お知らせ • Dec 04
Telkonet Enters into Wireless Network Patent License Agreement with Sipco, LLC in Order to Settle Lawsuit
On November 30, 2020, Telkonet (the Company) entered into a Wireless Network Patent License Agreement (the License Agreement) with SIPCO, LLC (Sipco) and IPCO, LLC dba IntusIQ (collectively, the “Licensors”) in order to settle a patent infringement lawsuit previously filed by Sipco against the Company (the “Sipco Lawsuit”), which alleged infringement on multiple essential wireless mesh patents held by Sipco, without the expense of costly litigation. Without admission as to infringement, validity, or enforceability of the Licensed Patents or liability with respect to any claims of the complaint filed in the Sipco Lawsuit, the Company has agreed to pay certain royalty fees to the Licensors in exchange for the right under the Essential Claims of the Licensed Patents to manufacture, have manufactured, sell, offer to sell, import, export, and use the Licensed Products. Subject to the payment of the royalty fees and the other terms of the License Agreement, the Licensors agree to (a) not assert the Licensed Patents against the Company or its Affiliates or their Suppliers, based solely on the re-sale or use by Distributors or Customers of Licensed Products in the Field of Use on or after July 1, 2020, and (b) release the Company and its Current Affiliates and their Suppliers, Distributors, and Customers from any and all past, present, or future claims for infringement of any of the Licensed Patents prior to July 1, 2020, subject to the specific terms in the License Agreement. Under the terms of the License Agreement, the Company is required to pay the Licensors royalties on (a) all Licensed Products sold by Telkonet or its Affiliates from July 1, 2020 to December 31, 2024 and (b) all Licensed Products in Telkonet or its Affiliates’ possession, but not sold, as of December 31, 2024. Specifically, the Company is required to pay a royalty fee, calculated quarterly, equal to 3.50% of applicable sales for the period beginning on July 1, 2020 and continuing until December 31, 2021 (the “First Period”). There is also an upfront payment of $40,000 that must be paid in aggregate by December 31, 2020, $20,000 of which was paid on November 30, 2020. Based on the Company and its Affiliates’ applicable sales in the three months ended September 30, 2020, the royalty fee was approximately $59,000 for the third quarter of 2020. The royalty fees for the remaining quarters in the First Period will be dependent on the Company and its Affiliates’ sales of applicable products. Beginning on January 1, 2022 and continuing until June 30, 2023, the Company is required to pay a royalty fee, calculated quarterly, equal to 3.75% of applicable sales or $35,000, whichever is greater. Beginning on July 1, 2023 and continuing until December 31, 2024, the Company is required to pay a royalty fee, calculated quarterly, equal to 4% of applicable sales or $40,000, whichever is greater. Finally, the Company is required to pay a Closing Payment of $50,000 no later than January 31, 2025. Upon termination of the License Agreement, Telkonet and its Affiliates have six months to sell off any unsold inventory of Licensed Products as of date of termination, paying the appropriate royalty on a quarterly basis as the Licensed Products are sold, and then pay a final royalty on any such inventory of Licensed Products still unsold after six months.
All quarterly payments are due within thirty days of the end of the relevant three-month period (with the exception of the payment for the quarter ended September 30, 2020, which must be paid by December 31, 2020). The Company must also provide the Licensors royalty statements summarizing the quantity of all Licensed Products sold or used by Telkonet or its Affiliates during the relevant reporting period, the calculation of the royalties due, and certain other information regarding the Licensed Products for each reporting period. In the event (a) the Company fails to make the payments and provide the statements required under the License Agreement and such breach is not cured within thirty days of written notice from the Licensors and (b) the Licensors elect not to terminate the License Agreement, the Licensors are entitled to an immediate and accelerated payment of any remaining payments due under the License Agreement. In addition to the payment terms described above, the License Agreement contains representations and warranties and other provisions customary to agreements of this nature.