Licensing Revenue Vs Royalties

Royalties for oil gas and mineral properties may be based on either revenue or on units such as barrels of oil or tons of coal.

Licensing revenue vs royalties. The irs asserted that the transaction was a license and increased mylan s ordinary income from tax years 2008 2011 resulting in tax deficiencies of approximately 100 million. The operative word is terms and every licensing agreement can have different terms. A royalty is a payment made to an owner or licensee of a particular asset for ongoing use of their asset. You may decide to offer the license for a fixed license fee a royalty based on revenue generated using the technology a combination of an upfront license fee and ongoing royalties or the licensee may give the licensor equity in the licensee s company.

Royalties are the income you can make off your name product or invention under the terms of a licensing agreement. When a business owner pays a share of revenue to the legal owner of a property such as patents copyrighted works franchises or natural resources. For example a major source of income for the publicly traded company dolby laboratories is the. They have share a percentage of their revenue in lieu of using their asset this is what you call as royalty.

Licensing revenues are a significant source of revenue for several publicly traded companies. The sports licensing category has soared to 698 million in royalty revenue and the collegiate category has grown but not without concerns about the outcome in o bannon v. Royalties for specific products like a book a piece of music a patented product or a concert are generally based on the number of units sold. If the terms of the licensing agreement pay you based on a percentage of net income and the company has no net income your percentage is zero.