Your Ultimate Guide to Royalty Rates Services
Royalties refer to payments provided to a licensor by a licensee in exchange for the right to operate under an idea or patent. One of the essential steps when it comes to licensing a patent or idea is establishing a royalty rate you’ll receive for you to grant the right or license to an individual, group or company for manufacturing and selling your invention. Allow us to help you get a clear idea how to calculate the right royalty rates, and discuss the factors affecting royalty rates. Royalty rates are affected by exclusivity, upfront sum, industry standard royalty rates, company standard rates, intellectual property stage, market potential, licensing to an infringer, related intellectual property included, testing and certification, and investment required.
How are royalty rates calculated? There are many ways how a franchisor establish their royalty rates such as the gross sales that the franchisee will earn, ranging from five to none percent. Gross sales refer to the total amount of sales made by the franchisee without any discounts or reduction applied to family members, employees, allowances, adjustments, returns, or taxes. It is important to take good care of determining the right royalty fee to become a successful franchisor, and there are some who just uses whatever their competitors are requiring.
The general approaches in assessing the right royalty rate for intellectual property licensing include cost approach, the comparable market approach, and the income approach. In terms of cost approach, it takes into consideration the costs associated with technology upgrading, research and development, patent application cost, pilot-plant, and test-marketing. When it comes to the success state development, the licensee pays higher royalties for the product as in moves through the stages including pre-clinical success (in vitro, 0-5 % royalty rate), phase I or safety (100 healthy people, 5-10%), phase II or efficacy (300 subjects, 8-15%), phase III or effectiveness (several thousands of patients, 10-20%), and launched product (regulatory body approval, 20% and above). Comparable market approach involves basing royalty rates on similar technologies or industry application. In order to get the appropriate share of the profit generated, the income approach focuses on the estimated profits of the licensor as generated by the licensee.
Are you having issues determining the right royalty rate for your invention? You may come and check our homepage or website to get to know more how royalty rates services work. Royalty rate services are our expertise so check us out now!