Page 16 - Four Art Projects by Petru Russu: Catalogue 2024

Royalty payments on sales:
There are multiple paths to achieving a return on investment at a trade fair,
and there’s no rule that says you have to pick just one of them. Here are a few
possibilities: Meeting and networking with movers in publishing, Developing
marketing collateral, Pitching potential publishers and investors in author’s work,
Using social media to raise your author profile.
Often when negotiating an intellectual property (IP) licence, royalties and licence
fees, it can be difficult to know what the payments should be, or how they should be
calculated.

Types of royalties and licence fees:

Most intellectual property (IP) licences will state that the licensee will pay one or more of
the following:
• an up-front licence fee;
• ongoing lump sum licence fee payments;
• rolling royalties.

In some cases, there may be a good reason for granting a royalty-free licence where
the intellectual property owner is receiving some other benefit. For example, the
intellectual property owner may also be supplying research services for payment, or
may be selling a product. It may sometimes be possible to treat up-front payments
as capital payments under a restraint of trade agreement, rather than as licence
fees. But in most cases, licence fees will be income in the hands of the intellectual
property owner and will incur tax.

What should the royalty rate be?
It is common for the licensee to pay a rolling royalty based on its performance.
Royalties are usually either a percentage of the licensee’s net sales, or an amount
per unit of licensed product sold. But what should that percentage rate or per unit
amount be? This is a common question and it’s often hard for a party involved in a
licensing negotiation to know where to begin. To avoid simply guessing a figure, it’s
best to apply a royalty valuation methodology. The three main methodologies are
summarized below.

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