Economics

The royalty base can matter as much as the royalty percentage

Two agreements showing the same percentage may produce very different economics if one applies to gross sales and another to net sales, units, sublicensing income or another base.

The main issueCompare economics, not just percentages.

Identify the contractual base before comparing percentages.

Check deductions, exclusions and tiered structures.

Separate percentage rates from per-unit or fixed-fee terms.

Normalize only where the facts permit a supportable conversion.

TPRoyalty note

This is a concise research note, not a substitute for the facts and legal or transfer-pricing requirements of a particular case.

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