Patent Rights Agreement - Henry C. Yuen

Exhibit 10.3


REDACTED VERSION
Execution Copy


PATENT RIGHTS AGREEMENT


*** Confidential treatment has been requested as to certain
portions of this agreement. Such omitted confidential
information has been designated by an asterisk and has been
filed separately in accordance with the Securities and
Exchange Act of 1934, as amended, and the Commission's rules
and regulations promulgated under the Freedom of Information
Act, pursuant to a request for confidential treatment. ***


This Patent Rights Agreement (this "Agreement"), is entered into on November 7, 2002 (the "Effective Date"), by and between Gemstar-TV Guide International, Inc., a Delaware corporation (the "Company") and Henry C. Yuen, an individual ("Yuen"). The Company and Yuen may at times be referred to individually as a "Party" or collectively as the "Parties."


WITNESSETH:


WHEREAS, Yuen and the Company are, concurrently herewith, entering into certain agreements, including without limitation (i) that certain Termination Agreement of even date herewith relating to the termination of Yuen's employment with Company under his current employment agreement (the "Termination Agreement") and (ii) that certain Employment Agreement of even date herewith (the "Employment Agreement"), pursuant to which Yuen, among other things, is agreeing to assign to the Company all right, title and interest in certain inventions as more fully described therein;


WHEREAS, Yuen may from time to time after the expiration of the term of the Employment Agreement develop certain Inventions relating to the fields of Interactive Program Guides or Interactive Television (as such terms are defined below);


WHEREAS, Yuen recognizes that such Inventions are likely to arise from or relate to confidential information of the Company, developed or learned by Yuen in the course of his prior employment by the Company, and that the nature of such Inventions are global in application;


WHEREAS, the Company desires to acquire from Yuen, and Yuen desires to grant to the Company, an option to acquire all right, title and interest in and to such Inventions conceived or made by Yuen, whether individually or jointly, after the Commencement Date and prior to the end of the Term (as such terms are defined below) that relate in whole or in part to the fields of Interactive Program Guides or Interactive Television, in accordance with the terms and conditions set forth herein; and


WHEREAS, the Company desires to have Yuen consult with the Company with respect to such Inventions made during the Term of this Agreement, and Yuen is willing to consult with the Company on the terms set forth herein;


WHEREAS, Yuen desires to acquire from the Company, and the Company desires to grant to Yuen, a license-back of certain exclusive rights in certain Acquired Inventions (as defined below) in accordance with the terms and conditions set forth herein.


WHEREAS, by virtue of Yuen's background and experience, the personal services called for hereunder are special, unique, unusual, extraordinary and intellectual;


NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:


1. Definitions.


(a) "Disclosure" shall mean a disclosure made pursuant to the provisions of Section 2(a) or 2(f).


(b) "Commencement Date" shall mean the earlier of the fifth anniversary of the Effective Date or the day of expiration or earlier termination of the Employment Agreement.


(c) "Fee-Bearing Products" shall mean products, services, means, processes or functions within the fields of Interactive Program Guides and Interactive Television.


(d) "Interactive Television" shall mean any means, product, system, or process: ***


(e) "Interactive Program Guide" shall mean any means, product, system or process ***


(f) "Viewer means one who receives, whether at the time of transmission or at a later time, Television Content or Digital Radio Content; an "iTV Viewer" means one who receives, whether at the time of transmission or at a later time, Television Content.


(g) "Television Content" means information transmitted in an analog or digital television signal or information transmitted in substantially the same form from a single source to many recipients, irrespective of the means of transmission or the apparatus used to reproduce such content; and "Digital Radio Content" means information concurrently transmitted in substantially the same form from a single source to many recipients as Digital Radio; provided, however, that "transmission" for purposes of these definitions shall not include (x) the distribution of physical media (e.g., CD's, DVD's, video cassettes and other physical media of any type) having copies of audio or video content stored on the physical media; or (y) transmission of information using systems such as telephone-based conferencing systems. For illustrative purposes only, Television Content or Digital Radio Content transmitted via over-the-air broadcast, cable, telephone lines or satellite, or downloaded directly to a recipient for storage on a personal video recorder or recordable CD or DVD, would be included within the scope of these definitions of "Television Content" and "Digital Radio Content," respectively.


(h) "Digital Radio" shall mean the communication of an audio signal in digital format by transmission of the signal from a transmitter to a receiver, where the receiver processes the received signal using digital signal processing techniques.


