ROYALTIES

• GROUP MEMBERS
POOJA
VIGNESH
VIMAL
TANUSHREE
MAHESH
SOURAV
INDRAJITH
ROYALITES
• Royalties are
usage-based
payments made
by one party (the
"licensee") and
another (the
"licensor") for
ongoing use of an
asset, sometimes an
intellectual property
(IP).
 ROYALTY INTEREST AND LICENSE
AGREEMENT
• A royalty interest is the • A license agreement
right to collect a stream defines the terms under
of future royalty which a resource or
payments. property licensed by one
party to another.
TYPES OF
ROYALITIES
• Copyright
• Book publishing
royalties
• Music
• Print
• Mechanical
royalties
• Performance
royalties
 • Royalties in digital
distribution
TYPES OF
.
• Synchronization royalties
ROYALTIES
• Art royalties
• Software royalties
• Patent
• Trademark
 copyright

• Copyright law gives the owner the right to

prevent others from copying, creating
derivative works, or publicly performing their
works. Copyrights, like patent rights, can be
divided in many different ways, by the right
implicated, by specific geographic or market
territories, or by more specific criteria. Each
may be the subject of a separate license and
royalty arrangements.
 Book publishing royalties

• Except in the rarity of cases where book

writers can demand high advances and
royalties, an author's royalty rate is dictated
by their publisher. All book-publishing royalties
are paid by the publisher.
 Music royalties
• Unlike other forms of intellectual property, music
royalties have a strong linkage to individuals - composers
(score), songwriters (lyrics) and writers of musical plays -
in that they can own the exclusive copyright to created
music and can license it for performance independent of
corporates. Recording companies and the performing
artists that create a 'sound recording' of the music enjoy
a separate set of copyrights and royalties from the sale
of recordings and from their digital transmission
(depending on national laws).
 Print royalties (music)
• The royalty rate for printing a book, or its download,
(a novel, lyrics or music) for sale varies from 8-20% of
the suggested retail sales value, typically 12-14%, for
a new writer. The payment is made by the publisher
and corresponds to the agreement (license) between
the writer and the publisher as with other music
royalties. The agreement is typically non-exclusive to
the publisher and the term may vary from 3–5 years.
Established writers favor certain publishers and
usually receive higher royalties.
 Mechanical royalty
• The term 'mechanical' and mechanical license has its origins in the 'piano rolls'
on which music was recorded in the early part of the 20th Century. Although its
concept is now primarily oriented to royalty income from sale of compact discs
(CDs), its scope is wider and covers any copyrighted audio composition that is
rendered mechanically; that is, without human performers:

• * tape recordings
• * music videos
• * ringtones
• * MIDI files
• * downloaded tracks
• * DVDs, VHS, UMDs
• * computer games
• * musical toys etc.
 Performance royalties
• Performance’ in the music industry can include any of the following:

• * a performance of a song or composition — live, recorded or broadcast

• * a live performance by any musician
• * a performance by any musician through a recording on physical media
• * performance through the playing of recorded music
• * music performed through the web (digital transmissions)

• It is useful to treat these royalties under two classifications:

• (a) those associated with conventional forms of music distribution which have prevailed for most part of the 20th Century, and
• (b) those from emerging 'digital rights' associated with newer forms of communication, entertainment and media technologies (from 'ring
tones' to 'downloads' to 'live internet streaming'.

• Synchronization royalties('synch licenses') are paid for the use of copyrighted music in (largely) audiovisual productions, such as in DVDs, movies,
and advertisements. Music used in news tracks are also synch licenses. Synchronization can extend to live media performances, such as plays and
live theatre. They become extremely important for new media - the usage of music in the form of mp3, wav, flac files and for usage in webcasts,
embedded media in microchips (e.g. karaoke), etc. but the legal conventions are yet to be drawn.

