EXCLUSIVE PATENT LICENSE AGREEMENT DRAFTING PROMPT

You are an expert intellectual property attorney specializing in patent licensing transactions. Your task is to draft a comprehensive, legally sound Exclusive Patent License Agreement that protects both parties' interests while facilitating the commercial exploitation of patented technology.

DOCUMENT OVERVIEW AND CONTEXT

Draft a formal Exclusive Patent License Agreement suitable for a transaction where a patent holder (Licensor) grants exclusive rights to another party (Licensee) to commercialize patented technology within a defined scope. This agreement must balance the Licensor's interest in maximizing value from their intellectual property portfolio with the Licensee's need for sufficient exclusivity and freedom to operate to justify their investment in commercialization. The document should reflect sophisticated commercial terms typical of arm's-length negotiations between experienced parties and their counsel.

PARTIES AND RECITALS

Begin with a formal title "EXCLUSIVE PATENT LICENSE AGREEMENT" centered at the top of the document. Draft an introductory paragraph identifying this Agreement as made and entered into as of a specific date between the Licensor (provide full legal name, jurisdiction of organization, and principal place of business) and the Licensee (provide full legal name, jurisdiction of organization, and principal place of business). Include recitals that establish the factual and business context, specifically: that Licensor owns or controls certain patent rights covering valuable technology; that Licensee desires to obtain exclusive rights to commercialize products utilizing this technology; that Licensor wishes to grant such exclusive rights in exchange for financial consideration; and that the parties desire to memorialize their agreement on the terms set forth herein.

GRANT OF EXCLUSIVE LICENSE

Draft a comprehensive grant clause that clearly conveys an exclusive license under the Licensed Patents. The grant must specify that Licensor hereby grants to Licensee an exclusive right and license, with the exclusivity meaning that even Licensor cannot practice the Licensed Patents in the licensed field except as specifically reserved. Define the scope of the license using the traditional patent rights framework: the right to make, have made, use, sell, offer for sale, import, and otherwise exploit Licensed Products. Clarify that this exclusivity applies within the defined Territory and Field of Use, and specify whether the license is sublicensable (and if so, under what conditions requiring Licensor consent or meeting specific criteria). Address whether the license includes rights to improvements, continuations, divisionals, reissues, and foreign counterparts of the Licensed Patents.

DEFINITIONS OF KEY TERMS

Provide precise definitions for Licensed Patents, specifying that this means all patents and patent applications listed in Exhibit A, including all continuations, continuations-in-part, divisionals, reissues, reexaminations, extensions, and foreign equivalents thereof. Define Licensed Products as any products, processes, or services that, in the course of making, using, selling, or importing, would infringe one or more valid claims of the Licensed Patents absent this license. Define Territory as the specific geographic scope of exclusivity, whether worldwide, limited to specific countries, or defined by other geographic boundaries. Define Field of Use if the exclusivity is limited to specific applications or industries. Define Net Sales with precision, typically as gross amounts invoiced for Licensed Products less specifically enumerated deductions such as returns, credits, sales taxes, customs duties, and freight charges, while excluding transfers between affiliates except at fair market value.

FINANCIAL CONSIDERATION

Structure the financial terms to include multiple components that align the parties' interests. Specify an upfront license fee payable upon execution of the Agreement, stating the exact amount and payment terms. Establish a running royalty structure based on a specified percentage of Net Sales of Licensed Products, with the percentage clearly stated and applied to sales by Licensee and its sublicensees. Include minimum annual royalty obligations that Licensee must pay regardless of actual sales, with specific amounts for each contract year and clarification that running royalties paid in any year shall be credited against that year's minimum. Address milestone payments tied to development and regulatory achievements if appropriate for the technology. Specify that all payments shall be made in a designated currency, to a specified account, and address foreign exchange and withholding tax issues.

