Issue link: https://htpgraphics.uberflip.com/i/246988
Payment Provisions Section 6 Stage Payments/Milestone Payments Another option you may wish to consider is requesting payments at certain stages. This is useful if your licensee is going to be carrying out further research and development or marketing under the licence, and the licensed rights are only going to reap benefits at certain stages. A payment can be triggered at each stage. It may be that during development certain regulatory milestones have to be met. A payment could be requested upon passing each milestone. Mary has developed a novel, patentable technique for assessing levels of cholesterol. She has discussed this with ABC Limited under a confidentiality agreement and is going to grant ABC Limited a sole licence to use her technique to develop a cholesterol gauging product for the UK market. Mary has filed a UK patent application. Mary has demanded that payments under the licence be made in stages, with the payments rising when the patent application has moved into its international stage and in regular stages after that until the patent has been granted. As the patent proceeds to grant – the technology will increase in value. The payments will reflect the diminishing risk associated with the project for ABC Limited and the reward for Mary for the growing success of her technology. Negotiation Tip If you are in need of initial or stage payments to help cash flow, you may be able to persuade a licensee to make such payments more easily if they can be "set off" in some form against the royalties to be paid in the future based on sales. It is possible for royalties to be set off against all or only part of any initial or stage payment made. How are royalties calculated? Royalty Base You must also consider the basis on which royalties will be charged. This will depend on the nature of the rights you are granting and the context in which your licensee will exercise those rights. 36