How to find patent licensing fees typical to your industry
Article – March 2020 | RoyaltyRange
When you’re negotiating royalty rates for a patent licensing deal, or carrying out a transfer pricing analysis on an intercompany transaction involving patents, it can be useful to see what licensing fees and royalty rates other organizations charged for similar transactions, so that you can get an idea of what the market rate is. However, finding patent licensing fees typical to your industry isn’t always easy. You need to make sure that any data you use comes from real third-party transactions that are sufficiently comparable with the patent licensing deal you’re analyzing.
In this article, we’ll look at:
- How to find patent license fees typical to your industry
- The different types of license fees you can charge
- How to work out fair licensing fees for patents
- Using a royalty rates database to get benchmarks for your patent
What are typical licensing fees in my industry?
The most reliable way to find typical market rates for your patent is to calculate average royalty rates from real market license agreements. You need to find licensing deals that are comparable to your license in terms of the patent’s strength, size of the market, exclusivity terms and more.
The quickest and easiest way to find comparable royalty rates and license agreements is to use a royalty rates database like RoyaltyRange. That way, you don’t have to worry about analyzing every agreement for comparability – this is all done for you, and you just check the search results.
If you don’t want to compare the licensing agreements and calculate the average royalty rate yourself, you can always order a benchmarking study. At RoyaltyRange, our benchmarking studies provide you with a full comparison report, including median and interquartile range calculations.
How are patent licensing fees typically charged?
The most common forms of remuneration for patent licensing agreements are:
- Upfront license fees
- Continuous lump-sum license fees
- Royalty payments
Some patent licensing deals require the licensee to pay a combination of upfront license fees, continuous lump-sum license fees and royalty payments. Others just ask for regular royalty payments. By looking at comparable transactions between two or more independent entities, you will be able to see what forms of remuneration unrelated parties typically charge in patent licensing deals and determine what is most appropriate for the license you are negotiating or analyzing.
Working out fair licensing fees for patents
Whether you’re working out fair royalty rates or arm’s length transfer prices, there are a number of calculation methods you can use. One approach is to look at the license fees charged in comparable uncontrolled transactions, and use these as a basis for your calculation. It’s important that the third-party data you use is accurate, up to date and comparable to your transaction.
When you are assessing whether a patent licensing deal is comparable, you need to keep in mind the conditions of the agreement. The nature of a patent means that there are many variables that can affect its value in a certain market or at a certain time. Here are just some of the factors that can affect the royalty rates that licensors can reasonably charge in a patent licensing agreement:
- Whether upfront licensing fees have been charged
- The exclusivity of the patent licensing agreement
- The strength of the patent
- The uniqueness of the product
- The size of the market
- The product’s potential in the market
When you use the RoyaltyRange database to search for royalty rates, you can filter your search by intellectual property type, keywords, NACE Rev. 2 code, SIC code, date, territory and exclusivity.
Find typical licensing fees for your patent today
To start searching for third-party patent licensing fees, use our One Search service today. Or, if you want a full comparison report on patent licensing fees typical to your industry, order a benchmarking study. Simply use the boxes on the right of this page to get started.