Exhibit 10.1

 

Quidel/Inverness Settlement Agreement

 

1          Quidel and its Affiliates will pay the Inverness Parties and their
Affiliates $17 million for a fully paid up worldwide irrevocable license to the
Inverness Portfolio of Lateral Flow Patents for all Quidel products made and
sold on or before the Effective Date and for a release of all actual and
potential claims against Quidel, its Affiliates and their customers,
distributors and retailers with respect to any Quidel Products using lateral
flow technology made and sold on or before the Effective Date, such payment to
be made within 2 business days of the execution of this agreement.

 

2          Quidel and its Affiliates will pay Inverness an 8.5% royalty on all
Quidel Product Sales of all Quidel Products utilizing or incorporating any of
the inventions claimed in the valid and enforceable claims of the Inverness
Portfolio of Lateral Flow Patents, which Products are manufactured or sold
anywhere in the world where Inverness maintains lateral flow patents; provided,
however, that for avoidance of doubt all current Quidel pregnancy, strep, and
flu products as well as any such products with minor modifications or new
products using the same technology shall bear royalty payments to Inverness
hereunder for the life of this agreement, but the products covered are not
limited to these.  The parties agree to produce a list of the current Quidel
Products which will bear royalties within 20 days following execution of this
Agreement.  Quidel and its Affiliates will make payments quarterly.  The payment
of any royalties by Quidel and its Affiliates shall not be considered an
admission that any Quidel Products practice valid, enforceable claims of the
Inverness Parties’ or their Affiliates’ patents, nor shall it be considered an
admission of any other kind. Inverness shall have a right to inspect and audit
Quidel royalty payments on reasonable notice using an independent, mutually
agreed upon, third party auditor under confidentiality, at Inverness’s cost,
provided that if the auditor discovers a royalty underpayment of more that 5%
Quidel shall bear the cost of the audit.

 

3          The Inverness Parties hereby grant to Quidel and its Affiliates an
irrevocable license, without the right to sublicense, to make, use, sell, offer
to sell, and/or import, products utilizing or incorporating the inventions
claimed in the valid and enforceable claims of the Inverness Portfolio of
Lateral Flow Patents, including continuations, continuations in part and
divisionals thereof.  Any new patents applied for or acquired by Inverness and
its Affiliates after the date of this agreement are not included in the license,
unless such patents embody lateral flow technology of the type at issue in this
dispute.  The Field of Use excludes all aspects of cardiology testing and all
aspects of consumer/over-the-counter women’s health diagnostics except
infectious diseases.  The term of the license is to the end of the last patent
to expire and the 8.5% royalty rate is to be paid on all royalty-bearing Quidel
Products through that date.  Inverness also grants to Quidel and its Affiliates
a full release of all actual and potential claims existing as of this date
against Quidel and its Affiliates with respect to any Quidel Products, including
all claims that were or could have been brought in the lawsuits pending between
Inverness and Quidel.

 

4          Quidel hereby grants Inverness a worldwide royalty free license,
without right to sublicense, to make, use, sell, offer to sell, and/or import,
products utilizing or incorporating the inventions claimed in the valid and
enforceable claims of the Quidel Portfolio of Lateral Flow Patents, including
without limitation, the Eisinger patent, and any continuations, continuations in
part or divisionals thereof.  Any new patents applied for or acquired by Quidel
and its Affiliates after the date of this agreement are not included in the
license, unless such patents embody lateral flow technology of the type at issue
in this dispute.  Quidel also grants the Inverness Parties a full release of all
actual and potential claims existing as of this date against the Inverness
Parties with respect to any Inverness products using lateral flow

 

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technology, including all claims that were or could have been brought in the
lawsuits pending between Inverness and Quidel.

 

5          It is expressly understood that the payments provided for in this
agreement represent a net payment from Quidel and its Affiliates to the
Inverness Parties which includes the value of the license that Quidel is
granting in paragraph 4 above.  No further payments are due by either party in
connection with the settlement except as set out in this offer letter.

 

6          The parties will dismiss with prejudice all pending cases or claims
against each other, including without limitation the U.S. proceedings filed in
the U.S. District Court in San Diego and the German infringement, nullity and
opposition proceedings.  The Inverness Parties and their Affiliates will not
instigate any new proceedings against the Quidel Products currently on the
market or against any such products with minor modifications or new products
using the same technology so long as the royalty is being paid on those
products.  Quidel and its Affiliates will not instigate any new proceedings
against the Inverness Parties’ lateral flow products currently on the market or
against any such products with minor modifications or new products using the
same technology.  The parties agree to dismiss with prejudice, or if they cannot
do so, to withdraw from any challenge to the validity of any of the patents
licensed under this agreement and not to reinstitute challenges to the validity
of any of such patents.

 

7          The parties represent and warrant that they have the full authority
to execute this offer letter and all the other documents and agreements
contemplated in this letter and to grant the licenses and releases described in
this letter, and that they will cause their Affiliates to execute any documents
and agreements required to implement the licenses and releases described and
perform the obligations set forth in this offer letter agreement.

