exv10w1



 





Exhibit 10.1




PATENT LICENSE AND SETTLEMENT AGREEMENT



This Patent License and Settlement Agreement, effective as of July 1, 2007 (hereinafter, “Effective
Date”), is made by and between Health Discovery Corporation (“HDC”), a Texas corporation having its
principal place of business at 2 East Bryan Street, Savannah, GA 31405, and Ciphergen Biosystems,
Inc. (“Ciphergen”), a Delaware corporation having its principal place of business at 6611 Dumbarton
Circle, Fremont, CA 94555 (referred to herein collectively as “the Parties” and individually as a
“Party”).




RECITALS



WHEREAS, the Parties have been involved in litigation concerning, among other things, the alleged
infringement by Ciphergen of certain patents owned by HDC and related counterclaims asserted by
Ciphergen in Health Discovery Corporation v. Ciphergen Biosystems, Inc., Case No. 07-00285-CRB,
pending as of the Effective Date in the United States District Court for the Northern District of
California (“Pending Litigation”); and



WHEREAS, Ciphergen and HDC, wishing to avoid the expense of further litigation, have agreed to
settle such Pending Litigation pursuant to the terms set forth below without either Party making
any admission of any liability and, as part of the settlement, HDC has agreed, among other things,
to grant to Ciphergen certain licenses, releases, and immunities from suit with respect to certain
patents, and Ciphergen has agreed to pay certain fees and to grant HDC certain releases from suit
with respect to its counterclaims.



NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and other
terms and conditions contained herein, the sufficiency of which is hereby acknowledged, the Parties
hereto agree as follows:




ARTICLE I. DEFINITIONS



As used in this Agreement, the following terms, whether used in singular or in plural, shall have
the respective meanings set forth below:




1.1 “Change in Control” with respect to Ciphergen means (a) any consolidation or merger of
Ciphergen with or into any other entity in which the holders of Ciphergen’s outstanding shares
immediately before such consolidation or merger do not, immediately after such consolidation or
merger, retain stock representing a majority of the voting power of the surviving entity or stock
representing a majority of the voting power of an entity that wholly owns, directly or indirectly,
the surviving entity; (b) the sale, transfer or assignment of securities of Ciphergen representing
a majority of the voting power of all Ciphergen’s outstanding voting securities to an acquiring
party or “group” (as defined under the Securities Exchange Act of 1934, as amended); (c) the sale
of all or substantially all of Ciphergen’s business or assets; or (d) any series of related
transactions that would fall within clause (a), (b) or (c) above if viewed as a single transaction.



 









 





1.2 “Valid Patent Claim” shall mean a claim of an issued, maintained, and unexpired patent
included within the Licensed Patents, which has not been revoked or held unenforceable or invalid
by a final decision of a court or other governmental agency of competent jurisdiction having
authority over said patent and that final decision is not appealed or is unappealable, and
which has not been admitted to be invalid or unenforceable through reissue, disclaimer or other
similar means.



ARTICLE II. RELEASES AND SETTLEMENT




2.1 Mutual Release. Each Party, on behalf of itself and its affiliates, agents, officers,
directors, shareholders, employees, successors and assigns (“Associated Parties”), hereby
irrevocably releases and forever discharges each other Party and its affiliates, agents, officers,
directors, shareholders, employees, scientific advisory board members, attorneys, successors,
assigns, and heirs (collectively, “Released Parties”) of and from any and all claims,
counterclaims, demands, actions, causes of action, damages, liabilities, losses, payments,
obligations, costs and expenses (including, without limitation, attorneys’ fees and costs) of any
kind or nature, past or present, fixed or contingent, direct or indirect, in law or equity, several
or otherwise, known or unknown, suspected or unsuspected, that arise from or relate in any way to
any act or omission committed by a Party prior to the Effective Date (“Released Claims”). The
foregoing release shall not apply to each Party’s obligations required to be performed under this
Agreement and shall not apply to any activity that continues beyond the Effective Date.



2.2 Waiver. Each Party, on behalf of itself and its Affiliates, agents, representatives,
officers, directors, shareholders, employees, attorneys, advisors, insurers, successors and
assigns, hereby irrevocably and forever waives all rights it may have arising under California
Civil Code Section 1542 (or any analogous requirement of law) with respect to the foregoing
release. Each Party understands that Section 1542 provides that:



A general release does not extend to claims which the creditor does not know or suspect to exist in
his favor at the time of executing the release, which if known by him must have materially affected
his settlement with the debtor.



Each Party acknowledges that it has been fully informed by its counsel concerning the effect and
import of this Agreement under California Civil Code Section 1542 and other requirements of law.



