILITY.
11.1 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, QUALCOMM MAKES NO
WARRANTIES IN THIS AGREEMENT AS TO PRODUCTS, TECHNOLOGY, MATERIALS, SERVICES,
INFORMATION OR OTHER ITEMS IT FURNISHES TO LICENSEE, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, OR THAT SUCH ITEMS ARE FREE FROM THE RIGHTFUL CLAIM OF ANY
THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE.
QUALCOMM SHALL NOT BE LIABLE TO LICENSEE FOR ANY INCIDENTAL, CONSEQUENTIAL OR
ANY OTHER INDIRECT LOSS OR DAMAGE ARISING OUT OF THIS AGREEMENT OR ANY RESULTING
OBLIGATION OR THE USE OF ANY INTELLECTUAL PROPERTY RECEIVED HEREUNDER, WHETHER
IN AN ACTION FOR OR ARISING OUT OF BREACH OF CONTRACT, FOR TORT, OR ANY OTHER
CAUSE OF ACTION. LICENSEE SHALL BE PERMITTED TO ENJOIN THE UNAUTHORIZED USE BY
QUALCOMM OF ANY OF LICENSEE'S INFORMATION.
11.2 Negation of Representation and Warranties. Except as expressly
provided herein, nothing contained in this Agreement shall be construed as (a)
requiring the filing of any patent application, the securing of any patent or
the maintaining of any patent in force; (b) a warranty or representation by
either Party as to the validity or scope of any patent, copyright or other
intellectual property right; (c) a warranty or representation that any
manufacture, sale, lease, use or importation will be free from infringement of
patents, copyrights or other intellectual property rights of others, and it
shall be the sole responsibility of LICENSEE to make such determination as is
necessary with respect to the acquisition of licenses under patents and other
intellectual property of third parties; (d) an agreement to bring or prosecute
actions or suits against third parties for infringement; (e) an obligation to
furnish any manufacturing assistance; or (f) conferring any right to use, in
advertising, publicity or otherwise, any name, trade name or trademark, or any
contraction, abbreviation or simulation thereof (other than as set forth in
Section 8).
22
<PAGE>
12. INDEMNITY FOR DAMAGE TO PERSONS, PROPERTY OR BUSINESS.
12.1 Indemnification by LICENSEE. LICENSEE shall indemnify, defend and
hold QUALCOMM harmless from, any and all claims, judgments, liabilities, costs
and expenses (including attorneys' fees) arising out of or related, directly or
indirectly, to any injury, loss or damage to persons, property or business
arising from, relating to, or in any way connected with, any CDMA Modem Cards or
Components which LICENSEE or its Affiliates manufactures or has manufactured and
sells to a third party or an Affiliate. LICENSEE agrees to indemnify and hold
harmless QUALCOMM against all liability or responsibility to LICENSEE or to
others for any failure in production, design, operation or otherwise of products
manufactured by or on behalf of LICENSEE and Sold to third parties.
12.2 Indemnification by QUALCOMM. QUALCOMM shall indemnify, defend and
hold LICENSEE harmless from, any and all claims, judgments, liabilities, costs
and expenses (including attorneys' fees) arising out of or related, directly or
indirectly, to any injury, loss or damage to persons, property or business
arising from, relating to, or in any way connected with, any Subscriber Units,
CDMA Modem Cards or Components which QUALCOMM manufactures or has manufactured
and sells to a third party or an Affiliate. QUALCOMM agrees to indemnify and
hold harmless LICENSEE against all liability or responsibility to QUALCOMM or to
others for any failure in production, design, operation or otherwise of products
manufactured by or on behalf of QUALCOMM and Sold to third parties.
12.3 Notice, Defense and Cooperation. The party seeking indemnification
under Section 12.1 or 12.2 above shall provide the indemnifying party with
prompt notice of any claim within such provisions, shall give the indemnifying
party the full right to defend any such claim and shall cooperate fully in such
defense.
