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 ?
The Earl of Essex, 'tis true, wore a splendid ring, set with diamonds, given him by his royal mistress, whilst I -- I have nothing but a simple circlet of gold, with a cipher on it and a date; but that ring has been blessed in the chapel of the Palais Royal,* so they will never ruin me, as they long to do, and whilst they shout,`Down with Mazarin!' I, unknown, and unperceived by them, incite them to cry out, `Long live the Duke de Beaufort' one day; another, `Long live the Prince de Conde;' and again,`Long live the parliament!'" And at this word the smile on the cardinal's lips assumed an expression of hatred, of which his mild countenance seemed incapable.
Then a door draped with royal green opened, and in came the fair and girlish Princess Ozma, who now greeted her guests in person for the first time.
The royal residence of Tamaahmaah was at this time at another island named Woahoo.
Chaka the king slept and dreamed that he lay dead, and that one of you, the princes, wore his royal kaross."
His royal highness is at breakfast -- must he be interrupted?
Richard's eyes sparkled as he looked from one to another of this stalwart band, and he thought within himself that here, indeed, was a royal bodyguard worth the while.
"On the royal word of a King I promise it!" he answered.
Followed by her Army the General now rushed to the gateway, where she was confronted by the Royal Army of Oz -- which was the other name for the Soldier with the Green Whiskers.
It strikes off money faster than the dies of the Royal Mint itself.
There followed another band after this, which was called the Royal Court Band, because the members all lived in the palace.
So Brus took the gold zecchins and De Vac the key, and the little prince played happily among the flowers of his royal father's garden, and all were satisfied; which was as it should have been.
At touch of the man's hand upon her flesh the girl went pallid beneath her coppery skin, for the persons of the royal women of the courts of Mars are held but little less than sacred.