2.3 Dismissal of Pending Litigation. Within ten (10) days after the Effective Date, the
Parties shall cause to be completed, executed and filed with the applicable court a stipulated
dismissal with prejudice of the Pending Litigation consistent with this Agreement and in the form
attached hereto as Attachment B (the “Dismissal”).



2.4 No Admission. This Agreement is entered into in order to compromise and settle
disputed claims, without any acquiescence on the part of any Party as to the merit of any claim,
defense, affirmative defense, counterclaim, liabilities or damages related to any patent rights
and/or the Pending Litigation. Neither this Agreement nor any part thereof shall be, or be used
as, an admission of infringement or liability by anyone, at any time for any purpose.



 









 





ARTICLE III. LICENSE GRANT




3.1 License: HDC grants to Ciphergen a worldwide, non-exclusive, fully paid-up,
royalty-free license to the patents and pending patent applications (“the Licensed Patents”)
identified in attached Schedule A, including any divisionals, continuations or
continuations-in-part of the Licensed Patents to the extent that they have claims covering the Licensed Field, which is defined
as follows:



     (a) Manufacture, offer for sale, sale, use and/or importation of SELDI-based mass
spectrometers and Associated Software, which is defined as the software developed and sold by
Ciphergen under the trademarks ProteinChip® Software, Biomarker PatternsTM Software, and
CiphergenExpressTM Software (whether done by Ciphergen or by a third party on Ciphergen’s behalf).
Customers of Ciphergen will have an implied license to utilize the Licensed Patents when using
SELDI instruments purchased from Ciphergen with the Associated Software, but will have no separate
right to use Support Vector Machine (SVM) technology as claimed in the Licensed Patents apart from
their use of the SELDI-based mass spectrometers with the Associated Software, which expressly
excludes the addition or substitution of third party-based SVM technology to or for the Associated
Software;



     (b) Use of SVM software in conjunction with a SELDI-based mass spectrometer by Ciphergen
and/or a research institution(s), pursuant to or in connection with a collaboration between
Ciphergen and such research institution(s) and primarily for Ciphergen’s benefit; and



     (c) Development, clinical testing and/or commercialization of tests or test kits, utilizing
the methods described in paragraph 3.1(b), which are commercialized by Ciphergen and/or
subsequently transferred by Ciphergen to a Ciphergen partner or third party for commercialization.



3.2 Assignment: Ciphergen may not assign its rights under this Agreement without the
written consent of HDC, with the exception that Ciphergen may assign its rights under this
agreement to a wholly-owned subsidiary without HDC’s consent. Any assignment hereunder of
Ciphergen’s obligations under this Agreement shall specifically obligate the assignee to perform
the payment obligations under Article IV.



ARTICLE IV. FEES




4.1 Fees. In exchange for the grant by HDC of the license as described above and the
covenants contained herein, Ciphergen shall pay HDC the sum of $600,000 over a two year period.
The payment by Ciphergen to HDC is agreed to be on the following schedule:



	 	 	 	 	 
	Event	 	Amount
	Signing of the License Agreement

	 	$	200,000	 
	3 Months After Signing

	 	$	100,000	 
	12 Months After Signing

	 	$	150,000	 
	24 Months After Signing

	 	$	150,000	 
	Total:

	 	$	600,000	 






 









 






and be made by wire transfer of immediately available funds to:



WIRING INSTRUCTIONS

SUNTRUST ESCROW (IOLTA)




	 	 	 
	Name of Bank:
	 	Sun Trust Bank

	 	 	25 Park Place

	 	 	Atlanta, Georgia 30303

	 	 	 

	Bank ABA Routing No.:   	 	061000104

	 	 	 

	Bank Account No.:
	 	1000045116430

	 	 	 

	Bank Account Name:
	 	Powell Goldstein LLP
 Escrow Account

	 	 	 

	Contact:
	 	Brenda Drukenmiller (404) 572-6750

or (404) 572-6999 (fax)







4.2 Late Payments. Payments late by more than forty-five (45) days shall bear an interest
at the rate of 2% over the prime rate in effect at Citibank, Manhattan on the due date, not to
exceed the maximum rate permitted by law. Payments late by more than sixty (60) days shall be
deemed to be a breach of this Agreement and shall immediately terminate any sublicenses granted by
Ciphergen hereunder, any implied licenses enjoyed by Ciphergen’s customers, and the provisions of
Article 7.1.



ARTICLE V. TERM AND TERMINATION




5.1 Termination and Expiration. This Agreement shall be effective as of the Effective
Date, even though necessary ratifying signatures may be at a later date, and shall remain in full
force and effective until expiration of the last Valid Patent Claim.



