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Intellectual Property Right - Licence Fee

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").
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