13. TERMINATION.
13.1 Termination For Cause by QUALCOMM. QUALCOMM may terminate this
Agreement, by written notice to LICENSEE, if LICENSEE shall at any time default
in the payment hereunder or the making of any report hereunder, or shall commit
any material breach of any covenant, representation, warranty or agreement
herein contained, or shall make any false report to QUALCOMM; provided, however,
that in the case of any such breach which is capable of being cured, QUALCOMM
shall not have a right to terminate this Agreement for cause unless and until
LICENSEE shall have failed to remedy any such default, breach or report within
thirty (30) days after written notice thereof by QUALCOMM. LICENSEE shall be
able to effectuate such cure with respect to a default in the making of any
report or payment of any amounts due hereunder
23
<PAGE>
no more than three times during the term of this Agreement. Upon termination of
this Agreement for cause, LICENSEE shall duly account to QUALCOMM for all
royalties and other payments within ten days of such termination.
13.2 Termination For Cause by LICENSEE. LICENSEE may terminate this
Agreement, by written notice to QUALCOMM, if QUALCOMM shall commit any material
breach of any material covenant, representation, warranty or agreement herein
contained; provided, however, that in the case of any such breach which is
capable of being cured, LICENSEE shall not have a right to terminate this
Agreement for cause unless and until QUALCOMM shall have failed to remedy any
such material breach within thirty (30) days after receipt by QUALCOMM of
written notice thereof by LICENSEE.
13.3 Bankruptcy, Dissolution or Liquidation. A Party shall provide written
notice (the "Notice") to the other Party immediately upon the occurrence of any
of the following events (the "Events"): (a) insolvency, bankruptcy or
liquidation or filing of any application therefor, or other commitment of an
affirmative act of insolvency; (b) attachment, execution or seizure of
substantially all of the assets or filing of any application therefore; (c)
assignment or transfer of that portion of the business to which this Agreement
pertains to a trustee for the benefit of creditors; (d) disposition, by sale or
assignment of all of its rights, of that portion of the business or the material
assets to which this Agreement pertains or of the majority of the equity or
voting stock of LICENSEE in violation of Section 15 of this Agreement; or (e)
termination of its business or dissolution. Either Party shall also have the
right to terminate this Agreement with immediate effect by giving written notice
of termination to the other Party at any time upon or before the later of (i)
sixty (60) days after the occurrence of any of the Events with respect to such
other Party (unless such event ceases within such period), or (ii) sixty (60)
days after receipt of the Notice (unless such event ceases within such period).
13.4 Termination in the Event of Litigation. QUALCOMM at its option may
terminate the license from QUALCOMM to LICENSEE in the event that LICENSEE
initiates any litigation against QUALCOMM or its Affiliates which includes any
claim for intellectual property infringement and LICENSEE does not prevail on
all such intellectual property infringement claims.
13.5 Rights Upon Termination. Upon any termination of this Agreement all
licenses granted by QUALCOMM hereunder shall also terminate and LICENSEE shall
immediately cease using any of QUALCOMM's Intellectual Property and return or
destroy all information and documentation furnished by QUALCOMM to LICENSEE. The
licenses granted by LICENSEE hereunder shall survive the termination of this
Agreement and remain in full force and effect thereafter until all of LICENSEE's
Intellectual Property has expired; except that,
24
<PAGE>
upon termination of this Agreement by LICENSEE for cause, all licenses granted
by LICENSEE hereunder shall also terminate and QUALCOMM shall immediately cease
using any of LICENSEE's Intellectual Property. Any termination or expiration of
this Agreement under this Section 13 shall not relieve LICENSEE from its
obligation under Section 14 hereof to make a report or from its liability for
payment of royalties on CDMA Modem Cards Sold on or prior to the date of such
termination and shall not prejudice the right to recover the full amount of the
Up-Front License Fee and any royalties or other sums due or accrued at the time
of such termination and shall not prejudice any cause of action or claim accrued
or to accrue on account of any breach or default. Furthermore, any termination
of this Agreement under this Section shall not prejudice the right of QUALCOMM
to conduct a final audit of the records of LICENSEE in accordance with the
provisions of Section 14 hereof. No termination hereunder shall limit the rights
of LICENSEE to sell those CDMA Modem Cards in inventory or in process at the
time of termination, subject to payment of the royalty applicable to the sale of
such CDMA Modem Cards and continued compliance with the other provisions of this
Agreement.
