Sony Technology License Agreement

EXHIBIT 10.19


CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request for confidential treatment and, where applicable, has been marked with an asterisk to denote where omissions have been made. The confidential material has been filed separately with the Commission.


SONY TECHNOLOGY LICENSE AGREEMENT


This SONY Technology License Agreement ("Agreement") is made and entered
--------- into as of this 21st day of March 2000 ("Effective Date") between SONY
-------------- Corporation, a corporation of Japan ("SONY") and Lexar Media, Inc., a California
---- corporation ("LEXAR").


RECITALS


A. SONY designs, manufactures, markets and sells certain flash memory products and associated devices under the trademark "Memory Stick". SONY is the owner or licensee of certain technology and intellectual property rights relating to such products and devices.


B. LEXAR develops, designs, manufactures, markets and sells certain proprietary flash memory products. LEXAR is the owner or licensee of certain technology and intellectual property rights relating to such products and devices.


C. LEXAR desires to receive from SONY a non-exclusive license to SONY's Memory Stick technology to manufacture and sell certain LEXAR-branded Memory Stick products on the terms and conditions of this Agreement.


NOW, THEREFORE, SONY and LEXAR hereby agree as follows:


1. DEFINITIONS


1.1 "Affiliate" shall mean, with respect to any person or entity, any
--------- other person or entity that controls, is controlled by or is under common control with such person or entity. For purposes of this Agreement, a person or entity shall be in "control" of an entity if it owns or controls at least fifty percent (50%) of the equity securities of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority), or otherwise has the power to control the management and policies of such other entity.


1.2 "Have Manufactured" means only that the licensee may contract
----------------- with a third party or parties to manufacture the licensed product for and on behalf of the licensee.


1.3 "Host Device" means any electronics product that utilizes a
----------- Memory Stick for the purposes of data storage, recording or retrieval.


1.4 "Improvements Technology" means any improvements or enhancements
----------------------- to the SONY Technology that are conceived or developed solely by LEXAR and that would, absent the license granted hereunder, infringe or constitute a misappropriation of the SONY Intellectual Property Rights.


1.5 "Intellectual Property Rights" means, with respect to a party,
---------------------------- all rights of such party in and to (i) all patent applications and patents having a priority date prior to *; and (ii) all mask work rights, copyrights, moral rights, trade secret rights and other know-how rights regarding subject matter generated prior to *.


* Material has been omitted and filed separately with the Commission.


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CONFIDENTIAL TREATMENT REQUESTED


1.6 "LEXAR Intellectual Property Rights" means the Intellectual
---------------------------------- Property Rights owned by or licensed to LEXAR (with the right to grant sublicenses without payment of compensation to any third party other than employees of LEXAR) in and to the Improvements Technology.


1.7 "Licensed Memory Stick" means a Memory Stick that incorporates or
--------------------- uses SONY Intellectual Property Rights.


1.8 "MagicGate Memory Stick" means SONY's Memory Stick flash memory
---------------------- product with a copy protection feature.


1.9 "Memory Stick" means a flash memory data storage device that
------------ meets the Memory Stick Specifications.


1.10 "Memory Stick Specifications" shall mean the specifications for
--------------------------- a certain flash memory data storage system, the outline of which is set forth in Exhibit A (as such specifications are from time to time modified or replaced by SONY in its sole discretion).


1.11 "Net Selling Price" shall mean the gross sales price of a
----------------- product invoiced by LEXAR or its Affiliates to customers that are not Affiliates for the sale or other distribution of a Licensed Memory Stick, less (a) credits, allowances, discounts and rebates to, and chargebacks from the account of, such customers for damaged and returned product; (b) freight and insurance costs incurred in transporting such product to such customers; (c) cash, quantity and trade discounts, rebates and other price reductions for such product given to such customers under price reduction programs that are consistent with industry practices and price reductions given for similar products by LEXAR or its Affiliates; (d) sales, use, value-added and other direct taxes incurred on the sale of such product to such customers; and (e) customs duties, surcharges and other governmental charges incurred in exporting or importing such product to such customers. In the case of Licensed Memory Sticks distributed with other products during any quarter, the Net Selling Price of such Licensed Memory Sticks shall be the average Net Selling Price of the same or comparable model of Licensed Memory Sticks sold separately to unaffiliated third parties in arm's length transactions during such calendar quarter.


1.12 "Royalty Term" shall mean * years from the Effective Date.
------------


1.13 "SONY Intellectual Property Rights" means the Intellectual
--------------------------------- Property Rights owned by or licensed to SONY (with the right to grant sublicenses without payment of compensation to any third party other than employees of SONY) in and to the SONY Technology.


1.14 "SONY Technology" means the technology described in the Memory
--------------- Stick Specifications.


2. GRANT OF LICENSE RIGHTS


2.1 SONY License Grant. Subject to LEXAR's compliance with the terms
------------------ and conditions of this Agreement and subject to Section 12.3 below, SONY hereby grants and agrees to grant to LEXAR * to: (i) manufacture, Have Manufactured, use, offer for sale, import and sell Licensed Memory Sticks, and (ii) manufacture, Have Manufactured and use any components of Licensed Memory Sticks.


* Material has been omitted and filed separately with the Commission.


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CONFIDENTIAL TREATMENT REQUESTED


2.2 Sublicense. LEXAR shall be permitted to sublicense the rights
---------- granted in Section 2.1 only to wholly-owned subsidiaries of LEXAR. LEXAR shall promptly notify SONY in writing of sublicenses granted to subsidiaries and LEXAR shall acknowledge responsibility for such subsidiary's compliance with the terms of this Sony Technology License Agreement. Sublicensees under this Section 2.2 shall not have the right to sublicense the rights granted under this agreement.


