The royalty agreement is an alliance between two parties. The contract holders are mainly referred to as licensor or granter and licensee or grantee. This agreement is signed to utilize the products, properties, logos, and trademarks of the licensor and pay them the royalty against the utilization of the licensed properties.
This agreement benefits both the licensor and the licensee. It builds trust and good business relations among the companies. The reputation of the licensor is at stake in such deals. This agreement is responsible for protecting the prestige of the licensor and providing sufficient rights to licensees.
What is the Royalty Agreement?
In business domains, it is a common practice to trade intellectual properties and get money in return. This act is beneficial for organizations that have ideas to launch new items in the market but are lacking the resources to develop them. Instead of waiting to get the money, an organization can sign an agreement with the manufacturing company to develop the products.
Signing such an agreement is called the royalty agreement. Under this agreement, the licensor will allow the licensee to use his company’s trademarks and use them in developing products. The licensee’s company generates revenue and gives royalty to the licensor for using the trademarks. This contract contains all the information regarding both companies.
It includes the rate at which the royalty will be paid. This treaty holds the period of the agreement. Most importantly, it consists of information about the property to be licensed. This document holds the indemnification clauses regarding the licensed property to handle the cases where the product or property is damaged.
The document helps set the limits of the usage of a licensed property. The property can only be used according to the usage stated in the agreement; otherwise, it is considered as a breach of agreement against the grantee.
Terms and Conditions in a Royalty Agreement
A royalty contract is a sensitive business contract that requires some rules to be followed. Following are some of the terms and conditions that are chosen by companies for such kinds of agreements.
- Right to Use the Property: After signing the agreement, the granter will be bound to give the rights of the intellectual property to the grantee. These products can be used all around the world.
- Pledges of Granter and Grantee: According to this agreement, the granter will deliver all the documents of the needed products with the valid license to the grantee. The grantee would pledge to take care of the property.
- Privacy of the Granter: The grantee may come to know some of the secrets of the granter because of this contract that could harm the reputation of the granter. Under this clause, the grantee promises to keep the confidentiality of the granter.
- Profit of the Grantee: Here, the grantee mentions the total profit earned by using the products of the granter. This profit is calculated after paying the bills of manufacturing and advertisement.
- Termination: Under this clause, all the conditions are mentioned according to which the contract will be terminated.
Checklist When Signing the Royalty Agreement
A royalty contract is signed by two parties and covers clauses related to their relevant obligations. These clauses have to be checked carefully before signing the pact. Some of the important elements that are to be checked are provided as follows:
- Name of Licensor and Licensee: The contract holders must check their names and contact information before signing the contract.
- Description of the Property being Licensed: The detail about the property to be permitted should be mentioned accurately before finalizing the agreement.
- Date and Duration: Both the parties should verify the date and duration of the agreement to avoid any future conflict.
- Rights: The rights that are provided to each party over signing this agreement should be thoroughly checked. This should be checked more than once to circumvent any misunderstandings.
- Payment Schedules: The payment against the use of the property has to be done either annually or quarterly, depending upon the understanding between the parties. Therefore, check the payment schedules carefully before signing the agreement.
- Royalty Rate: The royalty rate is defined depending upon the percentage of sales. The granter must verify this rate after discussing it with the grantee.
- Additional Fee Charges: Any additional charges that would occur in the future should be mentioned and verified by the contract holders.
How to Fill Out a Royalty Agreement Online
Filling out a royalty agreement form involves some steps to be followed systematically. Some of these steps are as follows.
- Identifying the Stakeholders: First and foremost, the stakeholders of the agreement should be identified. The names, along with the complete contact information, should be specified before printing out the contract.
- Narrating the Purpose of the Contract: The reason behind the royalty agreement is the next important field that is compulsory to add to this agreement. A complete description of the entire process leading to the benefits granted to both parties is mentioned here.
- Formulation of the Document: After identifying the parties and reason behind this deal, the document should be organized in a written form. There is an online tool named as CocoDoc that can fulfill the need to make this document online.
- Including Different Fields: Along with the fields of name, address of the company, and contact details, there are some specific fields too that should be added to this agreement. These include license information, royalty rates, indemnification, and termination.
- Sharing the Document: After preparing the document online within CocoDoc, it can be shared with other people by emailing them its copy.
The royalty agreement is not only a legally signed document between the parties, but it also helps strengthen professional relationships. By signing this agreement, one can get back the lost profit in business. This article has provided adequate information about the royalty agreement form and its clauses. The user can learn different ways to write this agreement using royalty templates and sample royalty agreements.