14. RECORDS AND AUDITS.
14.1 Records. LICENSEE shall keep accurate and complete books and records
concerning any CDMA Modem Cards it may sell under this Agreement. As applicable,
such books and records shall include the date of transaction involving sales of
CDMA Modem Cards, including the number of items Sold. LICENSEE shall require in
its agreements with sublicensees that each sublicensee agree to record keeping
and audits substantially the same as described in this Section 14. LICENSEE
hereby agrees to conduct periodic audits of its sublicensees as requested by
QUALCOMM. The results of such audits (together with all supporting information)
shall be included in the records described herein and subject to audit by
QUALCOMM as provided in this Section. QUALCOMM shall be an intended third party
beneficiary of LICENSEE's rights of audit with respect to its sublicensees, with
all proper authority to enforce such rights directly against any such
sublicensee. LICENSEE's agreements with its sublicensees shall expressly state
these third party beneficiary rights. LICENSEE shall furnish QUALCOMM within
thirty (30) days after the end of each calendar quarter a certificate, in the
form attached hereto as Exhibit B, signed by a responsible official of LICENSEE
showing the transactions and corresponding amounts during said calendar quarter
and any other information as may be reasonably requested by QUALCOMM.
14.2 Audits. QUALCOMM may, no more than once each calendar year, conduct
(itself and/or through its agent) an audit on reasonable notice of LICENSEE's
applicable books and records to confirm that LICENSEE has not underpaid the
royalties due to QUALCOMM in fulfilling LICENSEE's
25
<PAGE>
obligations under the terms and conditions set forth in Section 5.2 above.
QUALCOMM's written notice to LICENSEE of QUALCOMM's intention to audit
LICENSEE's books and records shall include a proposed commencement date for such
audit, such proposed commencement date to be no earlier than thirty (30) days
after the date of such notice. LICENSEE agrees to allow the audit to commence no
later than thirty (30) days after QUALCOMM's proposed audit commencement date.
LICENSEE further agrees to have assembled in a single location the necessary
books and records for such audit to be carried out and shall make available such
personnel as are reasonably necessary to interpret and explain such books and
records. The cost of such audit shall be borne by QUALCOMM, other than
LICENSEE's cost of providing its books, records and personnel, unless such audit
determines that the LICENSEE has underpaid the royalties due hereunder by the
lesser of (a) more than five percent (5%) or (b) one hundred thousand dollars
(US$100,000); in which case, LICENSEE shall, in addition to paying the
deficiency plus late payment charges, pay the cost of such audit. LICENSEE shall
preserve and maintain all such books and records required for audit for a period
of five (5) years after the calendar quarter for which the books and records
apply.
15. ASSIGNMENT.
Except as provided in this clause, LICENSEE shall not assign this
Agreement or any right or interest under this Agreement, nor delegate any work
or obligation to be performed under this Agreement (an "assignment"), without
QUALCOMM's prior written consent, which consent shall be at QUALCOMM's sole
discretion. Any attempted assignment in contravention of this Section 15 shall
be void and ineffective. For purposes of this Agreement, an "assignment" by
LICENSEE under this Section shall be deemed to include, without limitation, the
following: (a) a change in the beneficial ownership of LICENSEE of greater than
fifty percent (50%) (whether in a single transaction or a series of related
transactions) if LICENSEE is a partnership, trust, limited liability company or
other like entity; (b) the acquisition of more than fifty percent (50%) of any
class of LICENSEE's voting stock (or any class of non-voting security
convertible into voting stock) by a third party (whether in a single transaction
or series of related transactions) resulting in an effective change of control
of LICENSEE; or (c) the sale of more than fifty percent (50%) of LICENSEE's
assets (whether in a single transaction or series of related transactions).
