8-KMaterial Agreements

DEXCOM INC 8-K Report, Material Agreement (Jul 7, 2014)

Filed July 7, 2014For Securities:DXCM

Summary

DexCom, Inc. (DXCM) announced on July 7, 2014, that it entered into a material definitive agreement on July 2, 2014, with Abbott Diabetes Care, Inc. This agreement, a Settlement and License Agreement, fully resolves all pending patent infringement legal proceedings initiated by Abbott against DexCom. This is a significant development for investors as it removes a major legal overhang and potential financial risk. The key terms of the agreement include a royalty-free, worldwide, non-exclusive cross-license of certain patents between the two companies. DexCom receives a limited license from Abbott to patents that were at the center of the infringement claims, and DexCom grants Abbott a similar license to certain of its own patents. Crucially, DexCom is not obligated to pay any royalties or financial compensation to Abbott under this agreement. The agreement also includes mutual covenants not to sue and not to challenge each other's patents until March 31, 2021, with specific exclusions for certain sensor technologies.

Key Highlights

  • 1DexCom resolved all pending patent infringement litigation with Abbott Diabetes Care, Inc.
  • 2The settlement includes a royalty-free, worldwide, non-exclusive cross-license of certain patents.
  • 3DexCom is not required to pay any royalties or financial compensation to Abbott.
  • 4The agreement establishes mutual covenants not to sue and not to challenge patents until March 31, 2021.
  • 5Licenses and covenants exclude specific sensor technologies used by each party.
  • 6A $25 million continuation fee is payable to the non-acquired party in the event of a change of control.

Frequently Asked Questions

The main impact is the resolution of all patent infringement litigation with Abbott Diabetes Care, Inc. This removes a significant legal and financial risk for DexCom, allowing the company to focus on its operations and growth without the distraction and potential cost of the lawsuit.

No, according to the filing, DexCom is not obligated to pay any royalties or any other form of financial compensation to Abbott under the terms of the Settlement and License Agreement.

The agreement involves a royalty-free, worldwide, non-exclusive cross-license of certain patents. DexCom receives a limited license to specific Abbott patents that were the subject of the infringement claims, and DexCom grants Abbott a limited license to certain of its own patents. These licenses exclude the specific sensor technology used by each respective party.

Both parties have agreed not to sue each other for patent infringement based on certain continuous glucose monitoring products and not to challenge each other's patents or patent applications until March 31, 2021, subject to limited exceptions.