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   Author  Topic: Royalty Rates  (Read 11011 times)
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Posts: 2584
Re: Royalty Rates
« Reply #20 on: May 10th, 2006, 6:52pm »
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Again, I'm not intimately familiar with all the ins and outs of licensing.  However, I understand it's not outrageous to accept an up front fee, particularly if you're promising something in return -- like promising to delay negotiating (or agreeing) with others for a period of time.  For example, you might promise to give the potential licensee a month to evaluate your product/idea before considering offers from competitors and charge an up-front fee for that.
The bottom line in contracts is that you can ask for just about anything.  Will some things offend the other side?  Hard to say.  It depends largely on the other side.
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James D. Ivey
Law Offices of James D. Ivey

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Posts: 34
Re: Royalty Rates
« Reply #21 on: Jun 25th, 2006, 9:13pm »
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The company that has an interest in conducting a feasibility study has agreed to pay to have us suspend our activities in regards to appraoching others until the study is done.  they have suggested that the fee should not be more than 6 figures otherwise that might balk.
Should I ask them to make an offer and move on from ther?
Any suggestions will help;
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If you are interested in a must know how to drive.


Posts: 3
Re: Royalty Rates
« Reply #22 on: Jun 26th, 2006, 6:56pm »
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I don't have much experience in this except what I've heard through people I've talked to so take this with a grain of salt.
I managed to successfully get in contact with this inventor guy I had seen a special on TV. He sold a simple toy idea to Disney and now he has licensed about 10-20 ideas ideas and basically he never has to work again. But he mentioned that he has also licensed some gaming ideas to people like milton bradley and the likes, and that every contract with different companies is completely different.  
He said that for the gaming companies the average royalty was 5% of total sales, but that sometimes there his laywer was able to negotiate and up-front fee and sometimes not. He also said that on some of his contracts, he has it set up that he gets paid a certain set amount if the company doesn't reach a certain quota for sales that month. That sounds like a sweet deal.
From what I've read in books, I think it's very rare these days that someone can retire off one idea. The inventor guy I talked to also mentioned that he had about 20 ideas that failed, before he got his first successful idea licensed. That was not fun to hear but thus is reality and good information to know. That's not too encouraging but he said that he was diligent and just kept working hard at it.
Back to the royalties thing, he said his biggest check ever to come in for one month was around 30k, but wouldn't tell me what any of the checks average per month or anything like that except to say that 'i (he) never have to work again'.  
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Posts: 12
Re: Royalty Rates
« Reply #23 on: Sep 16th, 2006, 9:13am »
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Assuming that your invention is the product, and not just an improvement, wouldn't it make sense to charge 50% royalty rate and allow the business to write off expenses before the amount is calculated?  
I guess I should state that in my case the software is the product and there are no other patents involved.
« Last Edit: Sep 16th, 2006, 9:21am by Atomical » IP Logged
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Posts: 843
Re: Royalty Rates
« Reply #24 on: Sep 16th, 2006, 9:52am »
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“… wouldn't it make sense to charge 50% royalty rate and allow the business to write off expenses before the amount is calculated?”
At any given time the typical business has many options on how to spend its money.  When approached by a (potential) licensor the licensee has to evaluate the impact of the deal on the whole business.  Even if the licensor were asking for a nominal royalty, business management needs to weigh the known costs (dollars, time, disruption to current operations) and risks (financial, customer, labor and vendor relations, legal) against potential benefits (financial, brand equity, and so forth).  Needless to say, higher royalty rates make the proposition less attractive to the business.
The business should always ask “Is this the best place to invest our limited assets?”  Here “assets” include management’s time and effort, not just financial considerations.  For example – management should consider - rather than license this invention, “Would we be better off expanding our sales staff, or implementing some cost reduction programs.”
So sure, you can ask for half the profits.  And the business can simply say “No thanks.”
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Richard Tanzer
Patent Agent
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