16. COMPLIANCE WITH U.S. REGULATIONS.
Nothing contained in this Agreement shall require or permit LICENSEE or
QUALCOMM to do any act inconsistent with the requirements of (a) the regulations
of the United States Department of Commerce, or (b) the foreign assets controls
or foreign transactions controls regulations of the United States Treasury
Department, or (c) of any similar United States law, regulation or
26
<PAGE>
executive order as the same may be in effect from time to time. To enable
QUALCOMM to export QUALCOMM's Intellectual Property or technical data to
LICENSEE in compliance with the requirements of the Export Administration
Regulations (EAR), LICENSEE hereby gives its assurance to QUALCOMM that LICENSEE
will not re-export or otherwise disclose, directly or indirectly, any of
QUALCOMM's Intellectual Property or "technical data" received from QUALCOMM, nor
allow the direct product thereof to be shipped directly or indirectly to any of
the following countries; unless permitted by U.S. law in effect at the time of
such export:
Albania Libya
Afghanistan Lithuania
Angola
Armenia Macau
Azerbaijan Moldova
Belarus Mongolia
Bulgaria North Korea
Cambodia People's Republic Of China
Cuba Romania
Estonia Russia
Georgia Sudan
Iran Syria
Iraq Tajikistan
Kazakhstan Turkmenistan
Kyrgystan Ukraine
Laos Uzbekistan
Latvia Vietnam
LICENSEE agrees that no products, proprietary data, know-how, software, or other
information received from QUALCOMM will be directly employed in missile
technology, sensitive nuclear, or chemical biological weapons end uses or by
such end users. The foregoing obligations are U.S. legal requirements, and
therefore, such obligations shall survive any termination of this Agreement.
17. PUBLICITY.
Each Party shall submit to the other proposed copy of all advertising
wherein the name, trademark, code, specification or service mark of the other
Party is mentioned; and neither Party shall publish or use such advertising
without the other's prior written approval. Such approval shall be granted or
withheld as promptly as possible (usually within ten (10) days), and may be
withheld only for good cause.
18. SURVIVAL OF OBLIGATIONS.
27
<PAGE>
The Parties' rights and obligations which, by their nature, would continue
beyond the termination, cancellation, or expiration of this Agreement, including
but not limited to those rights and obligations of the parties set forth in
Section 10 entitled "INFORMATION," shall survive such termination, cancellation,
or expiration.
19. SEVERABILITY.
If any provision in this Agreement shall be held to be invalid or
unenforceable, the remaining portions shall remain in effect. In the event such
invalid or unenforceable provision is considered an essential element of this
Agreement, the Parties shall promptly negotiate a replacement provision.
20. NON-WAIVER.
No waiver of the terms and conditions of this Agreement, or the failure of
either Party strictly to enforce any such term or condition on one or more
occasions shall be construed as a waiver of the same or of any other term or
condition of this Agreement on any other occasion.
21. NOTICES.
All notices, requests, demands, consents, agreements and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be mailed to the Party to whom notice is to be given, by
facsimile, and confirmed by first class mail, postage prepaid, and properly
addressed as follow (in which case such notice shall be deemed to have been duly
given on the day the notice is first received by the Party):
QUALCOMM Incorporated Techfaith Wireless Communication
5775 Morehouse Drive Technology Limited
San Diego, CA 92121-1714 5/F M7 East
No. 1 Jiu Xian Qiao Dong Road
Chao Yang District,
Beijing, China, P.C #100016
Facsimile No.: (858) 658-2500 Facsimile No.: (8610) 8457 4122
Telephone No.: (858) 587-1121 Telephone No.: (8610) 6433 5588
Attn: President Attn: Dong Defu, Chairman
with a copy to: General Counsel
The above addresses can be changed by providing notice to the other Party
in accordance with this Section.
