Digital Audio System License Agreement - Dolby Laboratories Licensing Corp. and Sonic Foundry
[LOGO OF DOLBY LABORATORIES LICENSING CORPORATION APPEARS HERE]
DIGITAL AUDIO SYSTEM LICENSE AGREEMENT
PROFESSIONAL ENCODERS
AN AGREEMENT
------------
BY AND BETWEEN
--------------
Dolby Laboratories Licensing Corporation and Sonic Foundry
(hereinafter called "LICENSOR") (hereinafter called "LICENSEE")
of 100 Potrero Avenue of 100 South Baldwin Street,
San Francisco, CA 94103-4813 Suite 204
Madison, WI 53703
Facsimile telephone number of LICENSOR for transmission of quarterly royalty
reports (Section 4.05): (415) 863-1373
LICENSOR's bank and account number for wire transfer of royalty payments
(Section 4.05):
Bank: Wells Fargo Bank
Address: 464 California Street, San Francisco, CA 94104 U.S.A.
Account Name: Dolby Laboratories Licensing Corporation
Account Number: 4001-191451
ABA Number: 121000248
Identification of bank with respect to whose prime rate interest is calculated
on overdue royalties (Section 4.06): Wells Fargo Bank
Address of LICENSEE for communications not otherwise specified (Section 8.04):
SIGNATURES:
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On behalf of LICENSOR On behalf of LICENSEE
Signature: /s/ Lily S. Cheung Signature: /s/ RIMANTAS P. BUINEVICIUS
--------------------------------- ---------------------------
Name: Lily S. Cheung Name: RIMANTAS P. BUINEVICIUS
--------------------------------- ---------------------------
Title: Intellectual Property Manager Title: CEO
--------------------------------- ---------------------------
Place: San Francisco, California, U.S.A. Place: SONIC FOUNDRY, INC.
--------------------------------- ---------------------------
Date: July 28, 1997 Date: 6/27/97
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Witnessed By: Witnessed By:
/s/ Lara Thompson /s/ Kenneth A. Minor
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Effective Date of Agreement: July 28, 1997 Initial Payment: $10,000
<PAGE>
DIGITAL AUDIO SYSTEM LICENSE AGREEMENT
PROFESSIONAL ENCODERS
INDEX
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Preamble
I. DEFINITIONS
Section 1.01 - "LICENSOR"
Section 1.02 - "LICENSEE"
Section 1.03 - "Application"
Section 1.04 - "Patent"
Section 1.05 - "Related Application"
Section 1.06 - "Related Patent"
Section 1.07 - "Scheduled Patents"
Section 1.08 - "Dolby Digital AC-3 Audio System Specifications"
Section 1.09 - Section Deleted
Section 1.10 - "Licensed Device"
Section 1.11 - "Licensed Product"
Section 1.12 - "Patent Rights"
Section 1.13 - Section Deleted
Section 1.14 - "Sensitive Information"
Section 1.15 - "Non-Patent Country"
Section 1.16 - "LICENSEE's Trade Name and Trademarks"
Section 1.17 - Section Deleted
Section 1.18 - Section Deleted
Section 1.19 - The "Consumer Price Index"
Section 1.20 - The "Effective Date"
II. LICENSES GRANTED
Section 2.01 - Licenses Granted to LICENSEE
Section 2.02 - Limitation of Licenses Granted
III. OTHER OBLIGATIONS OF LICENSEE AND LICENSOR
Section 3.01 - Section Deleted
Section 3.02 - Section Deleted
Section 3.03 - Section Deleted
Section 3.04 - Patent Enforcement
Section 3.05 - Section Deleted
Section 3.06 - Patent Marking
Section 3.07 - Section Deleted
Section 3.08 - Section Deleted
Section 3.09 - License Notice
Section 3.10 - Section Deleted
Section 3.11 - Use of Sensitive Information
<PAGE>
IV. PAYMENTS
Section 4.01 - Initial Payment
Section 4.02 - Royalties
Section 4.03 - Manufacture of Licensed Products by Another Licensee
Section 4.04 - Royalty Applicability
Section 4.05 - Royalty Payments and Statements
Section 4.06 - Royalties in Non-Patent Country
Section 4.07 - Books and Records
Section 4.08 - Rights of Inspecting Books and Records
V. ARTICLE DELETED
VI. TERMINATION AND EFFECT OF TERMINATION
Section 6.01 - Expiration of Agreement
Section 6.02 - Termination for Cause
Section 6.03 - Option to Terminate in a Non-Patent Country
Section 6.04 - Effect of Termination
VII. LIMITATIONS OF RIGHTS AND AUTHORITY
Section 7.01 - Limitation of Rights
Section 7.02 - Limitation of Authority
Section 7.03 - Disclaimer of Warranties and Liability; Hold Harmless
Section 7.04 - Limitation of Assignment by LICENSEE
Section 7.05 - Compliance with U.S. Export Control Regulations
VIII. MISCELLANEOUS PROVISIONS
Section 8.01 - Language of Agreement; Language of Notices
Section 8.02 - Stability of Agreement
Section 8.03 - Public Announcements
Section 8.04 - Address of LICENSEE and LICENSOR for all Other Communications
Section 8.05 - Applicable Law
Section 8.06 - Choice of Forum; Attorneys' Fees
Section 8.07 - Construction of Agreement
Section 8.08 - Captions
Section 8.09 - Singular and Plural
Section 8.10 - Complete Agreement
Section 8.11 - Severability
Section 8.12 - Company Representation and Warranty
Section 8.13 - Execution
Appendix A - Scheduled Patents
Appendix B - Dolby Digital AC-3 Audio System
Appendix C - Preliminary Specifications for Dolby Digital AC-3 Encoders
Appendix D - Deleted
Appendix E - Royalty Schedule
<PAGE>
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DIGITAL AUDIO SYSTEM LICENSE AGREEMENT
WHEREAS, LICENSOR is engaged in the field of audio signal processing
systems and has developed signal processing systems useful for audio tape
recording and playback and for other applications; and
WHEREAS, LICENSOR has developed the model Dolby Digital AC-3 audio system
which uses a new technique for encoding and decoding of audio frequency data in
