Licensing intellectual property can be a lucrative stream of revenue. However, businesses need to have procedures in place to ensure accurate reporting and royalty payments.
According to Invotex’s 13th Annual Royalty Compliance Report, many companies are being shortchanged. It found that 89 percent of audited licensees underreport and underpay royalties. In addition, 56 percent underreport sales, while dubious license interpretation accounts for 44 percent of the shortfall.
Even more concerning, the errors tend to add up. Invotex found that 25 percent of licensees underreport the royalties they owe by more than 100 percent of the total amount reported.
Below are the most common oversights by licensees:
• Disallowed deductions: Unpermitted deductions comprised 20 percent of the unpaid royalties.
• Unreported sublicenses: The failure to account for sublicenses made up 6 percent of the total dollar amount that is misreported
• Incorrect royalty rates: Royalty rate errors accounted for 3 percent of the total misreported royalties.
• Calculation mistakes: Simple math errors comprised two percent of the unpaid royalties.
As this report highlights, mistakes frequently happen. While most are not intentional, they can still hurt your bottom line. To make sure you and your licensees are on the same page, it is important to establish clear expectations, monitor compliance, and act quickly to rectify issues.
ABOUT THE AUTHOR: William D. Bowen
William Bowen specializes in intellectual property litigation. Mr. Bowen manages all stages of the litigation process, including pre-filing investigation and case assessment, pretrial motion practice, discovery, trial practice, and post-trial and appellate proceedings. He has represented clients in federal and state courts in Delaware, Texas, and California, as well as appellate courts including the Ninth Circuit, the Federal Circuit, and the U.S. Supreme Court.
With a strong background in computer science and internet technology, Mr. Bowen's technical expertise positions him to be adept at working with expert witnesses, as well as explaining complex technical and legal issues to judges and juries.
Mr. Bowen is a zealous advocate for children's rights both domestically and internationally. He is fluent in Italian, proficient in French and Spanish, and intermediate in Mandarin.
Copyright Sheldon Mak & Anderson PC
More information about Sheldon Mak & Anderson PC
Even more concerning, the errors tend to add up. Invotex found that 25 percent of licensees underreport the royalties they owe by more than 100 percent of the total amount reported.
Below are the most common oversights by licensees:
• Disallowed deductions: Unpermitted deductions comprised 20 percent of the unpaid royalties.
• Unreported sublicenses: The failure to account for sublicenses made up 6 percent of the total dollar amount that is misreported
• Incorrect royalty rates: Royalty rate errors accounted for 3 percent of the total misreported royalties.
• Calculation mistakes: Simple math errors comprised two percent of the unpaid royalties.
As this report highlights, mistakes frequently happen. While most are not intentional, they can still hurt your bottom line. To make sure you and your licensees are on the same page, it is important to establish clear expectations, monitor compliance, and act quickly to rectify issues.
ABOUT THE AUTHOR: William D. Bowen
William Bowen specializes in intellectual property litigation. Mr. Bowen manages all stages of the litigation process, including pre-filing investigation and case assessment, pretrial motion practice, discovery, trial practice, and post-trial and appellate proceedings. He has represented clients in federal and state courts in Delaware, Texas, and California, as well as appellate courts including the Ninth Circuit, the Federal Circuit, and the U.S. Supreme Court.
With a strong background in computer science and internet technology, Mr. Bowen's technical expertise positions him to be adept at working with expert witnesses, as well as explaining complex technical and legal issues to judges and juries.
Mr. Bowen is a zealous advocate for children's rights both domestically and internationally. He is fluent in Italian, proficient in French and Spanish, and intermediate in Mandarin.
Copyright Sheldon Mak & Anderson PC
More information about Sheldon Mak & Anderson PC
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