Royalty payment

A royalty is a payment made by one party (the "licensee") to another that owns a particular asset (the "licensor") for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

A license agreement defines the terms under which a resource or property are licensed by one party to another, either without restriction or subject to a limitation on term, business or geographic territory, type of product, etc. License agreements can be regulated, particularly where a government is the resource owner, or they can be private contracts that follow a general structure. However, certain types of franchise agreements have comparable provisions.

Non-renewable resource royalties

A landowner with petroleum or mineral rights to their property may license to another party rights to extract those resources in exchange for a resource rent, or a royalty on the value of the resources sold. When a government owns the resource in question, the transaction is often subject to legal and regulatory requirements.