5.2 Impact of Change in Control. Upon a change in control, the successor in interest
shall fulfill all obligations Ciphergen has under this Agreement and shall acquire the rights
Ciphergen has under this Agreement pursuant to Article III.



5.3 Insolvency. Should Ciphergen (a) become insolvent or unable to pay its debts as they
mature, or (b) make an assignment of substantially all of its business assets for the benefit of
creditors, or (c) permit or procure the appointment of a receiver for substantially all of its
business assets, or (d) become the subject of any bankruptcy, insolvency or similar proceeding and
be unable to perform its obligations hereunder, then HDC may at any time thereafter on written
notice to Ciphergen, effective forthwith, cancel this Agreement and any sublicenses granted by
Ciphergen hereunder, any implied licenses enjoyed by Ciphergen’s customers, and negate the releases
and discharges granted by HDC pursuant to this Agreement.



 









 





ARTICLE VI. REPRESENTATIONS, WARRANTIES AND COVENANTS




6.1 HDC Representations, Warranties and Covenants. HDC represents, warrants and covenants
that (a) HDC has the full power to enter into this Agreement and to perform its obligations
hereunder; (b) HDC is the owner of the entire right, title and interest in and to the Licensed
Patents; (c) HDC has the sole right and authority to enter into this Agreement and grant the
rights, licenses, releases and immunities granted hereunder, without the need for any licenses,
releases, consents, approvals or immunities not yet granted or obtained; (d) HDC has not previously
granted and shall not grant any rights in the HDC Licensed Patents in the Licensed Field that are
inconsistent with the rights and licenses granted to Ciphergen herein or that would cause Ciphergen
not to have a fully paid-up, worldwide, non-exclusive, right and license under the Licensed Patents
in the Licensed Field; and (e) Attachment A includes all patents and patent applications within the
Licensed Field existing as of the Effective Date.



6.2 Ciphergen Representations, Warranties and Covenants. Ciphergen represents, warrants
and covenants that (a) Ciphergen has the full power to enter into this Agreement and to perform its
obligations hereunder; and (b) Ciphergen represents that it has no interest in and no claim to any
of the Licensed Patents except as expressly granted in this Agreement.



6.3 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTIONS 6.1 and 6.2 OF THIS
AGREEMENT, NO PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED.



ARTICLE VII. MISCELLANEOUS PROVISIONS




7.1 Covenant not to Sue: HDC agrees that neither HDC nor any affiliate of HDC will sue
Bio-Rad, any Bio-Rad affiliate or any third party acting on Bio-Rad’s behalf (including Salford
Systems), for its manufacture, offer for sale, sale, use, and importation of SELDI-based mass
spectrometers when used with the Associated Software. Nothing herein, however, gives Bio-Rad any
separate right to use Support Vector Machine technology as claimed in the Licensed Patents apart
from the SELDI-based mass spectrometers and Associated Software and the SELDI instrumentation
business that Bio-Rad acquired from Ciphergen, which expressly excludes the addition or
substitution of third party-based SVM technology to or for the Associated Software. This covenant
shall be binding upon, and inure to, the benefit of the parties, their successors, assigns and
executors, administrators, personal representatives and heirs. Further, this covenant not to sue
is intended to “run with” the patent rights in question. Accordingly, if HDC assigns such patent
rights or any right to enforce such patent rights to any third party, the relevant assignment
agreement shall include a provision pursuant to which the assignee agrees that its ownership of
such patent rights is subject to, and it will comply with and honor, the covenants set forth
herein.



7.2 Agreement to Arbitrate: Any dispute arising out of or related to this Agreement shall
be addressed diligently and in good faith by the Parties. In the event such dispute cannot be
resolved within (30) days from the date on which either Party notified the other Party in writing
of such dispute (or such longer time as agreed upon by the Parties), the matter shall be submitted



 









 







to binding arbitration. For this purpose, HDC and Ciphergen agree to forgo a jury trial and
arbitrate any future dispute related to this Agreement in San Francisco, California, before a
single arbitrator that is acceptable to both Parties.



7.3 Governing Law. This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Delaware (without giving effect to the laws, rules or
principles thereof regarding conflict of laws); provided, however, that all questions with respect
to the interpretation of the claims and the validity of any patents or patent applications shall be
determined in accordance with the laws of the respective country in which such patents or patent
applications shall have been granted or filed, as applicable.



