Issue link: https://htpgraphics.uberflip.com/i/246988
Payment Provisions Section 6 Up-Front Payments In addition to or instead of a royalty you may want to ask for an "up-front" or "lump sum" payment upon signature of the licence. Up-front payments are commonly found in a licence of software. In Publishing Agreements they are called "Advances". They are also useful if a licensor requires some immediate cash flow – perhaps to support further or reimburse past research costs. It may be more difficult to convince a licensee that an up-front payment should be paid when licensing other forms of IP, especially if the licensee is likely to have other initial investment costs and expenses. It is entirely appropriate to ask for this as an additional payment, although firms will often resist this or wish to set the sum against the early royalty payments (i.e. they will deduct it from those future payments which will be due to the institution). Let's look at a couple of examples of circumstances in which you may be able to obtain an up-front payment. Professor Smart has agreed to grant Paradox Limited an exclusive licence of patents and know-how for use in the manufacture and sale of a filtration tool in the United Kingdom. Professor Smart has previously granted a similar exclusive licence to Magnetix Limited (which has now expired). Magnetix had great success with the filtration tool and it is clear that there is a ready market for it, especially as there is no other tool like it on the market. Professor Smart may be able to demand an up-front payment and argue that this represents the price Paradox must pay for access to rights which have proven to be commercially successful and provide a competitive advantage. Dr Dexter has patented a novel technique of protein analysis which is more straightforward and significantly quicker than any other. Dr Dexter is thinking of granting NewChem Limited a sole licence to use the patent in the EU (as configured at 1 Jan 2014) for the purposes of developing a product it is looking to take to market. Dr Dexter could argue that an up-front payment is justifiable on the basis that it reflects the considerable amount of R&D investment time and money NewChem Limited has saved. 35