By
Lisa A. Lori
and Esq.
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• A royalty rate that is based on a percentage of net sales. Royalty rates paid to licensors typically range from 2 percent to 20 percent of the licensee's net sales. Thus, the most important provision in the license agreement is how the term "net sales" is defined.
Royalties are calculated by multiplying a royalty rate by net sales. "Net sales" is typically defined as gross sales less deductions, which can include customer discounts, returns, shipping costs and allowances. A licensor will want the "net sales" definition to contain as few deductions as possible, to maximize royalty payments; a licensee will want to include as many deductions as possible, to reduce royalty payments.
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- People:
- Lisa A. Lori
- Places:
- Cleveland
Lisa A. Lori
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Esq.
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