13.  Mediation Settlement

In connection with the process of seeking patent protection for RX-5902 in Japan, the Company had filed a patent application including claims covering RX-5902 with the Japanese Patent Office (“JPO”) for examination. The JPO initially agreed that the claims covering the compound for RX-5902 were allowable, but as a result of a mistake in the patent application filing as prepared and submitted by the Company’s Japanese patent attorney and incomplete review by the JPO’s patent examiner, the JPO issued a decision to grant a patent with claims that did not include RX-5902’s chemical structure. The Company appealed this decision with the JPO to request withdrawal of the decision to grant so that the correct claims would be allowed, but the JPO refused to withdraw its decision. As a result, and in accordance with Japanese law and procedure for appealing patent application decisions, the Company has filed a lawsuit against the JPO in Tokyo District Court to cause the JPO to reverse its decision to grant the errant patent and to allow a patent that includes claims covering RX-5902.  The patent application at issue remains pending subject to the outcome of this action. While the composition of matter patent on RX-5902 structure remains pending in Japan, the Company either has already or will have protection in Japan from its issued and pending patents on formulation, method of use, and method of manufacturing as well as from market exclusivity period.

On December 19, 2016, the Company entered into a binding settlement arrangement with the Company’s Japanese patent attorney in which the Japanese patent attorney agreed to pay a one-time settlement JPY 210,000,000, or $1,770,658, in exchange for the Company agreeing not to bring any future claims on account of this patent filing.  The settlement payment was received by the Company by December 31, 2016.