28
<PAGE>
22. PUBLICATION OF AGREEMENT.
Except as may otherwise be required by law or as reasonably necessary for
performance hereunder, each Party shall keep this Agreement and its provisions
confidential, and shall not disclose this Agreement or its provisions without
first obtaining the written consent of the other Party, which consent shall not
be unreasonably withheld. The confidentiality obligations hereunder do not apply
to the existence of this Agreement or the fact that QUALCOMM and LICENSEE have
executed this Agreement, but do apply to the terms and conditions of this
Agreement. Any press release or other announcement by either Party concerning
the entering into of this Agreement shall be subject to the prior written
approval of other Party, which approval shall not be unreasonably withheld. In
case a press release or other public announcement to the effect of the Parties'
entering into of this Agreement is issued by either Party pursuant to the
preceding sentence, (i) QUALCOMM may thereafter make a press release or other
public announcement to the effect that LICENSEE is one of QUALCOMM's licensees
for CDMA Modem Cards without prior written approval of LICENSEE and (ii)
LICENSEE may thereafter make a press release or other public announcement to the
effect that LICENSEE is licensed by QUALCOMM for CDMA Modem Cards without prior
written approval of QUALCOMM. Notwithstanding anything to the contrary herein,
QUALCOMM may identify LICENSEE on its public web site and other public documents
as a QUALCOMM CDMA Modem Card Licensee or authorized supplier.
23. APPLICABLE LAW; VENUE.
This Agreement is made and entered into in the State of California and
shall be governed by and construed and enforced in accordance with the laws of
the State of California without regard to conflict of laws principles. Any
dispute, claim or controversy arising out of or relating to this Agreement, or
the breach or validity hereof, except for those disputes expressly addressed in
Section 24 hereof, shall be adjudicated only by a court of competent
jurisdiction in the county of San Diego, State of California.
24. DISPUTES RELATING TO FOREIGN PATENTS.
Any controversy, claim or dispute (separately or collectively, the
"Dispute") as to whether a product manufactured and/or sold by LICENSEE outside
the United States would, but for the license granted hereunder, infringe any
foreign patent of QUALCOMM licensed hereunder and therefore is subject to
royalties hereunder, shall be resolved in accordance with the procedures
specified in this Section 24 which shall be the sole and exclusive procedures
for the resolution of any such Dispute.
29
<PAGE>
The Parties will attempt in good faith to resolve promptly any Dispute by
negotiations between senior executives of the Parties who have the authority to
settle the Dispute. If the Dispute is not resolved within thirty (30) days of a
party's written request for negotiation, either party may initiate arbitration
as hereinafter provided.
A Party desiring to commence arbitration shall provide written notice to
the other Party setting forth the Dispute(s) to be arbitrated. Within ten (10)
days of receipt of such written notice, the Parties will attempt in good faith
to reach agreement on an impartial arbitrator having as nearly as practicable
the following qualifications in order of importance: (1) at least ten years
experience in patent litigation, including substantial participation in at least
two patent trials, and/or ten years experience in patent prosecution in the
telecommunications field and/or at least three years experience as a Federal
Court of Appeals or District Court Judge, (2) expertise in the field of digital
spread spectrum communications as applied to the telecommunications industry,
and (3) some familiarity with the patent laws of the country or countries at
issue in the Dispute. In the event the Parties are unable to agree upon an
arbitrator within thirty (30) days of the above written notice, the arbitrator
shall be selected by Judicial Arbitration and Mediation Service/Endispute, Inc.
(or some similar company if the Judicial Arbitration and Mediation
Service/Endispute, Inc. is not available). The selected arbitrator shall be
impartial and shall have, as nearly as practicable, the qualifications set forth
above. The Parties will share equally the fees and expenses of the arbitrator.
The arbitration hearing shall commence in San Diego within 60 days of the
appointment of the arbitrator. The Parties shall be entitled to conduct
discovery prior to the arbitration hearing in accordance with the Federal Rules
of Civil Procedure, subject to any limitations ordered by the arbitrator.
