The “exclusivity” contract language between GTAT and Apple along with the IP transfer between parties

Posted: March 31, 2014 by mattmargolis24 in Apple Investor Information, GTAT Investor Information, Hyperion, Mesa Sapphire Plant
Tags: , , , , , ,

by Matt Margolis

During the March 14 GT Advanced Technologies New Product and Technology Briefing, GT’s CEO Tom Gutierrez was asked whether or not Hyperion 4 was included within the exclusivity clause with Apple.  His response was that Hyperion was not currently covered within the exclusivity under the Apple agreement.  The million dollar question that remains open is, what is covered or not covered under the Apple exclusivity clause within the current contract?

According to the contract GTAT cannot enter into performing the “same” or “similar Development Services in the Consumer Electronic Field” while performing “Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple”.  Development Services definition seems to be very specific and I would correlate this to mean that GT cannot enter into a materials agreement to grow sapphire and develop sapphire materials for consumer electronics while performing the same service for Apple or until 3 years after GT ceases to grow sapphire and develop sapphire materials for Apple.

The next part of the exclusivity contract language may require some legal interpretation.  In addition to restricting GT’s ability to grow sapphire materials for the Consumer Electronic Field the contract also states GT cannot “assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party”.  This could be interpreted to mean that GT cannot sell any ASF sapphire growth furnaces that could land in consumer electronic products, which means that GT’s ASF furnaces could only be sold for LED purposes.  Another interpretation on the other end of the spectrum is that GT simply cannot enter into a sapphire materials contract similar to Apple within the Consumer Electronic Field.  The key words to digest in the second part of the exclusivity contract language are “assist, enable and facilitate”.  When GT sells a ASF furnace to a customer they do go to the customer site and train the customer to help them maximize their results using GT’s equipment so I’m not sure where to draw the appropriate line.   I’m curious what everyone else thinks?

 

1.4.   GTAT agrees that while performing the Development Services for Apple, and for 3 years following the date that GTAT ceases to perform the Development Services for Apple, it will not to the best of its knowledge, after conducting reasonable due diligence, perform the same or similar Development Services in the Consumer Electronic Products Field for any other person or party, nor will GTAT assist, enable or in any way facilitate any other person or party in its provision of the same or similar Development Services for any other person or party. “Consumer Electronic Products” [***].

Intellectual Property (IP)

According to the master supply agreement Apple has granted GTAT a “limited, non-exclusive, worldwide, royalty-free license to Apple’s IP rights including Apple’s patents and/or any other trade secrets, data or materials that are necessary to perform the Development Services and other obligations under the Agreement.  What this means is that every patent that Apple has filed related to sapphire and various other uses, if GT needs to use them as a result of Apple’s development services needs than GT will have the rights to do so.


4.1.   Except as otherwise provided herein, no right or license to Apple’s Intellectual Property Rights is granted or implied as a result of the Agreement or the Development Services, except that Apple hereby grants to GTAT a limited, non-exclusive, worldwide, royalty-free license to use Apple’s Intellectual Property Rights (including Project Work Product) solely to the extent necessary to perform Development Services and other obligations under the Agreement.  The transfer or license of Project Materials or GTAT Background Technology provided herein does not constitute a public disclosure. “Intellectual Property Rights” means the rights in and to all (i) U.S. and foreign patents and patent applications claiming any inventions or discoveries made, developed, conceived, or reduced to practice, including all divisions, substitutions, continuations, continuation-in-part applications, and reissues, re-examinations and extensions thereof; (ii) copyrights; (iii) unpatented information, trade secrets, data, or materials; (iv) mask work rights; and (v) any other intellectual or other proprietary rights of any kind now known or hereafter recognized in any jurisdiction.

On the GTAT side of the fence Apple will be sole property owner to “all results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials,” that arise from the performance of the Development Services by GTAT.  However, Apple will not have the rights to GTAT Background Technology, which includes Hyperion 4.

All results, reports, findings, conclusions, work papers, notebooks, electronic records, samples, prototypes, deliverables, and any other information or materials in any form or format arising out of performance of the Development Services by or for GTAT (the “Project Work Product”) except GTAT Background Technology (defined below) will be the sole property of Apple and will become part of the Confidential Information to be protected under the Agreement.

What will not be the sole property of Apple will be GTAT’s Background Technology, which will be “will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement”.  GTAT’s Hyperion 4 technology falls within GTAT’s Background Technology and is it therefore not currently covered within GT’s exclusivity agreement with Apple just as GT’s CEO indicated so clearly during the March 14th Technology Briefing.    GTAT’s Background Technology includes, inventions, data, improvements, discoveries, etc. that were “created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement,” assuming that these inventions were “created or developed by GTAT separately and independently” from GTAT’s Development Services work performed on behalf of Apple or any “Apple Confidential Information or Project Materials, and all Intellectual Property Rights”.  Essentially any inventions, processes and methodologies that GT had already developed prior to their agreement with Apple will continue to be owned by GT and the rights to these technologies will not be transferred to Apple.  I have read some comments that GT gave away everything in the deal but it looks like GT will retain the rights to all of their proprietary knowledge and inventions related to sapphire growth, inspection and processing methodology and know-how.

“GTAT Background Technology” means GTAT’s inventions, data, improvements, discoveries, ideas, processes, methodologies, formulas, techniques, works of authorship, trade secrets and know-how, whether patentable or not, conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT either (i) prior to the date of the Agreement or (ii) subsequent to the date of the Agreement if conceived, reduced to practice, authored, or otherwise created or developed by GTAT separately and independently of its provision of any Development Services and any Apple Confidential Information or Project Materials, and all Intellectual Property Rights therein or thereto.  GTAT Background Technology is and will be owned by GTAT and is not being transferred or assigned to Apple under the Agreement.  For the avoidance of doubt, any Sapphire Technology that is conceived, reduced to practice, authored, or otherwise created or developed by or for GTAT using (i) any of Apple’s Confidential Information or (ii) any GTAT personnel or contractors who had access to Apple’s Confidential Information will be deemed Project Work Product.

 

 

Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings in the next 72 hours

 

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Comments
  1. Clark Kent says:

    Hey Matt. Thanks for bringing back the contract and the exclusivity clauses. Though I am a big GTAT fan and would love for them to be able to sell furnaces, Hyperion4, and other related services to smartphone manufacturers such as Samsung or other consumer electronics makers; I think it is quite clear that GTAT cannot do this during the stated period of the contract.

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    • I disagree on Hyperion 4 – I believe that an be sold anywhere to anyone. The furnaces for ASF could be limited or completely banned for consumer electronics and that is definitely not clear.

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      • Clark Kent says:

        So you think that the Hyperion 4 can be sold to a consumer electronics company but that company would have to get their supply of sapphire elsewhere? Then any infringement on laminate technique would be enforced by Apple patent?

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      • I don’t think Apple cares about laminate because it can’t do all of the pure sapphire “stuff”. Laminate may be used for the back of the iPhone at some point but they need the full sapphire front cover. GT’s original plan was to sell Hyperion to an after market laminate screen protector which is perfect for the lower end mobile market.

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  2. Clark Kent says:

    I hope that is the case. That would be a potentially huge windfall if we could have other smartphones dressed in sapphire laminates using the Hyperion 4.

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