2.3 LEXAR Cross License. LEXAR hereby grants to SONY *. SONY shall
------------------- be permitted to sublicense the rights granted in Section 2.3: (i) to wholly- owned subsidiaries of SONY and (ii) for the manufacture, use, offer for sale, import and sale of Host Devices and any components of Host Devices, to any parties.


2.4 SONY Acknowledgement.
--------------------


(a) LEXAR shall prominently mark all Licensed Memory Sticks, and related packaging and documentation, sold or distributed by LEXAR or its Affiliates, with an acknowledgement that such Licensed Memory Sticks incorporate SONY Technology. LEXAR shall duplicate and apply SONY's patent and other proprietary rights notices, which SONY shall provide from time to time, to all Licensed Memory Sticks, and related packaging and documentation, sold or distributed by LEXAR or its Affiliates, to the same extent that SONY marks its own products and documentation.


(b) SONY grants LEXAR * to use the "Memory Stick" trademark set forth in Exhibit B on and with respect to Licensed Memory Sticks manufactured by or for LEXAR in accordance with the instructions laid down in the Logotype and How to Use It. In advertisements and sales literature with respect to Licensed Memory Sticks sold by LEXAR, such Memory Stick trademark may also be used in accordance with the instructions laid down in the document entitled: "Logotype and How to Use It." Such license shall be royalty free to the extent the fees and royalties of Section 6 are paid by LEXAR.


(c) LEXAR agrees that every Licensed Memory Stick sold or otherwise disposed under this Agreement shall have permanently affixed thereto an identifying mark or insignia acceptable to SONY which mark or insignia shall serve as an indicia of origin of the Licensed Memory Stick.


2.5 Restrictions. LEXAR shall abide by the following restrictions:
------------


(a) Except as expressly provided in Sections 2.1 and 2.2 above, LEXAR will have no right or license to use, sublicense, transfer or otherwise convey to any third party the SONY Technology or SONY's Intellectual Property Rights.


(b) Except as otherwise provided in Section 2.4 above, LEXAR shall have no right to use the SONY tradename, SONY trademarks or "Memory Stick" trademark.


(c) LEXAR's exercise of its "Have Manufactured" rights under Section 2.1 are contingent upon LEXAR entering into a written agreement with each


* Material has been omitted and filed separately with the Commission.


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CONFIDENTIAL TREATMENT REQUESTED


manufacturer that protects the Confidential Information of SONY to the same extent as provided for in this Agreement.


(d) LEXAR shall not permit any of its Contractors (as defined in Section 8) to reverse engineer any of the SONY Technology.


(e) *


(f) *


(g) All Licensed Memory Sticks manufactured by or for LEXAR will comply with the then current version of the Memory Stick Specifications and *.


2.6 Conformance with Specification. LEXAR shall deliver to SONY,
------------------------------ upon the request of SONY at reasonable intervals no greater than once per quarter, a reasonable number of random samples of Licensed Memory Sticks manufactured by or for LEXAR (other than by SONY) in order to permit SONY to verify that the Licensed Memory Sticks meet the Memory Stick Specifications. After examining any such Licensed Memory Sticks or any Licensed Memory Sticks sold by LEXAR and purchased by SONY in the market, SONY may notify LEXAR of any failure by LEXAR to conform to the Memory Stick Specifications. If LEXAR continues to sell Licensed Memory Sticks that fail to conform to the Memory Stick Specifications three (3) months after notice from SONY as set forth in this Section 2.6, SONY shall have the right to terminate this Agreement; provided, however, LEXAR shall have the right to dispute SONY's determination under this Section 2.6 by arbitration conducted in San Francisco, California according to the rules of the American Arbitration Association. In the event LEXAR disputes SONY's determination that the LEXAR Memory Sticks fail to conform to the Memory Stick Specifications, LEXAR shall discontinue use of the "Memory Stick" trademark pending resolution of the arbitration. LEXAR's right to arbitration under this Section 2.6 shall only apply to disputes arising under this Section 2.6.


2.7 Reservation. No license or right is granted, by implication or
----------- otherwise, to LEXAR hereunder under any patent rights, Confidential Information or other intellectual property rights now or hereafter owned or controlled by SONY, except for the licenses and rights expressly granted in this Agreement. No license is granted to LEXAR with respect to other SONY products or technologies.


3. TECHNOLOGY TRANSFER


3.1 Delivery of SONY Technology. SONY shall deliver to LEXAR one
--------------------------- copy of the Memory Stick Specifications within a reasonable, mutually agreed- upon time after the Effective Date. On or before *, SONY shall deliver to LEXAR, within a reasonable time period, all revisions and additions the Memory Stick Specifications (if any).


3.2 Delivery of Improvements Technology. On or before *, upon the
----------------------------------- request of SONY, LEXAR shall deliver to SONY, no more often than quarterly, all Improvements Technology (if any).


4. PAYMENTS, PAYMENT TERMS AND OTHER CONSIDERATION


* Material has been omitted and filed separately with the Commission.


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CONFIDENTIAL TREATMENT REQUESTED


4.1 License Fee. *.
-----------


4.2 Royalties. During the Royalty Term for each Licensed Memory
--------- Stick sold or distributed by LEXAR or its sublicensees, LEXAR shall pay SONY ...