Issue link: https://htpgraphics.uberflip.com/i/246988
Payment Provisions Section 6 Clearly an important aim of the licence is to see some money in return. It is therefore important to make sure you get the payment provisions right. What happens if payment provisions are not included in the licence agreement? Be aware that, if your licence agreement does not: n fix a price; or n specify a method of calculating the price; or the price cannot be determined by previous dealings between the parties, it may be implied that a "reasonable" charge was intended to be fixed. n You do not want to get into a position where you and your licensee are arguing about what a reasonable charge is, therefore it is best to include express payment provisions in the agreement. Avoid including provisions that state that the parties will agree the price at a later date. "Agreements to agree" are unenforceable under English law and in some other countries. Payment Terms What are the most common methods of payment found in a licence? Royalties The most common form of payment for licensed IP is a royalty. The term royalty tends to mean regular payments which typically may vary according to the number of products manufactured, used or sold, or the number of times a process is applied (depending on the type of rights you have licensed out). However, the term can also be used to describe payments which are more of a capital nature, for example "lump sum", "up-front", "stage" or "annual" payments. It is illegal to fix the price at which your buyer sells its products. In the same way you must not fix the minimum price at which a licensee sells licensed products. Only the rate at which royalties will be charged, or the method of calculation for the royalties, can be specified. Specifying the price for selling the licensed goods may be deemed to be price fixing and this may cause you problems under competition law. Always check with your IP commercialisation organisation or specialist lawyers if you are at all unsure. 34