digital form with a substantially reduced bit-rate while maintaining a high
quality decoded audio signal;
WHEREAS, LICENSOR's model Dolby Digital AC-3 audio system and its
manufacture embody inventive subject matter which are the subject of
international patents and patent applications owned or licensable by LICENSOR,
WHEREAS, LICENSOR represents and warrants that it has rights to grant
licenses under such patents and patent applications;
WHEREAS, LICENSEE is engaged in the manufacture of equipment for the
encoding of entertainment source material into a variety of digitally
compressed formats;
WHEREAS, LICENSEE desires a non-exclusive license to manufacture and sell
professional encoding equipment using LICENSOR's model Dolby Digital AC-3 audio
system under LICENSOR's patents and patent applications; and
WHEREAS, LICENSOR is willing to grant such a license under the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, it is agreed by and between LICENSOR and LICENSEE as
follows:
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2
ARTICLE I
DEFINITIONS
Section 1.01 - "LICENSOR" means Dolby Laboratories Licensing Corporation, a
-------------------------
corporation of the State of New York, having a place of business as indicated on
the title page of this Agreement, and its successors and assigns.
Section 1.02 - "LICENSEE" means the corporation identified on the title
-------------------------
page of this Agreement and any subsidiary thereof of whose ordinary voting
shares more than 50% are controlled directly or indirectly by such corporation,
but only so long as such control exists.
Section 1.03 - "Application" means an application for the protection of an
----------------------------
invention or an industrial design; references to an "Application" shall be
construed as references to applications for patents for inventions, inventors'
certificates, utility certificates, utility models, patents or certificates of
addition, inventors' certificates of addition, utility certificates of addition,
design patents, and industrial design registrations.
Section 1.04.- "Patent" means patents for inventions, inventors'
-----------------------
certificates, utility certificates, utility models, patents or certificates of
addition, inventors' certificates of addition, utility certificates of addition,
design patents, and industrial design registrations.
Section 1.05 "Related Application" means an Application, whether
----------------------------------
international or in the same or another country or region, which
(1) is substantially the same as (e.g., it does not include any new matter
in the sense of the United States Patent Law) an Application or Patent listed in
Appendix A, entitled "Scheduled Patents and Applications," which is attached
hereto and forms an integral part of this Agreement (for example, without
limiting the foregoing; a continuation Application, a corresponding Application,
an Application to reissue, or a re-filed Application), or
(2) is substantially only a portion of (e.g., it contains less than an
Application or Patent listed in Appendix A and, it does not include any new
matter in the sense of the United States Patent Law) an Application or Patent
listed in Appendix A (for example, a divisional Application, or a corresponding
or refiled Application in the nature of a divisional Application).
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Section 1.06 - "Related Patent" means:
--------------------------------------
(1) a Patent granted on an Application listed in Appendix A,
(2) a Patent granted on a Related Application,
(3) a reissue of a Patent of Sections 1.06(1) or 1.06(2), and
(4) a reexamination certificate of a Patent of Sections 1.06 (1), 1.06(2),
or 1.06(3).
Section 1.07 - "Scheduled Patents" means the Applications and Patents
----------------------------------
listed in Appendix A together with Related Applications and Related Patents.
Applications and Patents which contain not only common subject matter but
also additional subject matter going beyond the disclosure of Applications and
Patents of this Section (for example, without limiting the foregoing, a
continuation-in-part Application, or a corresponding or re-filed Application in
the nature of a continuation-in-part Application) shall be deemed to be
Scheduled Patents only with respect to that portion of their subject matter
common to the Applications and Patents of this Section.
Section 1.08 - "Dolby Digital AC-3 Audio System Specifications" means the
---------------------------------------------------------------
specifications for the Dolby Digital AC-3 audio system, comprising the claims
and teachings of the Scheduled Patents, the Dolby Digital AC-3 audio system
operating parameters as specified in Appendix B entitled "Dolby Digital AC-3
Audio System," and the "Preliminary Specifications for Dolby Digital AC-3
Encoders" as specified in Appendix C. Appendices B and C are attached hereto and
form an integral part of this Agreement.
Section 1.09 - Section Deleted
------------------------------
Section 1.10 - "Licensed Device" means a digital audio circuit having Dolby
--------------------------------
Digital AC-3 Audio System Specifications, whether made in discrete component,
integrated circuit, or other forms, for encoding one audio channel into a
digital AC-3 bitstream. A circuit counts as one "Licensed Device" for each input
audio channel it can simultaneously encode.
