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International Production Rights Agreement
Int. Business Transactions ( ....1995) Chapter 25 B - 5
This International production rights agreement was designed to authorize a joint venture partner to make copies of a United States manufacturer's (Product) for distribution in (Country). It is one of a number of agreements and relies heavily on references to a distribution agreement which included additional protections for the intellectual property, including use of the trademarks and tradename. It is the result of negotiation and does not include all the clauses which one side or the other might want in an ideal situation. The agreement was entered into between joint venture partners for reasons peculiar to the transaction, but in most cases this agreement would be entered into between the (Product) manufacturer and the joint venture itself. The agreement contemplates that, on formation of a joint venture entity, the (Country) partner would assign its rights under the agreement to the joint venture.
The most important consideration in these agreements is protection of the manufacturer's rights in the (Product). This was particularly true in Brazil which, at one time, required submittal of source code as part of the registration process. (Country) law still required registration at which time the (Product) would be compared against local (Country) (Product) to make sure that the market was not already served by a similar product. The manufacturer's concern in this case was that the right to copy and distribute be pursuant to an enforceable license agreement. The production rights agreement does not grant any distribution right but rather a right to copy only. Distribution rights for these copies is granted pursuant to the referenced distribution agreement. As is typical of most license agreements this is a non-exclusive non-transferable license, allowing the manufacturer to grant other companies the same rights and preventing the distributor from transferring these rights to another party.
The production rights agreement was one piece of the transaction which also entailed a shareholder agreement between the manufacturer and local distributor governing their rights in a joint venture established for the purposes of distributing the manufacturer's products. A distribution agreement between the manufacturer and the joint venture provided the manufacturer with revenue from (Product) sales and a management agreement between the (Country) distributor and the joint venture provided the (Country) partner with revenue for the support services it provided. The production rights agreement not only gave the (Country) partner (and subsequently the joint venture) rights to copy but also served as another source of revenue for the United States manufacturer.
In consideration of the right to make copies the (Country) distributor is required to make payment net of tax. The tax clause is a typical gross-up clause which provides for an increase in the payment in the event withholding applies. The (Product) manufacturer requires a tax receipt for the payment because it will need to report the gross number as income, not the net, and will be able to deduct local taxes paid from its foreign earned income.
The local distributor needed the right not only to copy the (Product) but the accompanying documentation as well. This would include operating manuals and marketing literature which, under this agreement, could be translated into local language. Although translation of the material and copying of the (Product) is authorized, the (Product) manufacturer does not warrant the copies or the translations. Sections 8 and 9 provide that the (Product) manufacturer warrants only the original copies it provides under the agreement and the distributor indemnifies the manufacturer for any liability incurred by the manufacturer as a result of the distributor's performance under the agreement.
Finally, the agreement provides for termination in case the distribution agreement has been terminated or has expired or if the rights under the agreement were not assigned to the joint venture. Any person wishing to structure a similar transaction must pay careful attention to the intellectual property laws in the local jurisdiction and determine whether reference to separate agreements which include more IP protection would be enforceable or whether it would be preferable to restate these protections.
PRODUCTION RIGHTS AGREEMENT
AGREEMENT made as of the ___ day of _____________ 20 __ MICROTECH CORPORATION, with its principal office at (Country, City, State, Zip), ("MICROTECH") and INTERNATIONAL DISTRIBUTORS LTD, with its principal office at (Country, City, State, Zip), ("INTERNATIONAL DISTRIBUTORS LTD").
1. Purpose. MICROTECH agrees to grant to INTERNATIONAL DISTRIBUTORS LTD a limited license for production rights to MICROTECH's proprietary "Multisense" (Product) products and Multisense documentation (collectively the "Multisense Products") under the terms and conditions of this Agreement.
2. Grant of License/Production Rights. Subject to payment by INTERNATIONAL DISTRIBUTORS LTD to MICROTECH of the amount set forth in Section 3 below, MICROTECH grants to INTERNATIONAL DISTRIBUTORS LTD a non-exclusive, non-transferable license to make copies of the Multisense Products up to the cumulative value of (USD $___________) (as determined by MICROTECH's then current standard Distributor List Price) for the sole purpose of assigning such limited production rights to the subsidiary which INTERNATIONAL DISTRIBUTORS LTD will be forming under the Joint Venture agreement between the parties. Such subsidiary will be distributing certain mutually agreed to MICROTECH products in accordance with MICROTECH's standard International Distribution Agreement ("International Distribution Agreement").
INTERNATIONAL DISTRIBUTORS LTD further agrees to require, as a condition of such assignment, such subsidiary to be bound by all of INTERNATIONAL DISTRIBUTORS LTD's obligations set forth in this Production Rights Agreement. INTERNATIONAL DISTRIBUTORS LTD shall not use the Multisense Products for any other purpose or in any other manner.
