Contract analysis

I. INTRODUCTORY MEMORANDUM / COVER NOTE A. Purpose and Context This revised Article VII represents Quorum's good-faith attempt to bridge the impasse over derived-data rights that has persisted since the January 18, 2023 first in-person negotiation session and remained unresolved through the March 9, 2023 second session in Atlanta. The parties have exchanged multiple marked-up drafts, engaged in extensive telephonic d

II. PROPOSED ARTICLE VII: DERIVED DATA AND INTELLECTUAL PROPERTY RIGHTS [Note: The following constitutes the proposed contract language for Article VII of the MDLA. Bracketed italicized text represents internal drafting notes and commentary for Calderwood & Harkness and Quorum review only and will be removed from the version transmitted to Kessler Pruitt & Ashe LLP.]

ARTICLE VII DERIVED DATA AND INTELLECTUAL PROPERTY RIGHTS

Section 7.1 — Definitions For purposes of this Article VII, the following capitalized terms shall have the meanings set forth below. Capitalized terms used but not defined in this Article VII shall have the meanings ascribed to them elsewhere in this Agreement. (a) "Derived Data" means any and all data, datasets, databases, indices, scores, risk assessments, models, algorithms, model weights, model parameters, statis

Section 7.2 — Ownership of Derived Data (a) Licensee Ownership. As between the parties, Licensee shall own all right, title, and interest (including all intellectual property rights, whether arising under copyright, patent, trade secret, database rights, or other applicable law) in and to all Derived Data created, generated, compiled, developed, or produced by or on behalf of Licensee or its Affiliates during the Ter

Section 7.3 — Licensee's Internal Use Rights (a) Unrestricted Internal Use. Licensee shall have the unrestricted, perpetual (subject to the Term limitations on creating new Derived Data set forth in Section 7.7(b)), irrevocable, fully paid-up, worldwide right to use, copy, store, modify, adapt, enhance, analyze, reprocess, reformat, and create further derivatives of Derived Data for any and all internal business purp

Section 7.4 — Commercialization of Derived Data to Third Parties (a) Permitted Third-Party Commercialization. Subject to the conditions set forth in this Section 7.4 and Section 7.5, Licensee shall have the right to license, sublicense, sell, distribute, publish, or otherwise make available Derived Data to third parties (including entities outside Licensee's corporate group) for commercial purposes, provided that suc

Section 7.5 — Objective Transformation Standard and Procedures (a) Objective Criteria. Whether Derived Data constitutes a "Sufficiently Transformed Output" for purposes of Section 7.4 shall be determined solely by reference to the following objective criteria, and not by either party's sole, unilateral, or unfettered discretion: (i) No Extractability. Individual consumer records or business records from the Licensed

Section 7.6 — Intellectual Property Protections for Licensee's Proprietary Technology (a) QuorumScore™ and Proprietary Models. Licensor acknowledges that Licensee's proprietary models and algorithms (including, without limitation, QuorumScore™, United States Patent and Trademark Office application Serial No. 97/482,116) constitute Licensee's valuable trade secrets and confidential information, and that Licensee has i

Section 7.7 — Post-Termination Treatment of Derived Data (a) Survival of Ownership. Licensee's ownership of all Derived Data (including all intellectual property rights therein) shall survive expiration or termination of this Agreement for any reason, whether by mutual agreement, material breach, insolvency, convenience, or otherwise. Expiration or termination of this Agreement shall not divest Licensee of any owners

Section 7.8 — Representations and Covenants (a) Licensee Representations and Covenants. Licensee represents, warrants, and covenants to Licensor as follows: (i) Licensee's creation, use, storage, processing, and distribution of Derived Data shall comply in all material respects with all applicable federal, state, and local laws, rules, and regulations, including, without limitation, the Fair Credit Reporting Act, 15

Section 7.9 — Audit Rights (Limited) (a) Licensor Audit Right. Licensor shall have the right, exercisable no more than once per calendar year and upon not less than thirty (30) calendar days' prior written notice to Licensee, to engage an independent third-party auditor (mutually agreed by the parties, such agreement not to be unreasonably withheld, conditioned, or delayed) to verify that Licensee's third-party comme

III. DRAFTING NOTES AND STRATEGIC COMMENTARY [Note: This section contains internal Calderwood & Harkness analysis and strategic commentary for Quorum's legal team. This section will not be included in any version transmitted to Kessler Pruitt & Ashe LLP or Meridian.] A. Summary of Concessions Made by Quorum in This Revised Framework In developing this compromise framework, Quorum has made several meaningful concessio