How to calculate the royalty reasonably is a very important but very difficult problem in the licensing contract. The determination of patent royalties depends on many factors, including: (1) the expenses incurred by the patentee in patent research and development; (2) the economic benefits that the licensee can obtain by using the patent; (3) Types, implementation methods and time limits of patent licensing; (four) the way and time for the licensee to pay the royalties. In addition, whether there are alternative technologies in the market, before the crisis of technological improvement, the bargaining power of both parties is also a factor affecting the use fee.
According to the provisions of Article 325 of the Contract Law, the payment method of the use fee shall be agreed by the parties, which may be lump-sum payment or lump-sum payment, royalty payment or additional prepayment of the entry fee. If it is agreed to pay the royalties, the royalties may be calculated according to the product price, the newly added output value after the patent is implemented, the profit or a certain proportion of the product sales or other agreed ways. The proportion of royalty payment can be fixed, increasing year by year or decreasing year by year. Where royalty payment is agreed, the parties shall stipulate in the contract the method of consulting relevant accounting accounts.
Finally, the two methods have their own advantages and disadvantages. Finally, the patentee gets the money early and the risk is small, but it may need to pay more taxes. If the products sell well in the future, the patentee will not get additional benefits. Of course, if the products can't reach the expected sales volume in the future, this method will bring risks to the licensee. If the royalties are paid by installments, the risk borne by the licensee is relatively small, but if the sales of products in the future are very good, the patentee can get higher royalties. In many cases, royalties are paid by combining entry fees with royalties.