7.4 Notices. Any notice, request, demand or other communication required or permitted
hereunder shall be in writing, shall reference this Agreement and shall be deemed to be properly
given: (a) when delivered personally; (b) when sent by facsimile, with written confirmation of
receipt; (c) five (5) business days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (d) two (2) business days after deposit with a private
industry express courier, with written confirmation of receipt. All notices shall be sent to the
address set forth below (or to such other address or person as may be designated by a Party by
giving written notice to the other Party pursuant to this section).



	 	 	 
	Health Discovery Corporation

	 	Ciphergen Biosystems, Inc.
	Attention: Chief Executive Officer

	 	Attention: President and Chief Executive Officer
	2 East Bryan Street

	 	6611 Dumbarton Circle
	Savannah, GA 31401

	 	Fremont, CA 94555






7.5 Waiver. A waiver, express or implied, by either HDC or Ciphergen of any right under
this Agreement or of any failure to perform or breach hereof by the other Party hereto shall not
constitute or be deemed to be a waiver of any other right hereunder or of any other failure to
perform or breach hereof by such other Party, whether of a similar or dissimilar nature thereto.



7.6 Severability. If any provision of this Agreement is unenforceable or invalid under
any applicable law or is so held by applicable court decision, such unenforceability or invalidity
shall not render this Agreement unenforceable or invalid as a whole, and, in such event, such
provision shall be changed and interpreted so as to best accomplish the objectives of the Parties
within the limits of applicable law or applicable court decision.



7.7 Force Majeure. In the event any Party hereto is prevented from or delayed in the
performance of any of its obligations hereunder by reason of acts of God, war, strikes, riots,
storms, fires or any other cause whatsoever beyond the reasonable control of the Party, the Party
so prevented or delayed shall be excused from the performance of any such obligation to the extent
and during the period of such prevention or delay.



7.8 Cumulative Remedies. The rights and remedies of the Parties as set forth in this
Agreement are not exclusive and are in addition to any other rights and remedies now or hereafter
provided by law or at equity.



 









 





7.9 Captions and Headings. The captions and headings used in this Agreement are inserted
for convenience only, do not form a part of this Agreement, and shall not be used in any way to
construe or interpret this Agreement.



7.10 Construction. This Agreement has been negotiated by the Parties and shall be
interpreted fairly in accordance with its terms and without any construction in favor of or against
any Party.



7.11 Counterparts. This Agreement may be executed (including, without limitation, by
facsimile signature) in one or more counterparts with the same effect as if the parties had signed
the same document. Each counterpart so executed shall be deemed to be an original, and all such
counterparts shall be construed together and shall constitute one Agreement.



7.12 Entire Agreement; Amendment. This Agreement, including the Exhibit(s) attached
hereto which are incorporated herein by reference, constitutes the entire understanding and only
agreement between the Parties with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous negotiations, representations, agreements and understandings, written or
oral, that the Parties may have reached with respect to the subject matter hereof. No agreements
altering or supplementing the terms hereof may be made except by means of a written document signed
by the duly authorized representatives of each of the Parties hereto.



IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be signed in duplicate by
their duly authorized officers.



HEALTH DISCOVERY CORPORATION




	 	 	 
	Agreed by:
	 	/s/ Stephen D. Barnhill

	 	 	 

	Printed Name:
	 	Stephen D. Barnhill, MD

	 	 	 

	Title:
	 	CEO

	 	 	 

	Date:
	 	July 10, 2007

	 	 	 






CIPHERGEN BIOSYSTEMS, INC.




	 	 	 
	Agreed by:
	 	/s/ Gail S. Page

	 	 	 

	Printed Name:
	 	Gail S. Page

	 	 	 

	Title:
	 	CEO

	 	 	 

	Date:
	 	July 5th 2007

	 	 	 







 









 








ATTACHMENT A




Licensed Patents




LICENSED INTELLECTUAL PROPERTY




	 	 	 	 	 	 	 
	Country/	 	Patent/Publication/	 	 
	Region	 	Application No.	 	Description
	U.S.
	 	 	6,128,608	 	 	Enhancing Knowledge Discovery Using Multiple Support Vector Machines

	U.S.
	 	 	6,427,141	 	 	Enhancing Knowledge Discovery Using Multiple Support Vector Machines

	U.S.
	 	 	6,658,395	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	U.S.
	 	 	6,760,715	 	 	Enhancing Biological Knowledge Discovery Using Multiple Support Vector Machines

	U.S.
	 	 	6,789,069	 	 	Method of Identifying Patterns in Biological Systems and Method of Uses

	U.S.
	 	 	6,882,990	 	 	Method of Identifying Biological Patterns Using Multiple Data Sets

	Australia
	 	 	764897	 	 	Pre-processing and Post-processing for Enhancing Knowledge Discovery Using Support Vector Machines

