Issue link: https://htpgraphics.uberflip.com/i/246988
Payment Provisions What happens if the licensee decides to hire/lease its products as opposed to selling them? Section 6 In these cases, you can include a provision which states that – should any product be leased or otherwise disposed of, the price that would have been charged if the product had been sold, will be used for the purposes of calculating the royalty. How do I know what percentage royalty to ask for? What percentage royalty is normal? Well, this is not that easy to answer as it will depend on a whole range of factors. In some of the media industries, such as music, rates are fairly standardised. More typically elsewhere, rates can have a very wide range. However, there are no hard and fast rules for determining an exact figure. One of the most common rules of thumb for patent licensing is the "25% Rule". This says that the licensee pays a royalty equivalent to 25% of its expected profits for the product that incorporates the patent. It is only a rule of thumb! The final figure will depend upon, amongst other things, the type of IP, its 'shelf-life', its value and – how much your licensee wants it! Figure 5 illustrates a list of the factors which may be taken into account when making a decision. This may also be useful should you ever need to argue why the rate you have requested is not too high! Figure 5 FactorExplanation Anticipated commercial benefits of the licensed IP If there is a strong chance your IP is likely to be successful and it is the only option your licensee really has – you should be in a fairly strong position to request a higher percentage. 40