Section 1.11 - "Licensed Product" means a complete ready-to-use electronic
---------------------------------
professional encoder product which:
(1) contains one or more Licensed Devices;
(2) is sold in conjunction with, or as an encoder product package that has
both video and audio encoding capabilities, the video component of which is
manufactured by LICENSEE; and
(3) is intended to encode one or more audio channels from digital or
analog sources into an AC-3 bitstream;
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(4) may have a built in "confidence" audio decoder for checking the
encoded bitstream. Such confidence decoder may not include Dolby Pro Logic
decoding capability, a noise sequencer, any bass management or level trims. It
may not be sold as a stand-alone unit.
A Licensed Product is not a semiconductor chip, a partially assembled
product, a product in kit form, or a knocked-down or semi-knocked-down product.
Section 1.12 "Patent Rights" means:
-----------------------------------
(1) the Scheduled Patents; and
(2) such Patents and Applications directed to Licensed Products that
LICENSOR may own or gain rights to license during the term of this Agreement and
which LICENSOR may agree to include in the Patent Rights without payment of
additional compensation by LICENSEE.
The Patent Rights do not include such other Applications and Patents as
LICENSOR does not agree to include in the Patent Rights without payment of
additional compensation by LICENSEE.
Section 1.13 - Section Deleted
------------------------------
Section 1.14 - "Sensitive Information" means non-technical proprietary
--------------------------------------
information of LICENSOR or L1CENSEE, including, without limiting the foregoing,
marketing information, product plans, business plans, royalty, and sales
information.
Section 1.15 - "Non-Patent Country" means a country in which there do not
-----------------------------------
exist, with respect to a Licensed Product, any Scheduled Patents including any
pending Application or unexpired Patent, which, but for the licenses herein
granted, are (or in the case of an Application, would be if it were an issued
Patent) infringed by the manufacture, and/or use, lease or sale of such Licensed
Product.
Section 1.16 - "LICENSEE's Trade Name and Trademarks" means any trade name
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or trademark used and owned by LICENSEE.
Section 1.17 - Section Deleted
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Section 1.18 - Section Deleted
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Section 1.19 - The "Consumer Price Index" means the U.S. City Average Index
-----------------------------------------
(base of 1982-1984=100) of the Consumer Price Index for All Urban Consumers as
published by the Department of Labor, Bureau of Labor Statistics of the United
States Government. In the event that said Index ceases to be published under its
present name or form or ceases to be published by the same government entity,
reference shall be made to the most similar index then available.
<PAGE>
5
Section 1.20 - The "Effective Date" of this Agreement is the date of
-----------------------------------
execution hereof by the last party to execute the Agreement, or, if this
Agreement requires validation by any governmental or quasi-governmental body,
the "Effective Date" is the date of validation of this Agreement.
ARTICLE II
LICENSES GRANTED
----------------
Section 2.01 - Licenses Granted to LICENSEE
-------------------------------------------
LICENSOR hereby grants to LICENSEE:
a personal, non-transferable, indivisible, and non-exclusive license
throughout the world under the Patent Rights, subject to the conditions set
forth and LICENSEE's performance of its obligations, including paying royalties
due, to make Licensed Products, and to use, lease and sell the same.
Section 2.02 - Limitation of Licenses Granted
---------------------------------------------
Notwithstanding the license granted under Section 2.01:
(1) no license is granted to lease, sell, transfer, or otherwise dispose
of any part of a Licensed Product, including, without limiting the foregoing, a
semiconductor chip specially adapted for use in a Licensed Product, which part
(a) is a material part of an invention which is the subject of a Scheduled
Patent and which part is not a staple article or commodity of commerce suitable
for substantial noninfringing use or (b) is not a spare part solely for the
repair of a Licensed Product manufactured by Licensee under this Agreement;
(2) no license is granted under this Agreement to lease, sell, transfer,
or otherwise dispose of any partially assembled products, products in kit form,
and knocked-down or semi-knocked-down products;
(3) no license is granted under this Agreement to copy any of LICENSOR's
own hardware designs or any of LICENSOR's proprietary software;
(4) no license is granted under this Agreement with respect to LICENSOR's
A-type, B-type, C-type, SR or S-type noise reduction systems;
(5) no license is granted under this Agreement with respect to LICENSOR's
Consumer Surround Decoder Systems;
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6
(6) no license is granted under this Agreement to use any Licensed
Trademark in connection with offering for sale or in advertising and/or
informational material relating to any Licensed Product;
(7) no right is granted with respect to LICENSOR's trade name "Dolby
Laboratories" except with respect to the use of said tradename on and in
connection with Licensed Products in the License Notice required by Section
3.09; and
(8) no right to grant sublicenses is granted under this Agreement.
ARTICLE III
OTHER OBLIGATIONS OF THE LICENSOR AND LICENSEE
----------------------------------------------
Section 3.01 - Section Deleted
------------------------------
Section 3.02 - Section Deleted
------------------------------
Section 3.03 - Section Deleted
------------------------------
Section 3.04 - Patent Enforcement
---------------------------------
LICENSEE shall immediately inform LICENSOR of all Infringements, potential
or actual, which may come to its attention, of the Patent Rights. It shall be
the exclusive responsibility of LICENSOR, at its own expense, to terminate,
compromise, or otherwise act at its discretion with respect to such
infringements. LICENSEE agrees to cooperate with LICENSOR by furnishing, without
charge, except out-of-pocket expenses, such evidence, documents and testimony as
may be required therein.
