Intellectual Property: Valuation, Exploitation and Infringement Damages 2013 Cumulative Supplement, 11th Edition

CHAPTER 27A

ROYALTY RATES AND LICENSE FEES FOR TECHNOLOGY (NEW)

  27A.1 ROYALTY RATES

  27A.2 PER UNIT ROYALTIES

  27A.3 ROYALTIES BASED ON PROFITABILITY

  27A.4 LICENSE FEES

  27A.5 MEDICAL DEVICE INDUSTRY ROYALTY RATES

  27A.6 MEDICAL DEVICE INDUSTRY LICENSE FEE DISTRIBUTION

  27A.7 CONCLUSION

The focus of this new chapter is on the compensation terms in technology license agreements. Specially discussed are royalty rates and up-front license fees.

Royalty rates permeate many aspects of business beyond the completion of licensing transactions. They also are often used in technology valuation assignments where a relief-from-royalty calculation defines the value of a technology. As such, royalty rates are important for technology acquisition pricing and also for when valuation conclusions are used in financial reporting. Royalty rates are also the foundation of intellectual property infringement damage awards. U.S. law states that when a plaintiff cannot prove the amount of lost profits suffered because of the infringer's activities, the plaintiff is entitled to at least a reasonable royalty on the sales made by the infringer. So, royalty rates are used for completing license agreements, pricing the purchase and sale of technology, financial reporting, and settling legal disputes. Consequently, we maintain a database of license agreements focused on the compensation terms. Recently, we embarked on a research study to expand and enhance our database. This chapter presents some ...