*** Confidential treatment has been requested pursuant to Section IV.4 of the request for confidential treatment dated November 12, 2002.


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(i) "Inventions" shall mean inventions (whether or not patentable) including all embodiments of such inventions, developments, concepts, know-how, technology, ideas, methods, techniques, products or processes.


(j) The following principles shall be used to apply the definitions of "Interactive Television" and "Interactive Program Guide":


(i) Living Definitions. For the purpose of determining whether an Invention is within or outside of the fields of Interactive Television and Interactive Program Guide, the above definitions are intended to be "living definitions" in that, as used in these definitions, while the term "television" shall mean television in all forms generally known as of the Effective Date, it is intended to include the future evolution of television, taking into account improvements, enhancements and developments therein, and the convergence of television with personal computers and the Internet.


(ii) Inventions Intended to Improve, Evolve or Further Develop Interactive Television and/or Interactive Program Guide. An Invention intended to improve, evolve or further develop any means, product, system or process within the definitions of Interactive Television and/or Interactive Program Guide shall be deemed to be included within the fields of Interactive Television and Interactive Program Guide for the purpose of Section 2 of this Agreement, even though at the time of conception of the Invention, the Invention may not fall within the then applicable definitions of Interactive Television and Interactive Program Guide.


(iii) Inventions Not Intended to Improve, Evolve or Further Develop Interactive Television and Interactive Program Guide. If an Invention which is not intended to improve, evolve or further develop any means, product, system or process within the definitions of Interactive Television and/or Interactive Program Guide, and which is outside of the fields of Interactive Television and Interactive Program Guide at the time Yuen's obligation to disclose under Section 2 arises, but which later becomes applicable to the fields of Interactive Television and/or Interactive Program Guide after the Commencement Date and during the Term of this Agreement due to the effect of the "Living Definitions" of these terms, then Yuen shall be obligated to disclose and grant to the Company an option to acquire such Invention pursuant to Section 2 hereof.


(iv) Definition Conferral Process. On the second anniversary of the Effective Date, and every two (2) years thereafter during the Term, the Parties shall meet and confer in good faith regarding the applicability of the definitions of Interactive Television and Interactive Program Guide to the business of the Company and the evolution of television, and modify such definitions as appropriate in accordance with the intentions of the Parties under the Living Definitions. Any disagreements between the Parties regarding the modifications of such definitions shall be resolved by the arbitration process set forth below.


(j) "Inventions" shall mean inventions (whether or not patentable) and all embodiments of such inventions, developments, concepts, know-how, technology, ideas, methods, techniques, products or processes.


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2. Disclosure and Option.


(a) Obligation to Disclose.


Yuen shall promptly provide a written disclosure to the Company of any Inventions related in whole or part to the fields of Interactive Program Guides or Interactive Television (as such terms are defined at the time of Yuen's disclosure) that he solely or jointly conceives, makes, or reduces to practice, or with respect to which he acquires ownership or control directly or indirectly through an entity owned or controlled by him ("Disclosure") during the period beginning on the Commencement Date and ending upon expiration of the Term. The disclosure required hereunder shall contain a reasonably detailed and complete written description of all Inventions then known to Yuen relating to the subject matter of the Disclosure, in as much detail as Yuen can reasonably provide. The provision to the Company of Disclosures as required herein shall be for the sole purpose of determining the Company's rights hereunder as set forth in this Section 2.


Yuen's disclosure obligations pursuant to this Section 2(a) shall continue during the Term (and potentially beyond the Term as provided herein), and in the event that an Invention solely or jointly conceived, made or developed by Yuen during the Term does not at the time it is conceived, made or developed relate in whole or in part to the fields of Interactive Program Guides or Interactive Television, but due to the evolution of such fields relates in whole or in part to such fields at a later date, such Invention shall be subject to a disclosure (a "Subsequent Disclosure"), subject to all rights and obligations of the Parties' hereunder at the date of such Subsequent Disclosure, including without limitation the provisions of this Section 2, except as provided herein.


