Standard Royalty Contract
Licences can be used for many purposes and across a wide range of subject matter. In many cases, a licence allows one party to use something owned by another party in return for payment.
This Standard Royalty Contract is designed for licence arrangements where payment is made by royalties, usually as a percentage of income generated by the licensee’s activities.
The template is deliberately broad, allowing the licensed subject matter to be defined by the parties.
Royalty-Based Licence Payments
Payment may be structured in more than one way. The contract can provide for royalties alone, or for an initial fee paid at the start of the agreement followed by royalties.
It also includes provision for an advance against royalties. Where an advance is used, it must be recouped before royalty payments begin.
Exclusive and Non-Exclusive Licence Options
The licence granted under this contract may be either exclusive or non-exclusive.
This flexibility makes the template suitable for a range of commercial licensing arrangements, depending on whether the licensor wishes to give the licensee sole rights or retain the ability to license the subject matter to others.
Defining the Licensed Subject Matter
The subject matter of the licence should be clearly named and defined. For example, if a written extract is being licensed, it might be referred to as “the Extract”.
The main definition should be included in Clause 1 and used consistently throughout the agreement. A brief explanation of the subject matter should appear in Clause 1, with fuller details set out in Schedule 1.
Key Terms Covered by the Standard Royalty Contract
The contract covers the main legal and commercial terms needed for a royalty-based licence, including:
- grant and scope of the licence;
- licensee rights and obligations;
- waiver of moral rights;
- payment, royalties and records;
- licensor and licensee warranties;
- indemnity, proceedings and confidentiality; and
- term, termination and post-termination provisions.
The schedules cover the defined subject matter of the licence and the stated purposes for which it may be used.
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