How to find the market range royalty percentage for your intellectual property
Article – April 2020 | RoyaltyRange
If you are licensing your intellectual property, finding the relevant range of royalty percentage for your intangible assets will help you set fair, accurate royalties that reflect market rates. Likewise, if you are developing transfer pricing documentation, determining the interquartile royalty set in comparable transactions will set your transaction compliant with transfer pricing requirements. In this article, we’ll explain two ways you can find market royalty percentages. So, whether you need transactions for your royalty rates analysis or transfer pricing documentation, read on to learn how to find them quickly and reliably.
There are two main options for calculating the market range royalty percentage
In order to calculate the market range royalty percentages that are accurate and up to date, you need to have access to recent licensing agreements that are similar to your own agreement or transaction. This is because the royalties you use needs to be up to date and calculated from real market data.
You can use a royalty rates database like RoyaltyRange to find the latest licensing agreements relevant to your criteria (you can filter your search by date, IP type, keyword, geography, etc.).
In terms of finding the market range of royalties, you have two main options: 1) conduct a comparable uncontrolled price (CUP) analysis in-house; or 2) order a full-scope benchmarking study.
Both options will enable you to find the arm’s-length royalty percentage for your intellectual property. The difference is whether you want to do the analysis yourself, or get a professional to do it.
1. Perform a CUP analysis on the royalty rates set in comparable licensing agreements
If you’d like to perform your own calculation for the royalty rate percentage for your intellectual property, here’s what you need to do:
- Find recent licensing agreements to use for the calculation, ensuring they are similar to your agreement in terms of things like the market and IP being licensed. An easy option is to use the RoyaltyRange One Search tool, which lets you search for licensing agreements by IP type, keyword, NACE Rev. 2 code, SIC code, date, territory and exclusivity.
- Identify the royalty rates set in each agreement. If you have used the One Search tool, you’ll see the royalty rates clearly outlined in the easy-to-read search report you received.
- Perform a CUP analysis on the royalty rates set in the licensing agreements. If you’re not sure how to do a CUP analysis, or don’t have the time to do it yourself, you can always order a RoyaltyRange benchmarking study and our experts will perform it for you.
2. Get a professional benchmarking study
If you’d like our experts to find the market range of royalties for your intellectual property, you can order a benchmarking study. Once you have told us your search criteria (IP type, keyword, NACE Rev. 2 code, SIC code, date, territory or exclusivity), our analysts will conduct a database search for licensing agreements that fit your requirements. We’ll then analyze the royalty rates set in the agreements to calculate an arm’s length rate of royalty rates.
- A detailed comparison of the licensing agreements that fit your search criteria, presented in an easy-to-read PowerPoint or Excel report
- A calculation of the inter-quartile range, as well as the minimum and maximum values and the median.
- Links to the original sources – e.g. the original licensing agreements, patents, etc.
With a RoyaltyRange benchmarking study, you’ll get an accurate benchmark of the royalty rates for your intellectual property, taking into account the specifics of your situation. This gives you a reliable starting point for your royalty rates analysis or transfer pricing documentation.
Ready to find the market range of royalty percentage for your intellectual property?
Whether you’d like to perform the analysis yourself or get our experts to do it, simply use the One Search and benchmarking study boxes on the right of this page to get started today.