Not paying royalties may lead to intellectual property litigation

Glenn W. Peterson

Just because a California individual or business owns a patent, copyright or trademark, it does not mean that no one else can use the item associated with it. Owners can negotiate licenses to others so they can use the item, and in return, they receive royalties. If the licensee fails to make the agreed upon payments, intellectual property litigation could ensue.

Every contract for royalties has its own unique provisions, but nearly all of them share some commonalities. The property associated with a patent, copyright or trademark needs to be described in as much detail as possible, along with its owner. The contract also needs to specify the limits and scope associated with the other party’s use, which can be anywhere from perpetual use to one-time use and anything in between.

The final common element sets out in detail the royalties owed to the property owner. Provisions should include the amount to be paid, when those amounts are due, how the amount was derived and how to keep records of the royalties. This and all other provisions should contain enough specificity to avoid any confusion or miscommunication in the future.

The more detailed and specific a royalty contract is, the better the chances are that a California business or individual will avoid intellectual property litigation. However, there is always the chance that something can go wrong, such as not receiving agreed upon royalty payments, and it will be necessary to take the matter to court. In that case, a detailed contract will serve to provide clear evidence to the court that an agreement existed and the other party violated it.