IdeaBuyer :: Patent Licensing Tips + News » Royalty Rates Made Easy – The Guide

IdeaBuyer :: Patent Licensing Tips + News » Royalty Rates Made Easy – The Guide

One of the most important steps in licensing a patent or idea is establishing the royalty rate you will receive in return for granting a licensee the right to manufacture and sell your invention. In this article we will explain what royalty rates are, how to calculate the proper royalty rates, elements that effect royalty rates, protections to put in place, and other important things to consider when licensing an idea.

What are Royalties? Royalties are payments that are provided to a licensor by a licensee in exchange for the right to operate under your idea.

Royalty rates are affected by several criteria:

Criteria Description Exclusive or Non-Exclusive Exclusive idea licensing will result in a higher royalty rate than non-exclusive licenses. Upfront Sum The higher the up-front sum being paid to the licensee, the lower royalty rate the licensor will likely receive as it is an element of the overall compensation. Industry Standard Royalty Rates Each industry...
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