 

8          Any dispute arising from or relating to this Agreement or relating in
any way to patents in the Inverness Portfolio of Lateral Flow Patents (including
without limitation the patents-in-suit) or to the patents in Quidel’s Portfolio
of Lateral Flow Patents, or to any claim that Quidel and its Affiliates owe or
do not owe payments to Inverness and its Affiliates, or to any claim as to
whether a particular product (other than those products falling within the scope
of the “provided, however” portion of the first sentence of paragraph 2 above) 
utilizes or incorporates a valid, enforceable claim of patents in the Inverness
Portfolio of Lateral Flow Patents, will be decided by binding Arbitration at the
American Arbitration Association in Chicago, Illinois, under its Commercial
Arbitration Rules.  To the extent state law is applicable in such a dispute, the
laws of the State of Illinois, excluding its choice of law provisions, shall
govern.  Within ten days after execution of this agreement, Inverness and Quidel
will agree to adopt such procedures for the arbitration as are necessary to
attempt to resolve any dispute subject to this arbitration within six months. 
Inverness agrees that it will not seek injunctive relief against Quidel so long
as Quidel pays the royalty sought by Inverness, pending the arbitration
decision.

 

9          The licenses granted are nontransferable without the written
agreement of the other party prior to any transfer, provided that the licenses,
releases and other rights granted hereunder may be transferred in a corporate
merger, asset sale, acquisition, reorganization or change in control (together a
“Change in Control”) by which all of those product lines and technology
platforms of the transferring party that exist and are being marketed on the
date of the transfer are transferred in their entirety, further provided that in
the event that such Change of Control is such that a third party already
participating in the diagnostics market in one or more of the jurisdictions in
which the other party has effective patents in force, assumes control of the
transferring party, the royalty rate, if any, shall be increased by 25% (i.e.,
from 8.5% to 10.625%), and yet further provided that the acquirer shall agree in
writing to be bound by the terms of this agreement.  In addition to the rights
above in this paragraph 9 relating to transferability, either party may have a
one-time right to transfer the rights under this agreement to a buyer, subject
to the consent of the other party which shall not be unreasonably withheld, in
connection with the sale of 20% or more

 

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(measured by revenue) of a line of business subject to the license granted
hereunder.  The licenses granted cannot be used by the receiving party with a
third party in any manner which would allow the third party to obtain access to
the license granted by an indirect manner. For the avoidance of doubt, in the
event of a Change in Control, the license granted to Quidel and its Affiliates
will not apply to products of the acquirer and its Affiliates or to their
customers, suppliers, distributors and retailers to the extent such products are
not Quidel Products.  In the event that either party acquires another party
whose products use the lateral flow technology licensed, then rights under this
agreement extend to such products only if the acquiring pays the other party
hereto in full for any past infringement by such other party, at the royalty
rate, if any, applicable under this agreement at the time of the acquisition.

 

10        This settlement is binding on Inverness and Quidel and their
Affiliates upon the execution of this offer letter by both parties and the
parties agree to promptly execute the required and appropriate confirming
documents and to cause their Affiliates to execute the required and appropriate
confirming documents.

 

11.                                 The terms of the settlement are
confidential, except as required by law.  The parties will issue a short,
matter-of-fact, joint press release announcing the settlement and, except as
required by law, will only make statements about the settlement that are
consistent with what is stated therein.

 

12.                                 DEFINITIONS

 

“Affiliates” shall include an entity’s past, present, and future affiliated
companies, parents, subsidiaries, and brother-sister entities, and shall include
U.S. and foreign entities.

 

“Effective Date” shall mean the date on which the parties execute this
agreement.

 

“Inverness Parties” or “Inverness” shall include Inverness Medical
Innovations, Inc., Inverness Medical Switzerland GmbH, Wampole Laboratories LLC,
Applied Biotech, Inc., and Unipath Diagnostics, Inc., and their Affiliates.

 

“Inverness Portfolio of Lateral Flow Patents” shall include all U.S. and foreign
patents and patent applications which the Inverness Parties or their Affiliates
currently own or hereafter acquire, or with respect to which they possess the
right to sublicense, which embody lateral flow technology of the type at issue
in this dispute, and the continuations, continuations-in-part, and divisionals
thereof.  For avoidance of doubt, the Inverness Portfolio of Lateral Flow
Patents includes, but is not limited to, all of the Inverness Parties’ and their
Affiliates’ patents at issue in the current litigation between the parties and
Church & Dwight’s patents at issue in pending litigation between the parties, to
the extent Inverness has the right to sublicense such patents.  Inverness shall
produce a list of the patents within the Inverness Portfolio of Lateral Flow
Patents not later than 10 business days of the execution of this agreement.

 

“Quidel” shall mean Quidel Corporation.

 

“Quidel Products” shall mean any past, present, or future products made, used,
sold, or offered for sale by Quidel or its Affiliates.

 

“Quidel Product Sales” shall mean gross final sales by Quidel or its Affiliates
to non-affiliated parties of Quidel Products made or sold in countries where
Inverness and its Affiliates maintain lateral flow patents, net of returns and
taxes stated on the invoices.

 

“Quidel Portfolio of Lateral Flow Patents” shall include all U.S. and foreign
patents and patent applications which Quidel or its Affiliates currently own or
hereafter acquire, or with respect to which

 

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they possess the right to sublicense, which embody lateral flow technology of
the type at issue in this dispute, and the continuations, continuations-in-part,
and divisionals thereof.  For avoidance of doubt, the Quidel Portfolio of
Lateral Flow Patents includes, but is not limited to, the Eisinger patent and
its foreign counterparts.   Quidel shall produce a list of the patents within
the Quidel Portfolio of Lateral Flow Patents not later than 10 business days
following the execution of this agreement.

 

13.                                 This is a complete and binding agreement
that is effective upon execution hereof, but the parties may suggest additional
minor terms for consideration and possible agreement by the parties within 10
business days following the execution of this agreement.

 

Inverness Medical Innovations, Inc.

 

 

/s/ Ron Zwanziger

 

 

 

Read and Agreed

 

 

 

Quidel Corporation

 

 

 

 

/s/ Caren L. Mason

 

 

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