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Subject |
License(2) - How does calculate the royalty? |
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2 |
Name |
IP_Park |
Date |
2003/10/31 14:00:21 |
Homepage |
http://www.ippark.com |
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Q2. How does calculate the royalty?
1) Royalty for use of IP rights is paid on the basis of a period. There are three types of royalties: fix-royalty, running-royalty and fix-running royalty.
2) A fix-royalty means that a licensee shall pay to the licensor on an agreed fix amount regardless of the sales amount/number for the period of agreement. In case of the fix-royalty basis, generally the royalty is paid in advance. The IP rights owner, who is not informed of the new market situation in which he launches his new business, generally requires only a fix-royalty to guarantee his profit.
3) A running-royalty means that a licensee shall pay a royalty on the basis of the royalty rate of the sales amount/number. Generally, the running-royalty is paid in a quarterly or semi annually basis, and this system is chosen from the market where the IP rights owner calculates the possible sales amount/number, and information thereof. In the adoption of a running-royalty, to guarantee some profit to the IP rights owner, if the sales amount/numbers is small, the royalty rate is high, while if the sales amount/number is big, the royalty rate is low.
4) A fix-running royalty is a combination of the fix-royalty and the running-royalty. In this fix-running royalty, if the sales amount/number is less than the agreed amount/number, then the fix-royalty is applied. However, if the sales amount/number exceeds the agreed amount/number, the running royalty is applied. These days, many IP rights owners wish to adopt this fix-running royalty, in order to guarantee their stable profit. |
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