Issue link: https://htpgraphics.uberflip.com/i/116731
Payment Provisions Degree of competition/ availability of other technologies Section 6 If your licensee has a number of options other than your IP, you will need to be careful not to charge a royalty which is too high and causes your licensee to go elsewhere for a cheaper option. On the other hand, if your licensee is restricted to your IP as its only or most preferred option – this will put you in a better position to ask for a higher royalty. Inherent risk You will need to consider the likelihood of any circumstances arising which could prevent or hinder the success of your IP. If, for example, there is a strong chance your patent may not proceed to grant, some regulatory approval e.g. for a pharmaceutical, may not be obtained, or there is a strong chance your IP will not be received well in the market, then it may be harder to justify a higher percentage. Should the percentage stay the same for the duration of the licence? Indexation It is a risky ploy going for a fixed royalty rate for the duration of the licence as this rate may only reflect the position of the market in the early stages of the licence or if it is a fixed amount it may be eroded by inflation. How do you take any inflationary factors into account? Well, to do this you can provide for an automatic review of the royalty rate by reference to a suitable index. This can take place at regular stages of the licence – usually annually. The General Index of Retail Prices is probably the most commonly used index in the UK, but may not be appropriate to all scenarios. 42