Intellectual Property Right - Licence Fee
In return for the licence of IPRs, the licensee will normally pay a royalty, a lump sum or combination thereof. If the licence is part of a wider deal e.g. long term supply, then the royalty may be built into the cost of the goods under the supply contract.
The level of licence fee will depend on a number of factors including:
The degree of exclusivity granted;
the state of development of any technology;
the strength of the IPRs;
the licensee's access to upgrades;
the going rate for such IPRs;
and whether both parties willingly entered into the deal or if it was forced on the licensee as part of a settlement of a dispute over ownership of IPRs. (As to tax treatment, see "Key Issues in an IP Licence").