ROYALTY RATE BENCHMARKING

Infographic – October 2017 | RoyaltyRange

What is the market royalty rate for licensing a clothing brand? Is a 5% royalty rate for licensing your technology too low in comparison with the rates applied by third parties? Did your client set a market royalty rate when granting a license to its subsidiary? If you encounter these kinds of questions in your day-to-day professional life, a RoyaltyRange benchmarking study could be the right service for you.

Our benchmarking study is a detailed comparison of publicly available license agreements and royalty rates in order to determine an arm’s length (market) royalty rate range for the specific products or services. Although the main purpose of the benchmarking study is to identify external transactions to assess whether intercompany transactions comply with the arm’s length principle, the data provided in our benchmarking study reports may be useful for purposes other than transfer pricing compliance, such as setting reasonable royalty rates, negotiation of licence agreements, intellectual property valuation, and consulting.

All agreements are manually analysed, rejected or selected, so that the final set consists only of agreements with the most comparable licensing terms. We use these agreements to conduct a Comparable Uncontrolled Price (CUP) analysis in order to calculate a royalty rate range that complies with the arm’s length principle, i.e. any royalty rate within this range is deemed to be at market rate.

Our benchmarking study report is prepared in a relatively short period of time and provides a wealth of additional information on the licensing practices in your industry, e.g. basis of royalty calculation, prepayment terms, terms of exclusivity, distribution of functions performed, risks assumed and assets used by the parties in the transaction, rights to enhancements, revisions and updates, and extent and duration of legal protection.

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