It is an express condition of this Agreement that title to, ownership of, and all rights in patents, copyrights and trade secrets in the Multisense Products and any copy or part of such Multisense Products shall not transfer to INTERNATIONAL DISTRIBUTORS LTD and shall remain in MICROTECH and/or MICROTECH's vendors.
3. Payment. In consideration of such license for limited production rights, INTERNATIONAL DISTRIBUTORS LTD agrees to pay MICROTECH the amount of (USD $------). In the event MICROTECH does not receive such payment, this Agreement shall automatically be terminated.
Payments to MICROTECH shall be made without deduction for taxes, imposts, customs, levies or other withholding ("Tax") or shall be grossed-up to provide MICROTECH the same amount after such Tax as it would have received without the imposition of such Tax, together with tax receipts or similar evidence of payment by INTERNATIONAL DISTRIBUTORS LTD INTERNATIONAL DISTRIBUTORS LTD shall also be responsible, at its own expense, for obtaining all necessary export and import permits and certificates.
4. Term. The term of this Agreement shall commence as of the date set forth above and shall end on the earlier of (i) failure of INTERNATIONAL DISTRIBUTORS LTD to assign such limited production rights to the subsidiary by __________, (ii) termination as set forth in Section 7 of this Agreement, or (iii) expiration or termination of the International Distribution Agreement to be entered into between INTERNATIONAL DISTRIBUTORS LTD's new subsidiary and MICROTECH
5. Copies/Translations. MICROTECH will provide INTERNATIONAL DISTRIBUTORS LTD with one (1) master copy for each Multisense Product. INTERNATIONAL DISTRIBUTORS LTD shall ensure that all copies of the Multisense Products (i) are serialized, (ii) properly contain MICROTECH and MICROTECH's vendor's copyright and proprietary notices and (iii) are equal in quality and appearance to the Multisense Product distributed by MICROTECH INTERNATIONAL DISTRIBUTORS LTD agrees to maintain complete records (as required by Section 13.2 of the International Distribution Agreement) of all copies of the Multisense Products and to make these records available to MICROTECH on request. INTERNATIONAL DISTRIBUTORS LTD may, at its own expense, translate the Multisense documentation into Portuguese provided such translation does not materially alter the Multisense documentation.
6. International Distribution Agreement. For the purposes of defining certain rights and obligations in regards to the limited production rights granted hereunder, the terms and conditions of the International Distribution Agreement referenced in Section 2 above shall apply to this Agreement. Such incorporation shall not in any way be construed as creating a distributor relationship between INTERNATIONAL DISTRIBUTORS LTD and MICROTECH
7. Termination. This Agreement shall terminate automatically if INTERNATIONAL DISTRIBUTORS LTD assigns or attempts to assign its rights under this Agreement to any third party except as expressly agreed to in writing by MICROTECH INTERNATIONAL DISTRIBUTORS LTD may terminate this Agreement on (--) days prior written notice to MICROTECH, however, INTERNATIONAL DISTRIBUTORS LTD shall not be entitled to a refund or credit for any amounts paid if MICROTECH has not receive payment as set forth in Section 3 above or if INTERNATIONAL DISTRIBUTORS LTD otherwise breaches this Agreement.
On termination of this Agreement, INTERNATIONAL DISTRIBUTORS LTD shall, at MICROTECH'S direction, either immediately return or destroy the Multisense Products master copies and all portions and copies, and if requested by MICROTECH, certify in writing that all copies have been so returned or destroyed.
8. Limited Warranty and Remedy. MICROTECH agrees to warrant the Multisense Products master copies in accordance with the warranty provisions set forth in Section 8 of the International Distribution Agreement. Copies of the Multisense Products made by INTERNATIONAL DISTRIBUTORS LTD shall be excluded from such warranties.
9. Limitation of Liability/Indemnity. The limitation of liability provisions set forth in Section 9 of the International Distribution Agreement shall apply to this Agreement. In addition, COMPANY AGREES TO HOLD MICROTECH AND MICROTECH'S VENDORS HARMLESS FROM ALL CLAIMS OR LIABILITY (WHETHER IN CONTRACT, WARRANTY, NEGLIGENCE, TORT OR OTHERWISE) ARISING DIRECTLY OR INDIRECTLY FROM COMPANY'S ACTIVITIES UNDER THIS AGREEMENT
10. Export Administration/Compliance With Laws. INTERNATIONAL DISTRIBUTORS LTD expressly agrees to comply with Section 13 of the International Distribution Agreement relating to compliance with United States export administration regulations and other applicable laws and regulations.
IN WITNESS WHEREOF, INTERNATIONAL DISTRIBUTORS LTD and MICROTECH hereby duly execute this Agreement on the date first written above.
New Company USA Software Corporation
*** If Required By Federal Or State Law ***
This Section for Notary:
State of _________
County of ________ [COUNTY]
On [DATE] before me, [NAME OF NOTARY], notary, personally appeared [NAME OF PERSON(S) INVOLVED], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____