(b) Grant of Option. Yuen hereby grants to the Company an exclusive option, exercisable as provided below, to acquire all right, title and interest in and to i) any Disclosure related in whole or in part to the fields of Interactive Program Guides or Interactive Television, and all intellectual property and proprietary rights arising from any Invention disclosed in any such Disclosure; and ii) any improvement to such an Invention disclosed in any Disclosure, to the extent that he solely or jointly conceives, makes, or reduces to practice such improvement during the Term; and iii) any Subsequent Disclosure related in whole or in part to the fields of Interactive Program Guides or Interactive Television (as such definitions exist at such time), and all intellectual property and proprietary rights arising from any Invention disclosed in any such Subsequent Disclosure.


(c) Exercise of Option.


The Company shall, as promptly as practicable and in no event later than ninety (90) days after receipt of any Disclosure or Subsequent Disclosure, deliver written notice to Yuen of the Company's election to exercise, or its election not to exercise, its option in connection with such Disclosure or Subsequent Disclosure (an "Election Notice"). Any such Inventions acquired by the Company hereunder may be referred to herein from time to time as the "Acquired Inventions." Upon receipt by Yuen of an Election Notice containing an election by the Company not to exercise its option in any Disclosure or any Subsequent Disclosure which is the subject of such Election Notice, or if Yuen does not receive such an Election Notice within


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the ninety (90) day period described above (in which case the Company shall be deemed to have elected not to exercise its option in connection with such Disclosure or such Subsequent Disclosure), Yuen shall be free to use, exploit and license any and all such Inventions, subject to the provisions of Article 10 hereof.


Yuen hereby covenants not to assert any patent rights or other intellectual property rights which arise from any Inventions retained by Yuen by reason of the Company's failure to exercise its option with respect to any such Disclosure or any such Subsequent Disclosure against the Company or its customers or licensees (in their capacities as such), mediate or immediate, for activities within the fields of Interactive Program Guides or Interactive Television. Such covenant shall be permanent, irrevocable, binding on Yuen's successors and assigns, and shall run with the patents, including any extensions thereof, and any other intellectual property rights arising from any such Disclosure or any such Subsequent Disclosure.


In the event that the Company, after the provision to Yuen of an Election Notice containing an election by the Company not to exercise its option in the Disclosure which is the subject of such Election Notice, or Yuen's failure to receive an Election Notice for such Disclosure within the ninety (90) day period, later determines that it desires to acquire such rights as may be available in such Disclosure due to the evolution of the fields of Interactive Television and Interactive Program Guides (a "Reclaimed Disclosure"), Company shall provide written notice to Yuen of such desire, and the Parties' rights and obligations set forth herein shall apply with respect to such Disclosure; provided, however, that the assignment by Yuen as set forth in Section 2(d) below shall be subject to any rights conveyed by Yuen in any Inventions described in the Reclaimed Disclosure prior to receipt of the notice, and such Reclaimed Disclosure shall be added to Schedule A hereto.


(d) Assignment. Upon Yuen's receipt of the Company's notice that it wishes to exercise its option in a Disclosure, a Subsequent Disclosure or a Reclaimed Disclosure pursuant to Section 2(c), Yuen shall promptly execute an assignment in a form reasonably acceptable to the Company assigning to the Company all right, title and interest in such Disclosure and any Inventions disclosed therein. Yuen shall at all times thereafter (i) take all actions reasonably requested by the Company and make all further assurances reasonably warranted to confirm that the Company is the exclusive owner of all Acquired Inventions, subject to the limitations provided above as to any Reclaimed Disclosures, in each of the foregoing cases all at the Company's sole cost and expense; and, (ii) shall provide all reasonable assistance in obtaining, perfecting and enforcing the Acquired Inventions or any legal rights in and to the same in any administrative agency or court, domestic or foreign including, but not limited to, reviewing and signing all lawful declarations, oaths, affidavits and other documents in connection with any of the foregoing, in each of the foregoing cases all at the Company's sole cost and expense including, without limitation, reasonable compensation for Yuen's time expended in connection with such assistance.


(e) Patent Prosecution and Cooperation. The Company shall have the right to file for patent protection in its own name, to the extent allowable by applicable law, for any Inventions acquired by the Company hereunder. The decision to seek patent protection, and prosecution of any patent applications, shall be at the Company's sole expense and control. Yuen shall cooperate at the Company's reasonable request and at the Company's sole cost and


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expense, in the prosecution of all patent applications, reissues, reexaminations, divisionals, continuations and continuations-in-part relating to such Inventions, including but not limited to reviewing and signing all lawful declarations, oaths, affidavits and other documents in connection with any of the foregoing. The Company shall reimburse Yuen for any reasonable out-of-pocket costs he incurs in providing such cooperation and shall reasonably compensate Yuen for his time expended in connection with such cooperation.