Section 3.05 - Section Deleted
------------------------------
Section 3.06 - Patent Marking
------------------------------
LICENSEE shall mark each Licensed Product in the form, manner and location
specified by LICENSOR, with one or more patent numbers of Patents in such
countries under which a license is granted under this Agreement.
Section 3.07 - Section Deleted
------------------------------
Section 3.08 - Section Deleted
------------------------------
Section 3.09 - License Notice
-----------------------------
On all Licensed Products, LICENSEE shall acknowledge that the Licensed
Products are manufactured under license from LICENSOR. The following notice
shall be used by LICENSEE on an
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7
exposed surface, such as the back or the bottom, of all Licensed Products:
"Dolby Digital AC-3 audio system manufactured under license from Dolby
Laboratories". Such notice shall also be used in all instruction and servicing
manuals unless such acknowledgment is clearly and unambiguously given in the
course of any textual descriptions or explanations.
Section 3.10 - Section Deleted
------------------------------
Section 3.11 - Use of Sensitive Information
-------------------------------------------
3.11(1) - By LICENSEE
---------------------
LICENSEE shall use all Sensitive Information obtained heretofore or
hereafter from LICENSOR solely for the purpose of manufacturing and selling
Licensed Products under this Agreement, shall not use such Sensitive Information
in an unauthorized way, and shall not divulge such Sensitive Information or any
portion thereof to third parties, unless such Sensitive Information (a) was
known to LICENSEE prior to its obtaining the same from LICENSOR; (b) becomes
known to LICENSEE from sources other than either directly or indirectly from
LICENSOR; or (c) becomes public knowledge other than by breach of this Agreement
by LICENSEE or by another licensee of LICENSOR. The obligations of this
subsection 3.11(1) shall cease six (6) years from the date on which such
Sensitive Information are acquired by LICENSEE from LICENSOR under this
Agreement.
3.11(2) - By LICENSOR
---------------------
Except as provided by Article IV of this Agreement, LICENSEE is not
obligated to disclose to LICENSOR any information that it deems proprietary or
sensitive. Except as provided by Article IV of this Agreement, LICENSOR has no
obligation to treat in confidence, nor to restrict, in any way, the use,
reproduction, or publication of information obtained from LICENSEE.
ARTICLE IV
PAYMENTS
--------
Section 4.01 - Initial Payment
------------------------------
LICENSEE shall promptly upon the Effective Date of this Agreement pay
LICENSOR the sum specified on the title page and shall pay all local fees,
taxes, duties, or charges of any kind and shall not deduct them from the payment
due.
<PAGE>
8
Section 4.02 - Royalties
-------------------------
Subject to the provisions of Section 4.05, LICENSEE shall pay to LICENSOR
royalties on Licensed Devices manufactured by or for LICENSEE and incorporated
in Licensed Products which are used, sold, leased, or otherwise disposed of by
LICENSEE, except for Licensed Devices incorporated in Licensed Products returned
to LICENSEE by customers of LICENSEE, other than in exchange for an upgraded
product, on which a credit has been allowed by LICENSEE to said customers. The
royalty payable shall be based on the number of Licensed Devices, hereinbefore
defined, contained in Licensed Products, which are used, sold, leased or
otherwise disposed of by LICENSEE in successive calendar quarters from the
effective date hereof, based on the schedule given in Appendix E of this
Agreement.
On the Effective Date of this Agreement, and annually thereafter on first
day of each calendar year, the rate at which the royalties are calculated shall
be adjusted in accordance with the Consumer Price Index. The adjustment shall be
made by multiplying the royalties calculated as specified above by the ratio
between the Consumer Price Index for the last month of the year preceding the
year in which the adjustment takes place and the Consumer Price Index for the
month of December 1993. LICENSOR will, during the first quarter of each calendar
year, or as soon as such information is known, if later, inform LICENSEE of the
adjustment ratio to be applied to royalties due in that year. The first
adjustment to royalty rates shall be made in the quarter commencing January 1,
1995.
Section 4.03 - Manufacture of Licensed Products by Another Licensee.
---------------------------------------------------------------------
If L1CENSEE purchases Licensed Products from or has Licensed Products made
for it by another party holding a Licensed Product license then LICENSEE shall
have no royalty obligation under this Agreement, but all other rights and
obligations of LICENSEE under this Agreement shall be fully effective.
Section 4.04 - Royalty Applicability
-------------------------------------
A Licensed Product shall be considered sold under Section 4.02 when
invoiced, or if not invoiced, delivered to another by LICENSEE or otherwise
disposed of or put into use by LICENSEE, except for consignment shipments, which
will be considered sold when the payment for such shipments is agreed upon
between LICENSEE and customer.
Section 4.05 - Royalty Payments and Statements
----------------------------------------------
Unless Licensed Products are manufactured for LICENSEE under the provisions
of Section 4.03 of this Agreement, LICENSEE shall render statements and royalty
payments as follows:
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9
(1) LICENSEE shall deliver to the address shown on the cover sheet of this
Agreement or such place as LICENSOR may from time to time designate, quarterly
reports certified by LICENSEE's chief financial officer or the officer's
designate within 30 days after each calendar quarter ending with the last day of
March, June, September and December. Alternatively, such reports may be
delivered by facsimile by transmitting them to LICENSOR's facsimile telephone
number shown on the cover sheet of this Agreement or such other number as
LICENSOR may from time to time designate. Royalty payments are due for each
quarter at the same time as each quarterly report and shall be made by wire
transfer in United States funds to LICENSOR's bank as identified on the cover
sheet of this Agreement or such other bank as LICENSOR may from time to time
designate. LICENSEE shall pay all local fees, taxes, duties, or charges of any
kind and shall not deduct them from the royalties due unless such deductions may
be offset against LICENSOR's own tax liabilities.