The arbitration hearing shall be conducted in accordance with the Federal
Rules of Civil Procedure and the Federal Rules of Evidence or such other
procedures and rules set by the arbitrator. The arbitrator shall be authorized
and empowered only to rule as to whether products manufactured and/or Sold by
LICENSEE in a foreign country or countries would, but for the license granted
hereunder, infringe any claim of the applicable foreign patent(s) of QUALCOMM,
and if so, the amount of the royalties owed by LICENSEE as to such product(s)
under Section 5.2 of this Agreement. The arbitrator shall award attorneys' fees
and costs to the prevailing Party. The arbitrator shall have no authority to
determine whether or not any product(s) of LICENSEE imported into or
manufactured and/or Sold in the United States is subject to the payment of
royalties under this Agreement or to determine any other issue except those
expressly set forth above. The arbitrator shall have no authority to make any
finding or award as to the validity or enforceability of any patent.
30
<PAGE>
Where noted, certain information has been omitted pursuant to a request for
confidential treatment and filed separately with the SEC.
The final award of the arbitrator shall be rendered in writing and signed
by the arbitrator. The final award shall be entered within thirty (30) days of
the commencement of the arbitration hearing. Each Party agrees to abide by the
arbitration award, and to the enforcement of the arbitration award in the United
States. Each Party further agrees that judgment may be entered upon the award in
any court of competent jurisdiction in the United States.
25. LATE CHARGE.
Each Party may charge the other a late charge, with respect to any amounts
that the other owes hereunder and fails to pay on or before the due date, in an
amount equal to the lesser of CONFIDENTIAL TREATMENT. The Parties agree that
such late charges are administrative in nature and are intended to defray each
Party's costs in processing and handling late payments.
26. ATTORNEYS' FEES.
In the event of any proceeding to enforce the provisions of this
Agreement, the prevailing Party (as determined by the court) shall be entitled
to reasonable attorneys' fees as fixed by the court.
27. ENTIRE AGREEMENT.
The terms and conditions contained in this Agreement supersede all prior
and contemporaneous oral or written understandings between the Parties with
respect to the subject matter thereof and constitute the entire agreement of the
Parties with respect to such subject matter. Such terms and conditions shall not
be modified or amended except by a writing signed by authorized representatives
of both Parties.
28. INDEPENDENT CONTRACTORS.
The relationship between QUALCOMM and LICENSEE is that of independent
contractors. QUALCOMM and LICENSEE are not joint venturers, partners, principal
and agent, master and servant, employer or employee, and have no other
relationship other than independent contracting parties.
29. U.S. DOLLARS.
All payments to be made hereunder shall be made in dollars of the United
States of America by wire-transfer and at a bank to be designated by the payee.
31
<PAGE>
EXHIBIT
30. FORCE MAJEURE
Neither Party shall be in default or liable for any loss or damage
resulting from delays in performance or from failure to perform or comply with
terms of this Agreement (other than the obligation to make payments, which
shall not be affected by this provision) due to any causes beyond its reasonable
control, which causes include but are not limited to Acts of God or the public
enemy; riots and insurrections; war; fire; strikes and other labor difficulties
(whether or not the Party is in a position to concede to such demands);
embargoes; judicial action; lack of or inability to obtain export permits or
approvals, necessary labor, materials, energy, components or machinery; and acts
of civil or military authorities.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the Effective Date. This Agreement may be signed in counterpart.
QUALCOMM Incorporated Techfaith Wireless Communication
Technology Limited
BY: /s/ Greg R. Cobb BY: /s/ Dong Defu
---------------- -------------------------
GREG R. COBB
TITLE: Director
TITLE: VP/ASST. GM
32
<PAGE>
EXHIBIT A
For Second Generation Products (IS-95A/B)
CDMA BY
QUALCOMM
For Third Generation CDMA Products (Cdma2000 1xRTT, IxEV, 3x)
QUALCOMM(R)
3G CDMA
<PAGE>
EXHIBIT B
Royalty Certificate
(To Be Supplied by QUALCOMM)