Royalty Buyout Agreement

Royalty Buyout Agreement

Buyback offers are much simpler and preferable for both parties if a fair price can be set and agreed. The problem is to create a fair price in a world of uncertainty. Whatever the promise of an invention in the development phase, commercial success is far from guaranteed. Miscalculations, competitive pressures and global events are not visible in advance. A buyback value must take these possibilities into account. Therefore, the value that a licensee of an invention could hopefully have must be reduced to the risk factor that something is wrong. “By using this attractive buyout agreement, we are reducing future royalties and will increase our financial flexibility to invest in future research and development projects and greater profitability,” said Eitan Oppenhaim, President and Chief Executive Officer of Nova. “As part of our plan to continue our long-term profitable growth, we are using our financial capacity to invest in maximizing shareholder value. This agreement supports these efforts and improves Nova`s position. As such, it decided to enter into an agreement with HeadSoundz, a manufacturer specializing in the manufacture and sale of audio equipment. To do this, PhoneMe must grant rights to its brand, trade name and brand on HeadSoundz, so that HeadSoundz can use PhoneMe`s unique branding on headphones, packaging and marketing. Both parties enter into a licensing agreement. Both sign a licensing agreement confirming that HeadSoundz PhoneMe will pay a royalty rate of 5% of net sales on a quarterly basis, in exchange for the use of the PhoneMe brand, trade name and brand for a period of 3 years.

One way for IP companies can overcome the challenge is to provide a buyback option for its customers. The buyback option allows the buyer to pay a certain amount of money to the seller and to stop all future royalties. SoC companies go to the buyback option when they see that the cash outflow of all future royalties is more than the redemption price. With the buyout option, IP providers can charge a higher percentage of royalties. 2. Charges: In a licensing agreement, the licensee makes routine payments to the inventor in connection with the commercial success of the invention. The licensing agreement generally sets annual minimum requirements and other things to ensure the delivery by the taker. If the licensee does not fulfill his rights as stipulated in the contract, he loses some or all of his rights over the invention.


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