DT applications and claims - Types of income: Royalties
Patent royalties continued
Patents and trademarks are usually exploited by the original owner or an assignee under an arrangement with the original owner. When patents etc are exploited by an assignee under an arrangement with the original owner this arrangement could take the form of one of the following
- the owner sells the rights outright to the assignee (a sale)
- the owner grants a licence to the assignee to use the rights (a licence).
In either of the above two situations the assignee may in turn sell the rights or grant a further licence for all or part of the rights held by him to another person.
The terms of such assignments by sale or licence are usually set out in a written agreement that provides for one of the following
- payment of a lump sum (that is a capital payment
- payment of a continuing sum (that is an income payment)
- payment of both a lump sum and a continuing sum.
Additionally a licence agreement
- usually provides that it can only be used in certain territories
- may be exclusive (that is no other agreement may be granted for the same rights) or non-exclusive
- may be for all time/for the unexpired life of a patent/a stated term
- may allow the licensee to grant sub-licences for the whole or any part of the rights
- may contain a provision of “continuing obligations” on the part of the licensor that is the licensor gives certain technical information and drawings to the licensee/exchange of information on improvements and developments of the invention.