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mike
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Royalty Rates
« on: Aug 3rd, 2004, 9:34am »
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Good Day All,
 
I have read that there are customary "industry specific" royalty rates used for licensing patent rights.  
 
Where can I find a reference for standard/customary rates by industry ?  
 
I have been asked to provide the "terms" for licensing rights to my patent but I am uncertain where to start.
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W
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Re: Royalty Rates
« Reply #1 on: Aug 3rd, 2004, 1:16pm »
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Check what the going rate is for your industry, consider the total amount of (possible, realistic) revenue (for the first 5 years) generated by your invention upon entering the marketplace, subtract out advertising and manufacturing, then take a fraction of that.  
 
For Manufacturing, you often times go with an immediate paytout + small percentage royalty. For Hardware (electronic) it's a slightly larger percentage royalty. For Software, it's a much larger percentage royalty (manufacturing costs are very small). For Biomedical, I do not know.
 
Here's an article for your consideration: http://www.cafezine.com/Index_article.asp?id=375&deptId=3
 
Best bet? Consultant. Get them to mediate the deal. They'll find a price that is acceptable to both parties.
 
Oh yeah, exclusive rights are higher than non-exclusive.
 
-W
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W
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Re: Royalty Rates
« Reply #2 on: Aug 3rd, 2004, 1:33pm »
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As an after thought, if this is your first time drawing up your licensing terms, you may want a contract lawyer. I do not know if they have a grasp as to the royalties in your industry, but they can keep you from accidently giving away the farm.
 
-W
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mike
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Posts: 49
Re: Royalty Rates
« Reply #3 on: Aug 3rd, 2004, 2:39pm »
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W,
 
Thanks for your reply and comments. This is my first stab at this and I am somewhat hesitant to begin negotiation
 
Have you any experience with patent valuation?
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W
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Re: Royalty Rates
« Reply #4 on: Aug 3rd, 2004, 3:32pm »
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Some, but not first-hand (the actual valuation is done at the table, by consultants or lawyers).
 
What you need to understand about licensing a patent is that a patent is like art: different people perceive different values.
 
Let's say you think your patent is worth $25M.
The people interested in your patent think it's worth $15M.
Your mediator(s) (lawyers on either side, arguing) want to settle on a price that you can both live with. Perhaps it's $15M, maybe it's $25M, maybe it's $20M, maybe it's $17M.  
 
Until and agreement is hammered out, and all your signatures are on that piece of paper, the 'value' of your patent is a grey area: $$M. What it turns out to be is up to your negotiator. Which is why it is important to have (usually) a lawyer (and a good one at that), ready to argue. No matter how much money you may think you can save by going it on your own, you will always save less than having a lawyer directly involved.
 
Good Luck,
-W
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