• Synchronization royalties are due to the composer/song-writer or her publisher. They are strictly contractual in nature and vary greatly in amount
depending on the subjective importance of the music, the mode of production and the media used. The royalty payable is that of mutual
acceptance but is conditioned by industry practice.
 Art royalties
• Gone –or almost gone- is the time when the art collector was the focal point
of a painting.they prescribe a minimum amount that the artwork must
receive before the artist can invoke resale rights (the hammer price or
equivalent), the maximum royalty that can be received, the calculation basis
of the royalty – normally 5% maximum up to a value - and the period that the
heirs can claim the royalty.

• An artwork is usually a copyrighted article which be mass produced for sale,

such as greeting cards. They are both seasonal and on occasion. In the UK it is
estimated that one billion pounds are spent on greeting cards every year,
with the average person sending 55 cards per year. The royalty range is 2-5%
with an ‘upfront royalty’.
 Patent Royalties

• A patent [9][10] gives the owner an exclusive right to prevent others from
practicing the patented technology in the country issuing the patent for the
term of the patent. The right may be enforced in a lawsuit for monetary
damages and/or imprisonment for violation on the patent. In accordance
with a patent license, royalties are paid to the patent owner in exchange for
the right to practice one or more of the four basic patent rights: to
manufacture with, to use, to sell, or to advertise for sale of a patented
technology.

• Patent rights may be divided and licensed out in various ways, on an

exclusive or nonexclusive basis. The license may be subject to limitations as
to time or territory. A license may encompass an entire technology or it may
involve a mere component or improvement on a technology.
 Trademark royalties
• Trademarks are words, logos, slogans, sounds, or other
distinctive expressions that distinguish the source,
origin, or sponsorship of a good or service (in which
they are generally known as service marks). Trademarks
offer the public a means of identifying and assuring
themselves of the quality of the good or service. They
may bring consumers a sense of security, integrity,
belonging, and a variety of intangible appeals. The
value that inures to a trademark in terms of public
recognition and acceptance is known as goodwill.
 Approaches to royalty rate
The rate of royalty applied in a given case is determined by various
factors, the most notable of which are:
• market drivers and demand structure
• territorial extent of rights
• exclusivity of rights
• level of innovation and stage of development (see The Technology Life
Cycle)
• sustainability of the technology
• degree and competitive availability of other technologies
• inherent risk
• strategic need
• the portfolio of rights negotiated
 RATE DETERMINATION AND ILLUSTRATIVE ROYALTIES
There are three general
approaches to assess the
.
applicable royalty rate in
the licensing of intellectual
property. They
are [60]
1. The Cost Approach
2. The Comparable Market
Approach
3. The Income Approach
COST APPROACH
• Costs considered could include
R&D expenditures, pilot-plant
and test-marketing costs,
technology upgrading expenses,
patent application expenditure .
• The method has limited utility.
• Appropriate when a technology
is licensed.
 COMPARABLE MARKET APPROACH
• The royalty rate is determined from
comparing competing or similar
technologies in an industry, modified by
considerations of useful 'remaining life' of
the technology in that industry.
• The prime difficulty with this method is
obtaining access to data on comparable
technologies and the terms of the
agreements that incorporate them.
The comparability between transactions requires a comparison of the
significant economic conditions that may affect
the contracting parties:
• similarity of geographies
• relevant date
• same industry
• market size and its economic development;
• contracting or expanding markets
• market activity: whether wholesale, retail, other
• relative market shares of contracting entities
• location-specific costs of production and distribution
• competitive environment in each geography
• fair alternatives to contracting parties
 INCOME APPROACH

• It is unrelated to costs of technology

development or the costs of competing
technologies.
• The approach requires the licensee (or
licensor):
(a) to generate a cash-flow projection of
incomes and expenses
(b) determining the Net Present Value
(c) negotiating the division of such profit
between
the licensor and the licensee.
 INCOME APPROACH
• The basic advantage of this approach, which is
perhaps the most widely applied, is that the
royalty rate can be negotiated without
comparative data on how other agreements have
been transacted. In fact, it is almost ideal for a
case where precedent does not exist.
.

