Issue link: https://htpgraphics.uberflip.com/i/246988
Payment Provisions Section 6 Royalty Reductions Your licensee may want to include a provision in the licence which will ensure that the royalty reduces if the licence becomes less useful/attractive for some reason. Figure 6 gives some examples of the kind of circumstances where this might arise. Figure 6 Why a reduction? The licensed IP becomes outdated or is overtaken by another model or version on the market. This is quite common in the context of software. Clearly, in these cases the value of your IP will diminish if something else 'better' comes on the market. The licensee may want this reflected in the royalty if this does occur. It is not possible to obtain protection for the licensed IP in a particular territory. For example, if you are licensing a patent in a number of different countries and that patent fails to proceed to grant in one country. The strength of the IP will diminish in that country on the basis that, without the protection of the patent, a third party could develop and use the same technology to compete with your licensee in that country without risk of infringing, as you have no patent there. The licensee may want to reduce the royalty or pay no royalty for sales in that country, if this occurs. The licensed IP has been infringed and it is not practical (for example, too expensive) to seek a legal resolution. If there is someone else using your IP in the market and you are not in a position to stop them – they will then become competition for your licensee. The licensee may want to reduce the royalty or not pay a royalty on the basis of this unwanted competition. 43