Posted in Finance, Accounting and Economics Terms, Total Reads: 412
Definition: Royalty Fee
A periodic compensation paid to the legal owner for the use of his property especially patents, copyrighted works, franchises or natural resources. In simple words, they are the payments made for the design of someone else. This royalty fee is usually some percent of the net sales obtained using owner’s property and the payment is done each week, monthly or quarterly.
The payment can be negotiated to meet the specific needs of the situation and are usually specified in the contract. The royalty fee is usage based and is paid by the people to the owner for the usage of the assets , sometimes an intellectual property for generating revenue or other desirable activities. The royalties are mostly legally binding.
As mentioned before royalty fee can also be paid in case of intellectual property. When someone writes a poem, a song ,painting, book - all these work is considered a s intellectual property.
The inventors of their creations do not have the finance to exploit commercially their creations. When different business receive the rights to market the creation, the creator receives compensation in the form of royalty fee from the manufacturer, agent, publisher ,distributor etc.
In case the book turns out to be a best – seller the author may hike his/her royalty fee. If someone uses the creation of another person either purposely or by mistake, it is an offense on the part of the user and he is answerable to the creator. However, a creator does not have to license his/her creation to anyone