2.2.2 Subject to Section 12.2, this Agreement does not convey and Children’s retains all rights, titles or interests, including conveyances by implication, estoppel or otherwise, in tangible or intangible property rights, including any patents, know-how, tangible materials, or other inventions or discoveries, that are not the Licensed Technology as granted in Sections 2.1.1 and 2.1.2.
2.3 Government Rights. Licensee understands that the Licensed Patents and licensed methods may have been conceived or may be first actually reduced to practice with funding from the U.S. government. All rights granted shall be limited by and subject to the rights of the U.S. government, as applicable, and Licensee agrees to comply and enable Children’s to comply with all obligations to the U.S. government, including those set forth in 35 U.S.C. §200 et al., regarding substantially manufacturing and practicing Licensed Products in the U.S., unless waived. On an annual basis, Licensee shall report to Children’s whether or not it qualifies as a “small business firm” as defined in 37 C.F.R. 401.14(a)(5).
DUE DILIGENCE BY LICENSEE
3.1 Due Diligence by Licensee. Licensee represents and warrants to Children’s, to induce Children’s to enter into this Agreement, that Licensee: (a) shall use commercially reasonable efforts to exploit the Licensed Technology, where it is commercially reasonable to do so, so that public utilization and practical application results therefrom; (b) has, or shall obtain within **** after the Effective Date, the expertise necessary to develop, market and sell Licensed Products if commercially reasonable.
3.2 Development Plan. Licensee has provided Children’s with the development plan attached as Exhibit C describing the steps Licensee agrees to take to develop the Licensed Technology and make and sell Licensed Products in the Field of Use and throughout the Licensed Territory, as may be updated by Licensee from time to time during the Term.
3.3 Development Report. Within **** following the end of each License Year, Licensee shall provide Children’s with a written development report containing at least the information set forth in Exhibit D, and describing in reasonable detail: (a) as of that reporting period, all development activities for each Licensed Product and the names of all sublicensees, including which are Affiliates; and (b) an updated development plan for the next reporting period which shall, notwithstanding Section 12.3, amend Exhibit C of this Agreement.
3.4 Milestones. Licensee shall achieve the following milestones. Licensee shall promptly notify Children’s upon the achievement of each of the milestones, identify whether the Licensee or a sublicensee is responsible for the achievement of such milestone and the actual achievement date of such.
3.4.1 Licensee shall market the Licensed Products in the United States upon receiving regulatory approval if commercially reasonable;
3.4.2 Following the first commercial sale of a Licensed Product, Licensee shall satisfy the market demand for such Licensed Product in those countries within the Licensed Territory for which Licensee has obtained regulatory approval for such Licensed Product during the Term if and where commercially reasonable to do so and continue to develop additional Licensed Products, Licensed Methods and applications within the Field of Use if commercially reasonable.
3.5 Requirements. Licensee’s failure to perform any of its obligations specified in this Article 3, including: (a) perform substantially in accordance with the current development plan as defined in Exhibit C (and any update thereto); or (b) meet each milestone in Section 3.4; in each case of (a) and (b), shall constitute a material breach of this Agreement and Children’s shall have the right and option at its