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 periodicals archive ?
ENPNewswire-August 15, 2019--EMX Royalty Announces Second Quarter 2019 Results
The combined company will be named Desert Peak Minerals and will be the largest pure-play mineral and royalty company in the Delaware Basin by net royalty acres.
An express trust, Permian Basin Royalty holds overriding royalty interests in various oil and gas properties in the US.
Due to the widespread criticism of the bright-line post-expiration patent royalty restriction, most courts allow, and even encourage, a variety of exceptions and workarounds to the restriction.
For additional information on Royalty Capital Corporation, please call John C.
In an earlier agreement, ImmunoGen announced a USD200m non-dilutive royalty transaction, under which, ImmunoGen sold the right to receive 100% of the royalty revenue on Kadcyla commercial sales to an undisclosed threshold amount, subject to certain conditions.
Under the approved substitute bill, large mining contractors will follow a margin-based royalty on their mining operations.
- above 10 percent up to 20 percent: 1.5 percent royalty
"We are pleased to welcome Hugoton Royalty Trust to the OTCQX Best Market," said Jason Paltrowitz, Executive Vice President of Corporate Services at OTC Markets Group.
'We (Sabah) asked to be given 20 per cent based on royalty,' he told reporters after officiating the 13th annual general meeting of the state level Education Service Pensioners Association here today.
A royalty transaction is optimal for a franchisor owner that wants a substantial liquidity event, doesn't want equity partners (especially selling control) and strongly believes in the continued new store growth prospects for the business.
ISLAMABAD -- The Federal Government has paid Rs 22,290 million oil and gas royalty to Punjab during last four years, official