	Australia
	 	 	780050	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	China
	 	ZL00808062.3
	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	Europe
	 	 	1192595	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	Norway
	 	 	319,838	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	South Africa
	 	 	00/7122	 	 	Pre-processing and Post-processing for Enhancing Knowledge Discovery Using Support Vector Machines

	Canada
	 	 	2,330,878	 	 	Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines

	Europe
	 	 	1082646	 	 	Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines

	Hong Kong
	 	 	011065063	 	 	Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines

	India
	 	 	2000/00580	 	 	Pre-Processing and Post-Processing for Enhancing Knowledge Discovery Using Support Vector Machines

	Canada
	 	 	2,371,240	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	India
	 	 	2001/01329	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	Israel
	 	 	146705	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	Japan
	 	 	2000-620577	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines

	South Korea
	 	 	7015064/2001	 	 	Enhancing Knowledge Discovery from Multiple Data Sets Using Multiple Support Vector Machines







 









 






	 	 	 	 	 	 	 
	Country/	 	Patent/Publication/	 	 
	Region	 	Application No.	 	Description
	Canada
	 	 	2,388,595	 	 	Method of Identifying Patterns in Biological Systems and Method of Uses

	Europe
	 	 	1236173	 	 	Method of Identifying Patterns in Biological Systems and Method of Uses

	Germany
	 	 	60024452	 	 	Method of Identifying Patterns in Biological Systems and Method of Uses (German patent from EP1236173)

	Japan
	 	 	2001-534088	 	 	Method of Identifying Patterns in Biological Systems and Methods of Uses








 









 








ATTACHMENT B




Dismissal




 









 






DONALD F. ZIMMER, JR. (State Bar No. 112279)

HILLARY S. WEINER (State Bar No. 203499)

TRACIE C. MILITANO (State Bar No. 215645)

DRINKER BIDDLE & REATH LLP

50 Fremont Street 20 Floor

San Francisco, California 94105-2235

Telephone: (415) 591-7500

Facsimile: (415) 591-7510

E-mail: donald.zimmer dbr.com

E-mail: hillary.weiner dbr.com

E-mail: tracie.militano dbr.com



Attorneys for Plaintiff

HEALTH DISCOVERY CORPORATION



UNITED STATES DISTRICT COURT




NORTHERN DISTRICT OF CALIFORNIA




	 	 	 	 
	HEALTH DISCOVERY CORPORATION,

     Plaintiff,



           v.

	 	 	Case No. C 07-00285 CRB


JOINT STIPULATION AND

[PROPOSED] ORDER OF

DISMISSAL WITH PREJUDICE
	 
	 	 	 
	 
	 	 	Hon. Charles R. Breyer
	CIPHERGEN BIOSYSTEMS, INC.,
	 	 	 
	     Defendant.
	 	 	 
	 


	 	 	 






     IT IS HEREBY STIPULATED by and between plaintiff
Health Discovery Corporation and Defendant
Ciphergen Biosystems, Inc., through their respective counsel of record, that the above-captioned
matter shall be and is hereby dismissed with prejudice pursuant to Rule 41(a)(1). Each party shall
bear its own costs and attorney’s fees in connection with the above-captioned matter.




IT IS SO STIPULATED, THROUGH COUNSEL OF RECORD.




 




 



 



Stip and [Proposed] Order to Extend Case Mgmt Deadlines



Case No. C07-00285 CRB




 









 





	 	 	 
	DATED: June _, 2007     
	 	Drinker Biddle & Reath llp 

	 	 	 

	 	 	 

	 	 	 

	 	 	DONALD F. ZIMMER, JR.

	 	 	HILLARY S. WEINER

	 	 	TRACIE C. MILITANO

	 	 	Attorneys for Plaintiff

	 	 	HEALTH DISCOVERY CORPORATION

	 	 	 

	DATED: June _, 2007
	 	Quinn Emanuel Urquhart Oliver & 

	 	 	Hedges, llp

	 	 	 

	 	 	 

	 	 	 

	 	 	MELISSA J. BAILY

	 	 	Attorneys for Defendant

	 	 	CIPHERGEN BIOSYSTEMS, INC.







PURSUANT TO STIPULATION, IT IS SO ORDERED:




	 	 	 
	DATED: June _, 2007     
	 	 

	 	 	 

	 	 	 

	 	 	HON. CHARLES R. BRYER

	 	 	United States District Court, Northern

	 	 	District of California

	 	 	 

	 	 	 








2


 



Stip and [Proposed] Order to Extend Case Mgmt Deadlines



Case No. C07-00285 CRB