The purpose of a license
is to grant another
individual, company or
corporation the right to
use your intellectual
property for a specific
amount of time and for a
specific purpose. The
specifics are outlined
in the terms of the
agreement.
A licensor may grant
license under
"intellectual property"
to do something (such as
copy software or use a
patented invention)
without fear of a claim
of intellectual property
infringement brought by
the licensor.
A license under
intellectual property
usually has several
parts including a term,
territory, renewal, as
well as other
limitations deemed vital
to the licensor and
licensee.
Many licenses are valid
for a particular length
of time protecting the
licensor should the
value of the license
increase, or market
conditions change.
Royalties
Royalties are payments
made by one party (the
"licensee") to another
(the "licensor") for
ongoing usage of an
asset, usually an
intellectual property
(IP) right. The royalty
for a given case is
determined by many
factors including:
market drivers and
demand structure,
territorial of rights,
exclusivity of rights,
inherent risk, strategic
need, fundability, deal
structure, level of
innovation, stage of
development,
sustainability of the
product, and
availability of similar
technologies.
Navigating through the
royalty terms is
important. You commonly
have both an advance
royalty, which is a flat
fee paid upfront, and
ongoing royalties, which
are paid as a percentage
of every sale you make.
The advance royalty is
basically a guarantee
that the licensor will
get some money even if
your product does�t
sell. Then, if and when
your product sells, the
licensor will get a
percentage of the
sale--on average, about
5 percent of the
wholesale price of each
product sold.The licensor usually decides what the royalties will be, and those rates are pretty firmly set. So make sure you understand what they are and that they�re spelled out in your licensing agreement to avoid any surprises later. In fact, that agreement is crucial in determining not only what the licensor receives, but also what rights you get.
