"The relevant question right now is whether VRNG is seeking the 3.5% royalty rate for negotiating purposes only or do they have their expert witnesses ready to offer up a substantial historical look at the past that maybe able to justify the trial end risk award of something close if not 3.5% should they prevail?"
But I think I found a licensing agreement (Marchex and Overture)
that may be the foundation for the 3.5% royalty rate VRNG is asking for. This is
verified by reading the Sept 8th transcript of Dr. Becker's Deposition,
where they ask him about Marchex's market cap back in 2004.
Snippet from License Agreement between Overture
and Marchex, Inc. from 2-14-2005
(link to Full Document: http://www.sec.gov/Archives/edgar/data/1224133/000119312505067127/dex1015.htm)
OVERTURE LICENSE AGREEMENT
This
License Agreement is effective by and between Overture Services, Inc.
(“Overture”) and Marchex, Inc. (“Licensee”) on the date on which Licensee
completes its acquisition of the domains currently owned by Name Development
Ltd. (“Effective Date”).
WITNESSETH
WHEREAS, Overture, as a result of its research and development and
pursuant to assignment, is the owner of all right, title and interest in and to
certain inventions relating to
improvements in search engine methods and apparatus for use with computer
networks such as the Internet; and
WHEREAS, Overture and Licensee desire to enter into this Agreement
pursuant to which Overture will license to Licensee, and Licensee will license
from Overture, certain patents subject to the terms and conditions hereof;
NOW,
THEREFORE, in consideration of the mutual covenants herein contained, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
DEFINITIONS
As
used in this Agreement, the following terms shall be defined as set forth:
“Change in Control” means (a) a merger, consolidation or other
reorganization to which Licensee is a party, if the individuals and entities who
were stockholders (or partners or members or others that hold an ownership
interest) of Licensee immediately prior to the effective date of the transaction
have “beneficial ownership” (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of less than fifty percent (50%) of the total
combined voting power for election of directors (or their equivalent) of the
surviving entity following the effective date of the transaction, (b)
acquisition by any entity or group of direct or indirect beneficial ownership in
the aggregate of then issued and outstanding securities (or other ownership
interests) of Licensee in a single transaction or a series of transactions
representing in the aggregate forty percent (40%) or more of the total combined
voting power of Licensee, or (c) a sale of all or substantially all of
Licensee’s assets.
“Earned Royalties” means royalties paid or payable by Licensee to
Overture pursuant to Section 4.2 below.
“Gross
Revenue” means amounts earned by Licensee resulting from revenue ***
attributable to the use, performance or other exploitation of the Licensed
Patents, to the extent applicable, after deducting any taxes that Licensee may
be required to collect, and deducting any international sales, goods and
services, VAT or similar taxes which Licensee is required to pay, if any,
excluding deductions for taxes on Licensee’s net income. ***
| [***] | Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
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In cases in which
Licensee operates the Licensee System to provide search results for partners or
affiliates, the total revenue earned before any revenue sharing with such
partners or affiliates shall be included in Gross Revenue.
“License” means the license granted pursuant to Section 2.1.
“Licensed Patents” means U.S. Patent Nos. 6,269,361 (“the ‘361
patent”), *** for the ‘361, *** patents (or respective foreign counterpart
patents).
“Licensee System” means the “Paid Listing” systems, technologies,
methodologies, services, and products, as currently available at Licensee’s
website, www.enhance.com and www.goclick.com as the same have been made
available prior to the Effective Date or are made available from time to time
during the Term, by Licensee and its wholly-owned subsidiaries.
“Quarter” means the three-month periods ending March 31, June 30,
September 30 and December 31 of each Royalty Year.
“Royalty Year” means each Royalty Year (or remainder thereof) during
the term of this Agreement.
ARTICLE II
GRANT OF LICENSE; ACKNOWLEDGEMENTS; RELEASE
2.1
Subject to the terms and conditions of this Agreement, Overture hereby grants to
Licensee and its subsidiaries a worldwide non-exclusive, non-transferable,
non-assignable, and non-sublicensable limited license under the Licensed Patents
to allow Licensee to use the Licensed Patents, to the extent applicable, in
connection with Licensee’s operation of the Licensee System. Any entities or
businesses acquired by Licensee after the Effective Date shall be included
hereunder only as of such date of acquisition, and this Agreement shall not
apply to release any such after-acquired businesses or entities from potential
claims based upon or arising out of the Licensed Patents before such date of
acquisition. No other license, express or implied, is granted to Licensee under
any other patent, patent application, or other proprietary right of Overture.