Each quarterly report shall:
(a) state the number of each model type of Licensed Products leased, sold,
or otherwise disposed of by LICENSEE during the calendar quarter with respect
to which the report is due;
(b) state the number of Licensed Devices in each model type of Licensed
Product; and
(c) contain such other information and be in such form as LICENSOR or its
outside auditors may prescribe. If LICENSEE claims less than full product
royalty (under Section 4.06) or no royalty due (under Section 6.03), LICENSEE
shall specify the country in which such Licensed Products were made, the country
in which such Licensed Products were sold, and the identity of the purchasers of
such Licensed Products.
(2) Any remittance in excess of royalties due with respect to the calendar
quarter for which the report is due shall be applied by LICENSOR to the next
payment due.
(3) LICENSEE's first report shall be for the calendar quarter in which
LICENSEE sells its first Licensed Product.
(4) LICENSEE shall deliver a final report and payment of royalties to
LICENSOR certified by LICENSEE's chief financial officer or the officer's
designate within 30 days after termination of this Agreement throughout the
world. Such a final report shall include a report of all royalties due with
respect to Licensed Products not previously reported to LICENSOR. Such final
report shall be supplemented at
<PAGE>
10
the end of the next and subsequent quarters, in the same manner as provided for
during the Life of the Agreement, in the event that LICENSEE learns of any
additional royalties due.
(5) LICENSEE shall pay interest to LICENSOR from the due date to the
date payment is made of any overdue royalties or fees, including the Initial
Payment, at the rate of 2% above the prime rate as is in effect from time to
time at the bank identified on the cover page of this Agreement, or another
major bank agreed to by the LICENSOR and LICENSEE in the event that the
identified bank should cease to exist, provided however, that if the interest
rate thus determined is in excess of rates allowable by any applicable law, the
maximum interest rate allowable by such law shall apply.
Section 4.06 - Royalties in Non-Patent Country
----------------------------------------------
If a Licensed Product is manufactured in a Non-Patent Country and used,
sold, leased or otherwise disposed of in a Non-Patent Country, be it the same or
a different Non-Patent Country, no royalties for the manufacture, use, sale,
lease or other disposal of the Licensed Products in such Non-Patent Country or
Countries shall be payable. This provision shall not apply and full royalties
shall be payable under Section 4.02:
(1) when Licensed Products are manufactured in any country which is not a
Non-Patent Country or are used, sold, leased or otherwise disposed of in any
country which is not a Non-Patent Country, be it the same country as the country
of manufacture or a different country; or
(2) when LICENSEE knows or has reason to know that the Licensed Products
manufactured in a Non-Patent Country and used, sold, leased or otherwise
disposed of in a Non-Patent Country are destined for use or for sale, lease or
other disposal in a country which is not a Non-Patent Country and LICENSOR
deems such sale to be for the purpose of defeating the royalty provisions of
this agreement.
Section 4.07 - Books and Records
--------------------------------
LICENSEE shall keep complete books and records of all sales, leases, uses,
returns, or other disposals by LICENSEE of Licensed Products.
Section 4.08 - Rights of Inspecting Books and Records
-----------------------------------------------------
LICENSOR shall have the right, through a professionally registered
accountant at LICENSOR's expense, to inspect, examine and make abstracts of the
said books and records insofar as may be necessary to verify the accuracy of
the same and of the statements provided for herein but such inspection and
examination shall be made during business hours upon reasonable notice and not
more
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11
often than once per calendar year. LICENSOR agrees not to divulge to third
parties any Sensitive Information obtained from the books and records of
LICENSEE as a result of such inspection unless such information (a) was known to
LICENSOR prior to its acquisition by LICENSOR as a result of such inspection;
(b) becomes known to LICENSOR from sources other than directly or indirectly
from LICENSEE; or (c) becomes a matter of public knowledge other than by breach
of this Agreement by LICENSOR.
ARTICLE V
ARTICLE DELETED
---------------
ARTICLE VI
TERMINATION AND EFFECT OF TERMINATION
-------------------------------------
Section 6.01 - Expiration of Agreement
--------------------------------------
Unless this Agreement already has been terminated in accordance with
the provisions of Section 6.02, this Agreement shall terminate five years
from the Effective Date and thereafter is renewable at LICENSEE's request at
same terms and conditions as in this Agreement, except that the royalty rates
shall be the same as LICENSOR offers to third parties at the time of renewal.
Section 6.02 - Termination for Cause
------------------------------------
At the option of LICENSOR, in the event that LICENSEE breaches any of its
material obligations under this Agreement, subject to the conditions of Section
6.04, this Agreement shall terminate upon LICENSOR's giving sixty (60) days
advance notice in writing, effective on dispatch of such notice, of such
termination, giving reasons therefor to LICENSEE, provided however, that, if
LICENSEE, within the sixty (60) day period, remedies the failure or default upon
which such notice is based, then such notice shall not become effective and this
Agreement shall continue in full force and effect. Notwithstanding the sixty day
cure period provided under the provisions of this Section 6.02, interest due
under Section 4.05 shall remain payable and shall not waive, diminish, or
otherwise affect any of LICENSOR's rights pursuant to this Section 6.02.