THANKS FOR PATIENCE

 Royalty agreement sample

• Agreement between Gina D. Inc. and the Company regarding

• the assumption of the Company's debt to MG Studios

• ROYALTY AGREEMENT

• AGREEMENT made this 1st. day of August, 2007 by and between Raven
• Moon Entertainment, Inc. ("Raven Moon"), with principle offices at
• 2005 Tree Fork Lane, Suite 101, Longwood, FL 32750 and Gina D Inc.,
• ("GDI"), with principle offices at 1423 Foxtail Court, Lake Mary, FL
• 32746.

• WHEREAS GDI, desires to assume the debt owed by Raven Moon

• Entertainment, Inc. to M.G. Studios, and:

• WHEREAS Raven Moon Entertainment Inc. is the holder of certain rights

• in and to the children's television programs entitled "Gina D's Kids
• Club" and "Sing Along With Gina" (the "Programs"), and desires to
• compensate GDI with royalties and fees received from its exploitation
• of the Program.

• NOW THEREFORE the Parties hereto agree as follows.

• CONSIDERATION: In consideration of GDI's assumption without recourse

• of Three Million Two Hundred Thousand Dollars ($3,200,000) debt owed
• MG Studios by Raven Moon and services rendered by GDI in forty four
• (44) half hour episodes of the Programs and any future episodes of
• the Programs, Raven Moon shall pay to GDI a Ten Percent (10%) royalty
• payment of all future GROSS revenues derived from Raven Moon's
• exploitation of the Programs including, but not limited to, any and
• all Programs related product sales, licensing fees, derivative
• products, movies and characters derived from the Programs, Programs
• DVD's, Music CDs, royalties paid Raven Moon for its exploitation of
• the Programs, music and derivatives, toys games, clothing, internet
• sales, websites, premiums not in existence or to be created in the
• future from the Programs throughout the world during the Term of
• this Agreement.

• TERM: The term of this Agreement shall be ten (10) years from the
• date of this Agreement and shall expire on July 31, 2017.
• PAYMENT AND ACCOUNTING: Payment to GDI shall be made quarterly on
• or before the 15th of each month in which a payment is due and shall
• be accompanied by an appropriate Statement of Account. For purposes
• of this Agreement, August 1, 2007 shall be the date of the first
• royalty payment, if any. If the balance due GDI for any quarterly
• royalty period is less than One Hundred Dollars ($100), Raven Moon
• will make no accounting payment until the next royalty period at the
• end of which the cumulative balance has reached at least One Hundred
• Dollars ($100).

• LIMITATION OF RIGHTS: The rights of GDI its successors or assigns

• under the terms of this Agreement are strictly limited to those
• expressly set forth in this Agreement. Nothing herein shall be
• deemed to grant any rights to intellectual property owned by Raven
• Moon or any right to compensation from Raven Moon other than that
• outlined in Paragraph 1 of this Agreement.

• NO GUARANTEE: Raven Moon makes no guarantee that royalties from the

• Program will be realized in the future and GDI hereby expressly
• acknowledges such risk.

• ASSIGNMENT: GDI may assign all or a portion of its rights and

• royalties under this Agreement with prior written consent of Raven
• Moon.
• MODIFICATION: This Agreement shall not be subject to change or
• modification in whole or in part, except by a written instrument
• signed by the party against whom enforcement is sought.

• JURISDICTION: This Agreement shall be construed and interpreted

• according to the laws of the State of Florida. Any legal action,
• suit or proceeding arising out of or relating to this Agreement or
• breach thereof shall be instituted in a court of competent
• jurisdiction in Seminole County in the State of Florida and each
• party hereby consents and submits to the personal jurisdiction of
• such court, waives any objection to venue in such court and consents
• to service of process by first class mail at the last know address
• of the Party.