Definition
A royalty is a payment, often a percentage of sales or a per-unit fee, made by a licensee to a patent owner for the right to use a patented invention.
Why It Matters Legally
Royalty structure directly determines the financial value of a license. Negotiating the rate, base, and duration is central to monetizing a patent and is a frequent point of dispute.
Example Use Case
A licensee agrees to pay a 5 percent royalty on net sales of products that use the patented technology.
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Related Terms
Licensing, License Agreement, Patent Pool, Reasonable Royalty, Damages