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12
Section 6.03 - Option to Terminate in a Non-Patent Country
----------------------------------------------------------
Subject to the provisions of Section 6.04, unless this Agreement already
has been terminated in accordance with the provisions of Section 6.01 or Section
6.02, LICENSEE shall have the option to terminate its license under this
Agreement with respect to a Non-Patent Country at any time after three years
from the Effective Date of this Agreement. Said option to terminate with respect
to such country shall be effective when LICENSOR receives LICENSEE's written
notice of its exercise of such option and shall be prospective only and not
retroactive.
Section 6.04 - Effect of Termination
------------------------------------
Upon termination of the Agreement, as provided in Sections 6.01 or 6.02, or
upon termination of the license under this Agreement with respect to a Non-
Patent Country in accordance with the option set forth in Section 6.03, with
respect to such country only, all licenses granted by LICENSOR to LICENSEE under
this Agreement shall terminate, all rights LICENSOR granted to LICENSEE shall
revest in LICENSOR, and all other rights and obligations of LICENSOR and
LICENSEE under this agreement shall terminate except that the following rights
and obligations of LICENSOR and LICENSEE shall survive to the extent necessary
to permit their complete fulfillment and discharge, with the exception that
subsection (9) shall not apply in case of termination under Section 6.01:
(1) LICENSEE's obligation to deliver a final royalty report and
supplements thereto as required by Section 4.05;
(2) LICENSOR's right to receive and LICENSEE's obligation to pay
royalties, under Article IV, including interest on overdue royalties, accrued or
accruable for payment at the time of termination and interest on overdue
royalties accruing subsequent to termination;
(3) LICENSEE's obligation to maintain books and records and LICENSOR's
right to examine, audit, and copy as provided in Section 4.07;
(4) any cause of action or claim of LICENSOR accrued or to accrue because
of any breach or default by LICENSEE;
(5) LICENSEE's obligations with respect to Sensitive Information under
Section 3.11(1) and LICENSOR's obligations with respect to Sensitive Information
under Section 4.08;
(6) LICENSEE's obligations to cooperate with LICENSOR with respect to
Patent enforcement under Section 3.04, with respect to matters arising before
termination;
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13
(7) LICENSEE's obligation to return to LICENSOR all documents and things
furnished to LICENSEE, and copies thereof, under the provisions of Section
3.11;
(8) LICENSEE's and LICENSOR's obligations regarding public announcements
under Section 8.03; and
(9) LICENSEE shall be entitled to fill orders for Licensed Products
already received and to make and sell Licensed Products for which
commitments to vendors have been made at the time of such termination, subject
to payment of applicable royalties thereon and subject to said Licensed
Products meeting LICENSOR's quality standards, provided that LICENSEE promptly
advises LICENSOR of such commitments upon termination.
The portions of the Agreement specifically identified in the sub-parts of
this Section shall be construed and interpreted in connection with such other
portions of the Agreement as may be required to make them effective.
ARTICLE VII
LIMITATIONS OF RIGHTS AND AUTHORITY
-----------------------------------
Section 7.01 - Limitation of Rights
-----------------------------------
No right or title whatsoever in the Patent Rights, Know-How, Licensed
Copyrighted Works, or the Licensed Trademarks is granted by LICENSOR to LICENSEE
or shall be taken or assumed by LICENSEE except as is specifically laid down in
this Agreement.
Section 7.02 - Limitation of Authority
--------------------------------------
Neither party shall in any respect whatsoever be taken to be the agent or
representative of the other party and neither party shall have any authority to
assume any obligation for or to commit the other party in any way.
Section 7.03 - Disclaimer of Warranties and Liability; Hold Harmless
--------------------------------------------------------------------
LICENSOR has provided LICENSEE the rights and privileges contained in this
Agreement in good faith. However, nothing contained in this Agreement shall be
construed as (1) a warranty or representation by LICENSOR as to the validity or
scope of any Patent included in the Patent Rights, (2) a warranty or
representation that the Dolby Digital AC-3 audio system technology, Patent
Rights, or any
<PAGE>
Licensed Device, Licensed Product, or part thereof embodying any of them will
be free from infringement of Patents, copyrights, trademarks, service marks, or
other proprietary rights of third parties; or (3) an agreement to defend
LICENSEE against actions or suits of any nature brought by any third parties.
LICENSOR disclaims all liability and responsibility for property damage,
personal injury, and consequential damages, whether or not foreseeable, that may
result from the manufacture, use, lease, or sale of Licensed Devices, Licensed
Products and parts thereof, and LICENSEE agrees to assume all liability and
responsibility for all such damage and injury.
LICENSEE agrees to indemnify, defend, and hold LICENSOR harmless from and
against all claims (including without limitation, product, liability claims),
suits, losses and damages, including reasonable attorneys' fees and any other
expenses incurred in investigation and defense, arising out of LICENSEE's
manufacture, use, lease, or sale of Licensed Devices, Licensed Products, or
parts thereof, or out of any allegedly unauthorized use of any trademark,
service mark, Patent, copyright, process, idea, method, or device (excepting the
Licensed Patent Rights) by LICENSEE or those acting under its apparent or actual
authority.
