How to find average royalties for inventions
Article – May 2019 | RoyaltyRange
To find average royalties for inventions, use a royalty rates database to ensure the data is recent, reliable and relevant. You can search the RoyaltyRange database to find the latest royalties for inventions from actual license agreements. With our benchmarking studies, you can quickly find the median and interquartile range for specific products and industries. You can then use this data as a guide to help you set fair and reasonable arm’s length royalties for inventions.
Go to the bottom of this page if you would like to purchase a benchmarking study.
Or, read on to find information about average royalties for inventions, how invention royalties work, the market approach and some of the factors affecting royalty rates.
What are the average royalties for inventions?
There is no simple answer to the question “What are the average royalties for inventions?”
License agreements and royalties for inventions are complicated, and broad royalty rates averages often overlook the nuances and complexities of individual licensing situations.
As such, if you want to find average royalties for your invention, you should use a database to find real license agreements that are comparable to the circumstances of your invention. This makes sure the averages you find are accurate, up to date and specific to your search.
When you order a RoyaltyRange benchmarking study, you will receive a calculation of the median and interquartile range for your search. Our experts ensure that the license agreements we use are comparable to the search criteria, so you can be sure the data is relevant.
How do invention royalties work?
Inventors have to set royalty rates when they license their invention. If you have an idea for an invention and get it patented, you might want someone else to develop, manufacture and/or commercialize it for you. To do this, you enter into a license agreement with them. That license agreement outlines the exact terms of how the licensee can use your intellectual property – including what royalties they will have to pay in exchange for using your licensed invention.
Royalty rates are usually a percentage of the revenue earned from the sale of the product that features your IP. Alternatively, you may agree on a fixed payment.
The market approach – basing your royalty rates on comparable royalties
A lot of inventors use the market approach to setting royalty rates for inventions. This involves basing your royalty rates on those earned in comparable license agreements.
When using third-party royalties to set royalty rates for your invention, you need to make sure the data is properly comparable. Ideally, you will use license agreements that involve the same intellectual property, the same industry and similar circumstances. When you use the RoyaltyRange database, our experts check license agreements for comparability.
Factors affecting royalties for inventions
There are a number of factors that can affect royalty rates for inventions. These may include:
- The novelty of the product
- Expected sales volume and profit margin
- Licensing territory (and whether this includes foreign patents)
- Whether the invention is patented (and the strength of the patent)
- Whether the market has typically high royalties (for example, if you have invented a new drug, you may receive a higher royalty rate than if you have invented a new food ingredient)
- The expected useful economic life of your invention
- The exclusivity of your license agreement
- The phase of development
Be sure to keep these factors in mind when setting your invention royalty rates and analyzing the comparability of third-party license agreements.
RoyaltyRange benchmarking studies
The fastest and most reliable way to find median royalties by industry is to invest in a RoyaltyRange benchmarking study. This is where our experts create a report of arm’s length market royalty rates for your product from actual license agreements. We find and analyze the most relevant license agreements in our database, and perform a Comparable Uncontrolled Price (CUP) analysis to find the median royalty rate and the interquartile range.
We offer two types of benchmarking studies:
- Tailored benchmarking studies: These enable you to tell us exactly what you’re looking for. Please use this form to narrow your search criteria and tell us your specific requirements for the benchmarking study. Within a few days, our team will create a bespoke benchmarking report based on your criteria.
- Readymade benchmarking studies: These are available for immediate download after payment. If you search ‘patent’ in the form below, you will find a number of pre-made reports, spanning various industries, that contain data on inventions.
Find royalties for inventions today
Simply use the form below to order your readymade benchmarking study.
Soon, you will have reliable data on median and interquartile range of royalties for inventions that you can use to set your own royalty rates.