PAYMENT REPORTING AND RECORDS

Establish quarterly reporting obligations requiring Licensee to provide detailed written reports within thirty days after the end of each calendar quarter. Specify that reports must include the number of Licensed Products sold, gross sales, applicable deductions, Net Sales, royalty calculations, and the names and addresses of sublicensees. Require that royalty payments accompany each report. Grant Licensor the right to audit Licensee's books and records related to Licensed Products upon reasonable notice, no more than once per year, during normal business hours, with audits conducted by an independent certified public accountant. Provide that if any audit reveals an underpayment exceeding five percent, Licensee shall bear the cost of the audit in addition to paying the deficiency plus interest.

DILIGENCE AND COMMERCIALIZATION OBLIGATIONS

Impose affirmative obligations on Licensee to diligently develop and commercialize Licensed Products to ensure the patented technology reaches the market. Require that Licensee use commercially reasonable efforts to develop, obtain necessary regulatory approvals for, and commercialize Licensed Products throughout the Territory. Establish specific diligence milestones with target dates, such as initiation of clinical trials, filing for regulatory approval, first commercial sale, and achievement of specified sales thresholds. Provide that failure to meet diligence milestones constitutes a material breach, but allow Licensee to cure by either achieving the milestone within a specified cure period or converting the exclusive license to a non-exclusive license while maintaining royalty obligations. This structure protects Licensor's interest in seeing the technology commercialized while giving Licensee flexibility to address unforeseen development challenges.

PATENT PROSECUTION AND MAINTENANCE

Allocate responsibility for prosecuting and maintaining the Licensed Patents. Specify whether Licensor or Licensee shall control prosecution of patent applications and maintenance of issued patents, including payment of all filing fees, prosecution costs, maintenance fees, and annuities. If Licensor retains control, require Licensor to keep Licensee informed of all material developments, provide Licensee with copies of all substantive correspondence with patent offices, and give Licensee reasonable opportunity to comment on proposed responses before filing. If Licensee assumes control, require similar information sharing with Licensor. Address the scenario where the controlling party decides to abandon prosecution or maintenance of any Licensed Patent, requiring advance written notice to the other party and opportunity for that party to assume responsibility and costs. Clarify that the party bearing prosecution and maintenance costs may not offset these against royalty obligations unless specifically agreed.

INFRINGEMENT ENFORCEMENT

Establish a comprehensive framework for addressing third-party infringement of Licensed Patents. Require both parties to promptly notify the other in writing of any suspected infringement of which they become aware. Grant Licensee the first right, but not the obligation, to bring and control any infringement action against third parties, at Licensee's expense, using counsel of its choice. Specify a time period (such as ninety days) within which Licensee must decide whether to pursue an infringement action after receiving notice. If Licensee declines or fails to initiate suit within the specified period, the right to sue reverts to Licensor. Require the party bringing suit to keep the other informed of progress and to consider the other's views on settlement. Address allocation of any recovery, typically providing that the party bringing suit recovers its costs and expenses first, with any remainder split according to a specified formula. Require the non-suing party to cooperate and provide reasonable assistance, including joining as a party if necessary for standing.

WARRANTIES AND REPRESENTATIONS

Include mutual representations that each party is duly organized, validly existing, and has full authority to enter into this Agreement. Require Licensor to represent that it owns or controls the Licensed Patents, has the right to grant the license, and that the Licensed Patents are subsisting and to Licensor's knowledge valid and enforceable. Require Licensor to represent that it has not granted any rights in the Licensed Patents that conflict with the exclusive rights granted herein. Include a critical disclaimer that LICENSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTY THAT THE LICENSED PATENTS ARE VALID OR THAT PRODUCTS MADE UNDER THE LICENSE WILL NOT INFRINGE THIRD-PARTY RIGHTS. This disclaimer protects Licensor from liability for patent invalidity or third-party infringement claims while placing appropriate risk on Licensee as the commercializing party.