Section 7.04 - Limitation of Assignment by LICENSEE
---------------------------------------------------
The rights, duties and privileges of LICENSEE hereunder shall not be
transferred or assigned by it either in part or in whole without prior written
consent of LICENSOR. However, LICENSEE shall have the right to transfer its
rights, duties and privileges under this Agreement in connection with its merger
and consolidation with another firm or the sale of its entire business to
another person or firm, provided that such person or firm shall first have
agreed with LICENSOR to perform the transferring party's obligations and duties
hereunder.
Section 7.05 - Compliance with U.S. Export Control Regulations
--------------------------------------------------------------
(1) LICENSEE agrees not to export any technical data acquired from
LICENSOR under this Agreement, nor the direct product thereof, either directly
or indirectly, to any country in contravention of United States law.
(2) Nothing in this Agreement shall be construed as requiring LICENSOR to
export from the United States, directly or indirectly, any technical data or any
commodities to any country in contravention of United States law.
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
------------------------
Section 8.01 - Language of Agreement; Language of Notices
---------------------------------------------------------
The language of this Agreement is English. If translated into another
language, this English version of the Agreement shall be controlling. Except as
may be agreed by LICENSOR and LICENSEE, all notices, reports, consents, and
approvals required or permitted to be given hereunder shall be written in the
English language.
Section 8.02 - Stability of Agreement
-------------------------------------
No provision of this Agreement shall be deemed modified by any acts of
LICENSOR, its agents or employees or by failure to object to any acts of
LICENSEE which may be inconsistent herewith, or otherwise, except by a
subsequent agreement in writing signed by LICENSOR and LICENSEE. No waiver of a
breach committed by either party in one instance shall constitute a waiver or a
license to commit or continue breaches in other or like instances.
Section 8.03 - Public Announcements
-----------------------------------
Neither party shall at any time heretofore or hereafter publicly state or
imply that the terms specified herein or the relationships between LICENSOR and
LICENSEE are in any way different from those specifically laid down in this
Agreement. LICENSEE shall not at any time publicly state or imply that any
unlicensed products use the Dolby Digital AC-3 Audio System Specifications. If
requested by one party, the other party shall promptly supply the first party
with copies of all public statements and of all publicity and promotional
material relating to this Agreement, the Dolby Digital AC-3 Audio System
Specifications, and Licensed Products.
Section 8.04 - Address of LICENSOR and LICENSEE for all Other
-------------------------------------------------------------
Communications
--------------
Except as otherwise specified in this Agreement, all notices, reports,
consents, and approvals required or permitted to be given hereunder shall be in
writing, signed by an officer of LICENSEE or LICENSOR, respectively, and sent
postage or shipping charges prepaid by certified or registered mail, return
receipt requested showing to whom, when and where delivered, or by Express mail,
or by a secure overnight or one-day delivery service that provides proof and
date of delivery, or by facsimile, properly addressed or transmitted to
LICENSEE or LICENSOR, respectively, at the address or facsimile number
<PAGE>
set forth on the cover page of this Agreement or to such other address or
facsimile number as may from time to time be designated by either party to the
other in writing. Wire payments from LICENSEE to LICENSOR shall be made to the
bank and account of LICENSOR as set forth on the cover page of this agreement or
to such other bank and account as LICENSOR may from time to time designate in
writing to LICENSEE.
Section 8.05 - Applicable Law
-----------------------------
This Agreement shall be construed in accordance with the substantive laws,
but not the choice of law rules, of the State of California.
Section 8.06 - Choice of Forum: Attorneys' Fees
-----------------------------------------------
To the full extent permitted by law, LICENSOR and LICENSEE agree that their
choice of forum, in the event that any dispute arising under this agreement is
not resolved by mutual agreement, shall be the United States Courts in the
State of California and the State Courts of the State of California.
In the event that any action is brought for any breach or default of any of
the terms of this Agreement, or otherwise in connection with this Agreement, the
prevailing party shall be entitled to recover from the other party all costs and
expenses incurred in that action or any appeal therefrom, including without
limitation, all attorneys' fees and costs actually incurred.
Section 8.07 - Construction of Agreement
----------------------------------------
This Agreement shall not be construed for or against any party based on any
rule of construction concerning who prepared the Agreement or otherwise.
Section 8.08 - Captions
-----------------------
Titles and captions in this Agreement are for convenient reference only and
shall not be considered in construing the intent, meaning, or scope of the
Agreement or any portion thereof.
Section 8.09 - Singular and Plural
----------------------------------
Throughout this Agreement, words in the singular shall be construed as
including the plural and words in the plural shall be construed as including the
singular.
Section 8.10 - Complete Agreement
---------------------------------
This Agreement contains the entire agreement and understanding between
LICENSOR and LICENSEE and merges all prior or contemporaneous oral or written
communication between them. Neither L1CENSOR nor LICENSEE now is, or shall
hereafter be, in any way bound by any prior,
<PAGE>
contemporaneous or subsequent oral or written communication except insofar as
the same is expressly set forth in this Agreement or in a subsequent written
agreement duly executed by both LICENSOR and LICENSEE.
Section 8.11 - Severability
---------------------------
Should any portion of this Agreement be declared null and void by operation
of law, or otherwise, the remainder of this Agreement shall remain in full force
and effect.
