Royalties are profits received by a group or an individual who owns intellectual rights to a product used or distributed by a third party. If you have once patented a product bought by a manufacturer or distributor, you are rightfully owed a fraction of the sales of this product by the said manufacturer or distributor.
The process of royalties is not as simple as it sounds, however. Some specific terms of the agreement, as well as legal jargons, may complicate the matter. Here are a few of these terms according to Chron.com:
- Gross Revenues – Some agreements allow the licensor to receive a fixed percentage off of gross sales.
- Net Revenues – Some agreements allow the licensor to receive a fixed percentage off of profit after outlays.
- Price Per Unit – Some agreements allow the licensor to receive a fixed percentage off of each unit sold.
- Minimum Rent – Some agreements allow the licensor a fluctuating payment rate depending on the product’s performance.
There are cases when royalty management is affected by other factors outside these very agreements, as well. Metacomet.com and other experts say that it’s best to understand them all to know your rights.
Case in Point
In the music industry, for instance, accounting royalties is one of the most laborious aspects of the enterprise. Artists in the business, from singers to producers to songwriters, get confused on how to go about collecting their dues. With YouTube and Spotify added to old-school music-airing media, there’s too much to keep tabs on.
If you’re in the manufacturing industry, things aren’t different either. Let’s look at Qualcomm’s case. Although the company forecasts that about 1.3 billion handheld devices bearing its patented technology will be sold this year, its royalty collection will only reach 1.085 billion. This is due to ongoing trade conflicts among others.
Royalties accounting is an unnecessary weight on anyone’s shoulder. If there’s available technology that enables royalty management automation, it’s something you must use and maximize. Not only will you be spared from having to deal with all the jargons and numbers, you’re rest assured that automation will take care of business.