(f) Failure to Disclose. If Yuen fails to disclose any Invention related to the fields of Interactive Program Guides or Interactive Television that he solely or jointly conceives or makes during the Term, such failure shall not affect the Company's option to acquire such Invention. Upon discovery that such Invention has not been disclosed to the Company, Yuen shall promptly make a Disclosure as set out in Section 2(a) (a "Late Disclosure") and shall use his reasonable best efforts to avoid prejudice to the Company's rights under the remainder of this Article 2.


(g) Third Party Material. If disclosure of any Invention required under this Article 2 would require disclosure of third-party trade secrets or other confidential information that Yuen is legally or contractually prohibited from disclosing to the Company, the parties will negotiate in good faith with each other and, if necessary, with any such third party, an approach that will allow the Company to determine whether it wishes to acquire such Invention hereunder and to allow the Company to acquire such Invention if it wishes to do so. Yuen shall not knowingly include any third party trade secrets, proprietary material or other confidential information in a Disclosure or Subsequent Disclosure without identifying same to the Company therein. Each Disclosure and each Subsequent Disclosure shall further identify i) any third-party patent rights that Yuen knows relate to one or more Inventions described therein ; and ii) any third parties who are joint inventors, authors or creators of the material contained therein or any portion thereof, including a description of the contribution of each such third party thereto.


(h) No Retained Rights. Yuen shall have no retained rights in any Acquired Inventions other than as provided in Section 2(k), and the Company shall be the sole and exclusive owner of the Acquired Inventions and any patents or other intellectual property rights arising therefrom with the right to grant licenses, sue for infringement and recover damages without accounting to Yuen therefor, except as expressly provided herein.


(i) Protection Prior to Disclosure. Yuen shall protect as Confidential Information, pursuant to the provisions of Article 13, any Inventions that he would be obligated to disclose under Section 2(a) until the termination of any option the Company may have to acquire such Inventions.


(j) No License to Company Intellectual Property. Except as set forth in Section 2(k), no license, express or implied, is being granted to Yuen hereunder, and Yuen shall have no rights whatsoever under any patent or other intellectual property rights of the Company.


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(k) Grant Back of License Rights in Other Fields of Use.


(i) The Company agrees to grant, and the Company hereby conveys and grants as of the Commencement Date, to Yuen an exclusive, royalty-free, non-transferable (except as provided in Section 7) worldwide right and license, with the full and complete right to sub-license, in and to all Acquired Inventions and all intellectual property rights arising therefrom that are later identified on Schedule A as set forth below, in all fields of use other than for use in connection with Interactive Television or Interactive Program Guides ("Licensed Inventions"); provided, however, that such license shall be taken subject to any grant of rights or other encumbrances to third parties under such Acquired Inventions existing prior to the time such Licensed Invention is added to Schedule A. Such license shall be permanent, irrevocable, binding on the Company's successors and assigns. Licensed Inventions shall be added to Schedule A during the Term and after the Commencement Date at Yuen's request, and in response to Yuen's demonstration during the Term that an Acquired Invention has a not immaterial application outside the fields of Interactive Television and Interactive Program Guides, as evolved at the time of such demonstration (a "Mixed Use Invention").


(ii) In the event that, during the Term, the Company knowingly conveys rights to a third party under any Acquired Invention that is not included on Schedule A (but subject to Yuen's rights hereunder) for the purpose of exploiting such Acquired Invention in a field that the Company knows is outside the fields of Interactive Television and Interactive Program Guides under any reasonable interpretation at the time of the conveyance, the Company hereby covenants not to assert any patent rights or other intellectual property rights which arise from such Acquired Invention against Yuen, or any of his customers or licensees, mediate or immediate, based on activities of any of the foregoing in fields other than Interactive Television and Interactive Program Guides, provided, that Yuen has requested that such Acquired Invention be added to Schedule A during the Term and establishes during the Term that such Acquired Invention is a Mixed Use Invention. Any such third party conveyance shall be subject to such covenant, which shall be permanent, irrevocable, binding on the Company's successors and assigns, and shall run with the patents, including any extensions thereof, and any other intellectual property rights arising from such Acquired Invention.