Section 8.12 - Company Representation and Warranty
--------------------------------------------------
LICENSEE represents and warrants to LICENSOR that it is not a party to any
agreement, and is not subject to any statutory or other obligation or
restriction, which might prevent or restrict it from performing all of its
obligations and undertakings under this License Agreement, and that the
execution and delivery of this Agreement and the performance by LICENSEE of its
obligations hereunder have been authorized by all necessary action, corporate or
otherwise.
Section 8.13 - Execution
------------------------
IN WITNESS WHEREOF, the said LICENSOR has caused this Agreement to be
executed on the cover page of this Agreement, in the presence of a witness, by
an officer duly authorized and the said LICENSEE has caused the same to be
executed on the cover page of this Agreement, in the presence of a witness by an
officer duly authorized, in duplicate original copies, as of the date set forth
on said cover page.
<PAGE>
APPENDIX A - SCHEDULED PATENTS
The Scheduled Patents shall mean the following patents and patent
applications:
PATENTS
-------
Country Patent Number
------- -------------
Australia 631,404
Australia 644,170
Australia 649,786
Australia 653,582
Australia 655,053
Australia 655,535
Austria 0 524 264
Belgium 0 208 712
Belgium 0 481 374
Belgium 0 524 264
Canada 1,239,701
Canada 1,301,337
Canada 2,026,213
Denmark 0 208 712
Denmark 0 481 374
Denmark 0 524 264
France 0 208 712
France 0 455 738
France 0 481 374
France 0 524 264
Germany 690 060 11.4
Germany 691 078 41.6
Greece 0 524 264
Italy 0 208 712
Italy 0 524 264
Netherlands 0 455 738
Netherlands 0 524 264
Spain 0 524 264
Sweden 0 524 264
Switzerland 0 524 264
Taiwan 52,047
Taiwan 53,726
Taiwan 56,006
Taiwan 60,430
United Kingdom 0 208 712
United Kingdom 0 455 738
United Kingdom 0 524 264
United States of America 4,790,016
United States of America 4,914,701
United States of America 5,109,417
United States of America 5,235,671
United States of America 5,274,740
United States of America 5,291,557
United States of America 5,297,236
United States of America 5,357,594
United States of America 5,394,473
United States of America 5,463,424
United States of America 5,479,562
<PAGE>
PATENT APPLICATIONS
-------------------
Country Application Number
------- ------------------
Australia 53266/94
Australia 73357/94
Australia 73621/94
Australia 73642/94
Australia 75531/94
Australia 76765/94
Australia 11305/95
Austria 92 904 177.0
Belgium 92 904 177.0
Canada 2,053,064-2
Canada 2,059,141
Canada 2,077,662
Canada 2,077,668
Canada 2,103,051
Canada 2,140,678
Canada 2,142,092
Canada 2,164,964
Canada 2,165,450
Canada 2,166,551
Canada 2,167,523
Canada 2,167,527
China 91 102 167.1
Denmark 92 904 177.0
Europe 92 903 819.8
Europe 94 107 838.8
Europe 93 108 874.4
Europe 92 912 812.2
Europe 93 923 341.7
Europe 94 922 554.4
Europe 94 925 719.0
Europe 94 927 268.6
Europe 94 922 585.8
Europe 94 923 506.3
France 92 904 177.0
Germany 92 904 177.0
Italy 92 904 177.0
Japan 2-503825
Japan 3-508357
Japan 4-504474
Japan 4-503836
Japan 5-500680
Japan 6-510170
Japan 7-504717
Japan 7-506055
Japan 7-508213
Japan 7-504753
Japan 7-504747
<PAGE>
PATENT APPLICATIONS (continued)
-------------------------------
Country Application Number
------- ------------------
Korea 90-702194
Korea 92-702394
Korea 92-702095
Korea 92-702096
Korea 95-700769
Netherlands 92 904 177.0
Singapore
Spain 92 204 177.0
Sweden 92 904 177.0
Switzerland 92 904 177.0
United Kingdom 92 904 177.0
United States of America 07/927,429
United States of America 08/115,513
United States of America 08/145,975
United States of America 08/190,655
United States of America 08/472,231
United States of America 08/478,983
United States of America 08/481,638
<PAGE>
APPENDIX B - "DOLBY DIGITAL AC-3 AUDIO SYSTEM"
Compliance with the algorithm description and operating parameters as specified
in ATSC document A/52, the "Dolby Digital AC-3 Licensee Information Manual", the
"Software Interface Protocol" issued by Dolby and any further reasonable
specifications and requirements as DOLBY may issue from time to time.
<PAGE>
APPENDIX C - PRELIMINARY SPECIFICATIONS FOR DOLBY DIGITAL AC-3 ENCODERS
Dolby Digital AC-3 audio system encoding equipment shall comply with the
following specifications in production (when measured through a standard
decoder):
Audio data rate for two channels: 192 kb/sec
Frequency Response: 20 Hz - 20 kHz +/- 0.2 dB
Dynamic Range: Greater than 85 dB
Distortion: Less than 0.1% at 1 kHz
Less than 0.5%, 20 Hz - 20 kHz
Crosstalk: Less than -80 dB
Level Stability: Better than 0.2 dB
<PAGE>
APPENDIX D - Deleted
<PAGE>
APPENDIX E - ROYALTY SCHEDULE
MANUFACTURING PATENT RIGHTS ONLY $ 5.00 per Licensed Device