2.2
Licensee’s acceptance of this grant of license is not an admission of use,
performance or exploitation of the Licensed Patents in connection with the
businesses of Licensee and its wholly-owned subsidiaries prior to the Effective
Date, nor an obligation to use, perform or otherwise exploit the Licensed
Patents in connection with its Licensee System or other businesses during the
Term hereof. Licensee shall not be restricted in any manner from licensing,
developing or otherwise acquiring intellectual property that may substitute or
be used in conjunction with the Licensed Patents to the extent applicable.
| [***] | Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
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2.3
Except as to executory performances required under this Agreement, Overture
hereby unconditionally assigns, releases and absolutely and forever discharges
Licensee and its wholly-owned subsidiaries at the date of this Agreement, and
each of their past, present, and future officers, directors, employees, agents
and representatives, and predecessors, and each of them, from any and all
claims, demands, damages, debts, losses, causes of action, costs, expenses,
accounts, obligations, attorney’s fees, liabilities, actions, causes of actions
and indemnities of all and any nature whatsoever, under the law of any
jurisdiction worldwide, whether known or unknown, suspected or unsuspected,
whether concealed or hidden, which Overture now has, owns or holds or at any
time heretofore ever had, owned or held, or could, shall or may hereafter have,
own or hold against Licensee and its wholly-owned subsidiaries, based upon or
arising out of the Licensed Patents prior to the Effective Date (collectively
referred to as the “Released Matters”). It is the intention of the parties in
executing this Agreement that this Agreement shall be effective as a full and
final accord and satisfaction and general release of and from the Released
Matters. With respect to any and all of the claims encompassed by this Section,
Overture intends to and does hereby expressly waive, to the fullest extent
permitted by law, the provisions, rights, and benefits of Section 1542 of the
California Civil Code, which provides that:
A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have a materially affected his settlement with the debtor.
Overture further agrees
that it may hereafter discover facts in addition to or different from those
which are known or believed by Overture to be true with respect to the subject
matter of this Section, but Overture nonetheless intends to, and does hereby
fully, finally, and forever release any and all such claims, as described above,
without regard to the subsequent discovery or existence of such different or
additional facts.
ARTICLE III
TERM OF LICENSE
3.1
Unless sooner terminated in accordance with this Agreement, the License shall
continue for the entirety of the term of the last to expire (including by a
final determination of invalidity or unenforceabilty) of the Licensed Patents
(the “Term”).
ARTICLE IV
ROYALTIES
4.1 As
consideration for the rights granted hereunder, and including payment for
Licensee’s manufacture, offer for sale, sale and use under the Licensed patents
prior to the Effective Date, Licensee shall make a one-time payment of
$5,174,000.00 (the “Upfront Payment”), payable pursuant to Article V. The amount
of the Upfront Payment is inclusive of any applicable taxes under any
jurisdiction worldwide.
4.2 In
addition, as further consideration for the rights granted herein and taking into
consideration the ongoing and valuable business relationship between the
parties,
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Licensee shall pay
to Overture a favorable royalty rate of 3.75% (“Royalty Rate”) of
Licensee’s Gross Revenue through December 31, 2016, after which no further
royalty payments for the Licensed Patents shall be due. *** The amount of
the Royalty Rate is inclusive of any applicable taxes under any jurisdiction
worldwide.
4.3
Overture and Licensee are simultaneously entering into an agreement entitled
Overture Master Agreement and dated the same as the Effective Date herein. The
Upfront Payment will be discounted to $4,500,000.00 provided that this amount is
paid in its entirety in accordance with Section 5.1 and the Overture Master
Agreement remains in effect until *** which is the *** of the *** of the
Overture Master Agreement; otherwise, no discount shall apply to any portion of
the Upfront Payment. The Royalty Rate also will be discounted by 20% to 3.0% so
long as the Overture Master Agreement remains in force and effect.