(iii) In the event the Company elects to pursue patent protection for a Licensed Invention, the Company and Yuen shall share equally in the costs of preparation, filing, and maintenance of all patents, renewals, and extensions arising from such Licensed Invention (other than a Reclaimed Disclosure) after the date on which such Licensed Invention is added to Schedule A, and the Company shall make commercially reasonable efforts to procure patent claims relating to applications outside the fields of Interactive Television and Interactive Program Guides at Yuen's reasonable direction. Yuen shall have the right to license and enforce the Licensed Inventions in fields outside the fields of Interactive Television and Interactive Program Guides and at his sole cost and expense. Yuen may not institute any action to enforce a patent for a Licensed Invention without the Company's consent, which consent shall not be unreasonably withheld or delayed. The Company shall reasonably cooperate in any enforcement action to which it consents, including joining as a party as required by law subject to (i) reimbursement by Yuen of Company's expenses incurred in connection with such action and (ii) payment by Yuen of Company's reasonable compensation for its employees' time expended in connection with such matter. Yuen shall fully and vigorously defend any challenges raised with


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respect to the validity and/or enforceability of any patents so enforced. Yuen may not settle or compromise any such action without the Company's express written consent, which consent shall not be unreasonably withheld; provided, however, that Yuen may settle or compromise an action for which consent is not received from Company within a reasonable amount of time (given the circumstances then applicable to such proposed compromise or settlement) following notice by Yuen of the terms of such proposed compromise or settlement. Any license fees, damages recovery, settlement amounts, or other compensation received for infringement or authorized use of such patent shall be belong solely to Yuen.


(l) Failure to Maintain or Prosecute by Yuen. Should Yuen at any time elect not to, or otherwise fail to, share the costs to maintain or prosecute any particular patent or patent application in accordance with the terms of this provision, Company shall provide Yuen with a written notice thereof. Yuen shall have thirty (30) days after receipt of such written notice of any such alleged failure to remedy the alleged failure set forth in such notice. If Yuen fails to remedy such alleged failure within such period of time, the Company shall have a claim for damages and/or a right of set-off for such amounts which are then actually due and owing (plus interest as provided for herein) against monies which are then or thereafter otherwise owing to Yuen hereunder, and Company shall have no further obligations to pursue patent claims relating to applications outside the fields of Interactive Television and Interactive Program Guides unless Yuen has paid all amounts then due and owing, and provided further assurances of his obligation to pay future expenses, by the time the Company is required to incur additional expense to maintain such patent claims. Nothing in this paragraph shall be deemed to abrogate any of the Company's rights under this Agreement.


(m) Patent Identification. Yuen shall have a duty to mark, and shall use commercially reasonable efforts to cause his licensees to mark, including without limitation including a provision in all licenses obligating such licensees to mark, all products and literature concerning any Licensed Invention in a form which complies with the law of the jurisdiction in which the products are manufactured, used, sold and distributed, and shall also comply with the provisions of 35 U.S.C. Section 287.


(n) Consultation. During the Term hereof, Yuen shall consult with the Company and provide assistance as reasonably requested in connection with the Company's use and exploitation of Acquired Inventions, all at the Company's sole cost and expense including, without limitation, reasonable compensation for Yuen's time expended in connection with such assistance. Such consultation shall be in addition to the cooperation and assistance provided by Yuen pursuant to Section 2(d).


(o) Covenant Not to Sue on Acquired Inventions. Yuen hereby covenants not to assert any patents or other intellectual property rights relating in whole or in part to the fields of Interactive Program Guides or Interactive Television, for which Yuen acquires ownership or control during the Term, whether directly or indirectly through an entity owned or controlled by him, against the Company or the Company's customers and licensees (in their capacities as such), mediate and immediate, for activities within the fields of Interactive Program Guides or Interactive Television.


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3. Term.


This term of this Agreement (the "Term") shall commence upon the Commencement Date, and shall remain in force until the date which is seven (7) years from the Effective Date unless otherwise terminated as provided herein (the "Initial Term"). At the end of the Initial Term, the Agreement shall terminate unless the Company and Yuen mutually agree in writing to extend the Agreement, in which case the Agreement shall continue in effect for an additional seven (7) year period. Thereafter, the Agreement shall continue in effect for additional seven (7) year periods (each seven (7) year period that the Agreement is in effect following the Initial Term, a "Subsequent Term") upon the Company's and Yuen's mutual written agreement to effect such extensions upon the expiration of a Subsequent Term. ...