Not all Technology Licenses Include an Upfront Fee

Russell L. Parr

IP Valuation and Royalty Rate Consulting

Published Mar 22, 2018

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There are many ways to pay for a license agreement. For the data in Royalty Rates for Technology, 7th Edition, the most popular payment structure is simply a running royalty rate as a percent of sales, representing 62% of the total deals reported. Another payment method is simply a running royalty rate paid as a fixed amount per unit, representing 10% of the total deals reported. When combined, 72% of the licensing deals involved a running royalty rate, either as a percent of sales or a per unit amount, as the sole form of compensation.

Sometimes, the payment structure involved an upfront fee plus payment of a running royalty rate. In this new book, just under 22% of the deals included an upfront cash payment in addition to a running royalty. Consequently, 94% of all the deals involved running royalty payments with and without upfront fees. Only 6% of the deals involved one-time payments and compensation structures that included common stock as part of the upfront license fees.

Upfront Cash Payments Around one-fifth of the deals included an upfront fee in the form of cash. One-third of the license fees were $100,000 or less and half of the license fees were $300,000 or less. Fees above $1 million represented one-quarter of the deals that included license fees.”

Cvedia is incorporating AKIDA neuromorphic IP in the Cvedia RT.
Those who attend Brainchip AGM’s either in person or remotely know that the Chair and CEO stated in answer to a shareholder question that they have a flexible pricing model.

This flexibility should mean not all IP sales include an upfront fee.

My opinion only DYOR

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