ARTICLE V
PAYMENTS AND REPORT
5.1
The total amount of the Upfront Payment shall be paid within *** of the
Effective Date.
5.2
Within *** after the end of each *** thereafter, Licensee shall furnish to
Overture *** in a form mutually agreed by the parties, and certified by an
officer of Licensee to be correct to the best of Licensee’s knowledge and
information, setting forth the *** applied thereto, and the *** payable thereon.
Each *** shall be accompanied by Licensee’s payment of the amount due. All
payments under this Agreement shall be in U.S. dollars.
5.3
Any payments, or portions thereof, more than *** overdue will bear a late
payment fee of ***, or, if lower, the maximum rate allowed by applicable law.
ARTICLE VI
BOOKS AND RECORDS
6.1
Licensee shall maintain complete and accurate records and books of account in
sufficient detail and form to enable determination and verification of *** until
*** after the expiration or termination of this Agreement. Overture shall have
the right, at its expense (except as provided below), to audit Licensee’s books
and records for the purpose of verifying *** during the term of this Agreement
and for a period of *** after expiration or termination of this
| [***] | Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
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Agreement. Any audits
made pursuant to this Section 6.1 shall be made not more than *** written
notice, during regular business hours, by independent auditors reasonably
acceptable to Licensee. For any audit performed hereunder, if the auditor’s
calculation of *** is less than *** of the figures provided by Licensee in the
***, then (i) Licensee shall also pay the reasonable cost of the audit and (ii)
such audit shall not count against the *** under this Section 6.1.
ARTICLE VII
CONFIDENTIALITY
7.1
The terms of this Agreement are confidential. Notwithstanding the
confidentiality of this Agreement, the parties may disclose the existence (but
not any of its terms) of this Agreement to any third party; provided, however,
that Licensee shall not make any statements to the media or issue any other
press releases whatsoever regarding this Agreement without the prior written
consent of Overture. If either party determines upon the advice of legal counsel
that disclosure of this Agreement to a third party is required under applicable
law, then such disclosure may be made provided that the disclosing party gives
notice in writing to the other party at least *** in advance of such disclosure
and makes a good faith effort, in consultation with the other party, to take
appropriate measures to ensure that the terms of this Agreement remain
confidential to the extent permitted by law.
ARTICLE VIII
TERMINATION
8.1
Overture may terminate this Agreement in its entirety or for a particular
country or website following *** written notice to Licensee, in the event
Licensee:
(a) fails to make, within the *** period set by the notice, any
payment which is due and payable pursuant to this Agreement and has been in
arrears for more than ***; or
(b) commits a material breach of any other obligation of this
Agreement that is not cured (if capable of being cured) within the *** period
set by the notice; or
(c) becomes insolvent or, a petition in bankruptcy is filed against
Licensee and is consented to, acquiesced in or remains undismissed for ***; or
makes a general assignment for the benefit of creditors, or a receiver is
appointed for Licensee, and Licensee does not return to solvency before the
expiration of said *** period set by the notice.
8.2
Licensee shall have the right to terminate this Agreement for any reason upon
*** prior written notice. In addition, Licensee shall be entitled to terminate
this Agreement upon *** written notice to Overture in the event of Overture’s
material breach of any of the provisions or this Agreement that is not cured (if
capable of being cured) within the *** period set by the notice.
| [***] | Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
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8.3
Termination of this Agreement for any reason shall not affect any rights or
obligations accrued prior to the effective date of such termination, and
specifically Licensee’s obligation to pay all of the ***, specified by Article
IV; and Licensee’s obligations of confidentiality specified in Article VII, and
the provisions of Articles V, VI, IX, and X shall survive the termination of
this Agreement. In the event of termination, *** shall become due and payable as
of the date of termination.
8.4
The rights provided in this Article VIII shall be in addition and without
prejudice to any other rights which the parties may have with respect to any
breach or violations of the provisions of this Agreement.
8.5
Waiver by either party of a single default or breach or of a succession of
defaults or breaches shall not deprive such party of any right to terminate this
Agreement pursuant to the terms hereof upon the occasion of any subsequent
default or breach.
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