Royalty

Royalty can be understood as the ius regale or royal prerogative, which included the inherent and exclusive rights of the sovereign power of the king, which is the payment made to the holder of copyright, patents, trademarks or know-how in exchange for the right to use or exploit them, or that must be made to the State for the use or extraction of certain natural resources, usually non-renewable. It should not be confused with the sale of patents, since this is carried out with very different objectives. Also called "royalties" certain benefits of a material order that the worker receives from his employer or employer, and that are appreciable in money for provisional and tax purposes.

Royalty as ius regale or royal prerogative

Historically, in the Old Regime, royalties, iura regalia or jura regalia (ius regale or jus regalia in the singular), were the inherent rights of the king's sovereign power or royal prerogatives, among which were not only political, economic and social attributions, but also symbolic elements (sword, sceptre, crown, etc.) of a markedly sacred nature.

The term has similar, but not identical, meanings in English, French, and Spanish. The Penguin English Dictionary, Second Edition (1969) states:

regalia: insignia of royalty; symbols or emblems of a society; (hist) privileges of royalty.

For its part, the dictionary of the Academie française says: 3)RÉGALE. no. F. Droit que le roi avait de percevoir les fruits des évêchés vacants, des abbayes vacantes, et de pourvoir pendant la vacance aux bénéfices qui étaient à la collation de l'évêque. Le droit de régale. La régale était ouverte par la mort ou la démission de l'évêque, et en quelques autres cas. Bénéfice vacant en régale, Celui qui se trouvait vacant pendant la vacance de l'évêché, de l'abbaye dont il dépendait. Être pourvu en régale, Obtenir des provisions pour un bénéfice vacant en régale.

The dictionary of the Royal Spanish Academy points out:

royalty. (From the lat. regālis, regal).

1. F. Pre-eminence, prerogative or particular and private exception that by virtue of supreme power exercises a sovereign in his kingdom or State; p. e.g., coin flipping. 2. f. Privilege that the Holy See grants to kings or sovereigns in some point related to the discipline of the Church. U.m. in pl. Crown royalties. 3. f. Private or particular privilege or exception that someone has in any line. 4. f. Perks or benefits that employees of some offices receive in addition to their salary. 5. f. econ. Revenue share or fixed amount paid to the owner of a right in exchange for permission to exercise it. 6. f. Am. Cen., Ant. and Col. gift (‖ gift). 7. f. Mex. An author's share of the publisher's revenue from the sale of his or her work. ~ room.

For example, the 'presentation privilege' was a royalty, which no longer exists in Spain, by which the head of state could recommend or choose a bishop from among a shortlist of candidates proposed by the ecclesiastical authorities, Tony Blair, when he was prime minister of the UK, designated by this procedure a primate of the Anglican Church.

Royalty as sovereign power or royalty

Patents

Royalty understood as "the sovereign power of the king", or simply in English, "royalty," is the payment of a "variable amount" linked to the volume of production or sales that must be paid for a period of time to the owner of the patent being exploited. In other areas of intellectual property they are called: 'Copyrights'.

There are several ways to pay for the license to use a patent. Both parties, the owner of the patent and the exploiter, will negotiate the way that best suits them. Payment types: Fixed amount, variable amount (royalty). In addition, there is a third optional payment that is made if the help of the bachelor's technicians is required, which is called "payment for technical assistance".

Royalties are paid for one or all of the rights granted by the right holder. There are usually royalties for the manufacture and sale of a licensed item in a certain geographic territory or for the use of a brand in a geographic territory.

The payment of royalties is added to the customs value of the goods if they appear as a condition of sale of the latter, so that import duties are calculated on a higher basis. This is so, because traditionally the holder of the licensed right sells the licensed article to the importer on the condition that he pays a royalty for each unit sold in the assigned territory. Therefore, the imported item is valued at customs both for what appears on the import invoice plus the subsequent payment of royalties to the right holder. In this context, the person receiving the royalty payment may be a person other than the owner of the licensed right.

Currently there are other forms of payment of royalties, in which the royalty is paid by whoever sells and not by whoever buys. In other words, it is no longer the importer who pays the royalty after importation, but the seller pays the royalty to the right holder at the time of export. In terms of the WTO value agreement, the payment of the royalty ceases to be a condition of sale for the importer. In this scheme, the right holder does not make or sell the items, but instead licenses those rights. In this way, if the article is sold and/or exported among several licensees, the holder obtains higher royalties.

Royalty-Free

There are legal figures that protect certain products or techniques from the use of royalties. The best known case is in electronic equipment standards, in which manufacturers agree not to pay for the right to produce their products according to standards. The best known would be the USB ports and connections, which the manufacturer does not have to pay their creators to use their technology.

How are intellectual property royalties collected?

There are different ways to structure royalty payments, and these depend on various factors within the IP license agreement. Here are some of the different options:

Royalty Percentages

In most license agreements, the royalty rate is a percentage. Therefore, if the royalty rate is 5%, during the term of the license agreement, the licensee must pay the licensor 5% of the gross or net income generated by the intellectual property. Fixed Fees: Licensors may decide that charging a flat fee is more appropriate than a percentage for their intellectual property royalties. Fixed fees are still charged on a regular basis, as are royalty percentages, but the parties know the exact fee that must be paid.

Fixed or variable rates

For newly created intellectual property that has not yet been tested in the market, it is common to agree to a variable royalty rate. This means that the licensor will receive a lower rate until certain conditions are met, at which time the rate will increase. Variable rates also apply to certain sales volumes or thresholds; for example, if a licensee achieves a certain number of sales, they will be rewarded with a lower royalty rate.

Minimal Royalty Rates

Some licensors require licensees to agree to a minimum royalty payment. This means that regardless of the royalty percentage or income generated by the IP, the licensor will receive a certain amount of money at a minimum. In terms of how often IP royalties are collected, most license agreements opt for monthly, quarterly, or annual payments. However, this completely depends on your needs as the licensor and what the licensee is willing to accept. There is no single way to collect royalties.

Valuing Intellectual Property

To set fair royalty rates, you need to know the value of your intellectual property. When you know the value of your patent, trademark, copyright, or brand assets, you'll be able to calculate your royalty rates more accurately and avoid the risk of setting rates that are either too high or too low.

There are three main approaches to intellectual property valuation that you can use: Cost Based Valuation Market Based Valuation Income Based Assessment Regardless of the method you choose, you must ensure that your valuation reflects the market value of similar intellectual property. To ensure this, you must know the current market rate for your product or service.

Calculating Intellectual Property Royalties

When you know the value of the IP in question, you can determine a fair royalty rate. One option for this is to find out what royalty rates other organizations are charging in similar licensing agreements, with similar intellectual property. Once you know this, you can use these rates as a starting point for your own IP royalties and royalty payment structure, making sure to take into account the many different factors that can affect the value of your IP.

Buy Parts

Practice in which an entity makes a single payment for all or most of the rights to the work to be disseminated, this with the aim of not paying royalties. These types of payments have become common, for example, for composers working on audiovisual works broadcast through streaming platforms such as Netflix and Amazon Prime Video: instead of receiving a payment each time the film or series where their music is reproduced, the digital platforms make them a single payment.