INDEMNIFICATION

Establish reciprocal indemnification obligations tailored to each party's role. Require Licensee to indemnify, defend, and hold harmless Licensor from any claims, damages, or liabilities arising from Licensee's development, manufacture, use, or sale of Licensed Products, including product liability claims, regulatory violations, and infringement of third-party rights. Require Licensor to indemnify Licensee from claims that Licensor lacks authority to grant the license or that the grant breaches third-party rights. Specify standard indemnification procedures requiring prompt notice of claims, opportunity for the indemnifying party to control defense, and cooperation by the indemnified party. Require that each party maintain adequate insurance coverage, with Licensee carrying product liability insurance with minimum specified limits and naming Licensor as an additional insured.

CONFIDENTIALITY

Impose mutual obligations to maintain confidentiality of the other party's proprietary information disclosed in connection with this Agreement. Define Confidential Information broadly to include technical data, business information, and the terms of this Agreement itself. Require each party to protect Confidential Information using at least the same degree of care it uses for its own confidential information, but no less than reasonable care. Specify standard exceptions for information that is publicly available, independently developed, rightfully received from third parties, or required to be disclosed by law. Establish that confidentiality obligations survive for a specified period (such as five years) after termination of the Agreement, except for trade secrets which remain confidential for as long as they qualify as trade secrets.

TERM AND TERMINATION

Specify that the Agreement commences on the Effective Date and continues until the expiration of the last-to-expire valid claim of the Licensed Patents, unless earlier terminated as provided herein. Provide that either party may terminate for material breach by the other party if such breach remains uncured for thirty days (or ninety days for payment breaches) after written notice specifying the breach. Allow Licensor to terminate immediately if Licensee challenges the validity or enforceability of any Licensed Patent. Allow Licensee to terminate for convenience upon ninety days' written notice. Specify the effects of termination, including that all licenses granted herein terminate, Licensee must cease making and selling Licensed Products (subject to a reasonable sell-off period for existing inventory), all unpaid royalties become immediately due, and specified provisions survive including confidentiality, indemnification, and dispute resolution clauses.

GENERAL PROVISIONS

Include standard but essential boilerplate provisions. Specify that this Agreement shall be governed by the laws of a designated jurisdiction without regard to conflicts of law principles. Require that any disputes be resolved through binding arbitration under specified rules (such as AAA or JAMS) in a designated location, or alternatively specify exclusive jurisdiction in the courts of a particular jurisdiction. Include a provision that this Agreement constitutes the entire agreement between the parties and supersedes all prior understandings, and may only be amended by written instrument signed by both parties. Specify that notices must be in writing and delivered to specified addresses by specified means. Include a severability clause providing that if any provision is found invalid, the remainder continues in effect. Address assignment, typically prohibiting assignment by either party without consent except to successors in a merger or acquisition. Include a waiver provision clarifying that failure to enforce any right does not waive that right.

SIGNATURE BLOCKS AND EXHIBITS

Conclude with formal signature blocks for both parties, with spaces for authorized signatories to sign and print their names, titles, and dates. Include appropriate attestation lines if corporate seals are required. Attach Exhibit A listing all Licensed Patents with complete information including patent numbers, application numbers, filing dates, issue dates, jurisdictions, and titles. Consider additional exhibits for the Field of Use definition if complex, sublicense form if pre-approved, or development milestones if detailed.

DRAFTING INSTRUCTIONS

Prepare this Agreement in a professional format using numbered sections and subsections for easy reference. Use defined terms consistently throughout, capitalizing them to indicate they are defined terms. Draft in clear, precise legal language appropriate for a sophisticated commercial transaction while avoiding unnecessary legalese. Ensure all cross-references are accurate. Include a table of contents if the agreement exceeds ten pages. Use traditional contract formatting with appropriate spacing, margins, and typography for a formal legal document. Tailor all bracketed placeholders and optional provisions to the specific transaction based on the parties' negotiations and business objectives.