Royalty


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Royalty

Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced.

When a person creates a book, song, play, or painting, the work is considered Intellectual Property. Similarly, when an inventor receives a patent on his invention, the inventor has intellectual property rights in the thing created. Typically, authors, songwriters, composers, playwrights, and inventors do not have the financial ability to fully exploit the commercial use of their creations. They must turn to businesses that specialize in the marketing of intellectual property. When a business obtains the right to market the creation, the creator usually receives compensation in the form of a royalty.

A royalty agreement is part of the contract that the creator of the work negotiates with the business that seeks to exploit the creation. A royalty can be as simple as a fixed amount of money for each copy of a book or compact disc sold by the business. For example, a novelist agrees to let a publisher publish her new book. For granting the publisher the rights to the book, the novelist will receive $3 for each copy sold. If the novelist is a best-selling author, the publisher may agree to a higher royalty rate. Book and music publishers sometimes give an advance against royalties to an author or musician when the contract is signed. For example, the novelist might receive $5,000 as an advance against her royalties. In this case the publisher will keep the first $5,000 of the royalties to cover the cash advance. Typically, if the book failed to produce enough royalties to cover the advance, the publisher would write off the difference as a loss. However, a publisher might sue an author to recover an advance if the author never produces a publishable manuscript.

A playwright's royalty may be based on a percentage of the box office receipts from each performance of the play. An inventor's royalty might be an amount per unit sold or a percentage of the profits generated by the invention. In some cases it might be both. Because a royalty is one of the terms negotiated in a contract, the type and amount will depend on the bargaining power of the parties.

Under the law royalties are Personal Property. When a person dies, the heirs receive the royalties. For example, when Elvis Presley died, his estate went to his daughter Lisa Marie, who now collects the royalties from the music company that sells her father's recordings.Royalty agreements are also used in the mineral and gas industries. These agreements have much in common with the origin of the term. For many centuries in Great Britain, the Crown owned all the gold and silver mines. A private business could mine these "royal" metals only if it made a payment, a royalty, to the Crown.

When, for example, a petroleum company wants to drill for oil on a person's land, the company negotiates a royalty agreement with the owner of the mineral rights. If the company strikes oil, the owner of the mineral rights will receive a royalty based on a percentage of the barrels pumped out of the wells. The owner may receive the royalty in kind (the actual oil) or in value (the dollar amount agreed to in the contract), based on the total production from the property.

The schedule for royalty payments is specified in the contract. Quarterly or annual payments are typical. The royalty owner has the right to make an independent accounting of the business records to ensure that the figures upon which the royalty is based are accurate.

Cross-references

Copyright; Entertainment Law; Literary Property; Mine and Mineral Law; Music Publishing; Patents; Publishing Law.

royalty

n. a percentage of gross or net profit or a fixed amount per sale to which a creator of a work is entitled which is determined by contract between the creator and the manufacturer, publisher, agent, and/or distributor. Inventors, authors, movie makers, scriptwriters, music composers, musicians, and other creators contract with the manufacturers, publishers, movie production companies and distributors, as well as producers and distributors for a license to manufacture and/or sell the product, who pay a royalty to the creator based on a percentage of funds received. Should someone use another person's creation either purposely or by mistake, the user could be found liable to the creator for all profits on the basis of copyright or patent infringement, which usually is far more than a royalty. However, a creator does not have to license his/her creation to anyone. (See: copyright, patent, infringement)

References in classic literature ?
In the first fervor of royalty, during the year 1816, those who later were called Jesuits were all for the expulsion of the Abbe Francois from his parish.
The plaza of Zodanga covers a square mile and is bounded by the palaces of the jeddak, the jeds, and other members of the royalty and nobility of Zodanga, as well as by the principal public buildings, cafes, and shops.
Yes, Treville, yes," said the king, in a melancholy tone; "and it is very sad, believe me, to see thus two parties in France, two heads to royalty.
Which seems to me the finest title under the royalty of July," replied Danglars.
They were listened to with great politeness by the duke, who held out hopes of easier measures, promised to speak in their behalf to the queen, and dismissed them with the ordinary expression of royalty, "We will see what we can do.
Though very moderate in my political antipathies and predilections, I confess to some excitement in my own case, declaring that if royalty WAS to be my lot, I would prefer not to ascend any higher on the scale than to become the property of that excellent princess, Amelie, who then presided in the Palais Royal, the daughter and sister of a king, but with as little prospects as desires of becoming a queen in her own person.
A broad patch of tattooing stretched completely across his face, in a line with his eyes, making him look as if he wore a huge pair of goggles; and royalty in goggles suggested some ludicrous ideas.
The Comte de la Fere, still faithful to his principles of loyalty and royalty, one day developed before his son in the vaults of Saint Denis, -- the Comte de la Fere, in the name of his son, had always declined them.
A good rule that, and only relaxed by courtesy in favour of the retinue of visiting royalty from a friendly foreign power.
Quite certain, your Majesty," said Jellia Jamb, trying hard not to laugh in the face of royalty.
During the years he had served as master of fence at the English Court the sons of royalty had learned to thrust and parry and cut as only De Vac could teach the art; and he had been as conscientious in the discharge of his duties as he had been in his unswerving hatred and contempt for his pupils.
Retailed at a dollar, on a royalty of fifteen per cent, it would bring him one hundred and fifty dollars.