Royalty agreement template

Managing royalty agreements isn't always straightforward. The balancing act between parties - the creator of intellectual property and those who want to use it - can be difficult to manage.

That's why it's important to have a comprehensive and robust royalty agreement template in place.

In this guide, we'll tell you everything you need to know about royalty agreements, including how to create and manage them more effectively. You can use this free royalty agreement template to get started.

What is a royalty agreement?

A royalty agreement is a contract between two parties, typically a licensor and a licensee, that outlines the terms and conditions for the use of intellectual property, such as patents, copyrights, trademarks, or other proprietary assets.

In a royalty agreement, the licensor grants the licensee the right to use, produce, or sell a specific intellectual property asset in exchange for royalty payments.

This type of agreement is most commonly used in fields where intellectual property rights are crucial, such as in the music, film, television, technology, or publishing industries.

How does a royalty agreement work?

A royalty agreement works by outlining the terms under which a licensee can use the licensor's intellectual property in exchange for a compensation (known as a royalty).

Royalties are usually calculated as a percentage of the revenues generated from the use of the intellectual property or as a fixed amount per unit sold or used. The exact royalty rate is often a subject of negotiation between the licensor and the licensee.

The royalty agreement lays out specific terms and conditions of this arrangement, such as how and where the licensee can use the intellectual property, how royalties are calculated and paid, the duration of the agreement, and provisions for renewal or termination.

It also provides protection for the intellectual property owner by clearly defining the scope of the license and retaining their ownership rights over the intellectual property.

Why are royalty agreement templates important?

A well-designed royalty agreement template is crucial for several reasons:

1. Avoid misunderstandings

‍Clear terms and conditions in the royalty agreement can prevent future conflicts. It defines what, where, and how the licensee can use the licensor's property, and the royalties that the licensor will receive.

2. Save time

‍Having a pre-made template for royalty agreements can speed up the contracting process. This can help licensors negotiate deals faster and manage their intellectual property more effectively.

3. Legal compliance

The agreement can help both parties adhere to intellectual property laws and regulations, reducing the risk of legal issues down the line. This is important in transactions like royalty agreements that can quickly become complicated.

What should a simple royalty agreement template include?

Royalty agreements can vary a lot in scope, length, duration and nature. However, most royalty agreement templates will include the following elements:

• Parties involved: Identifying information for the licensor and licensee. This typically includes names, addresses, and other contact information.
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• Description of the intellectual property: The property should be clearly defined and described so there is no ambiguity about what is being licensed.

• Grant of rights: The specific rights being granted to the licensee. This can range from an exclusive worldwide license to a non-exclusive local license. The scope of use (such as commercial, non-commercial, specific fields of use) should be clearly defined.

• Royalty rates and payment terms: Detailed information on how royalties will be calculated and when they are due. This can include percentages, flat fees, minimum guarantees, or a combination of these. It may also include how royalties will be audited and reported.

• Terms and termination: The start and end date of the agreement, as well as conditions under which the agreement can be terminated. This could include breach of contract terms, non-payment, or at the end of a fixed period.

• Warranties and representations: This section can include assurances from both parties, such as the licensor's claim to ownership of the intellectual property and the licensee's agreement to only use it in the ways discussed.

• Confidentiality clause: To protect sensitive information that may be shared during the term of the agreement. This can also be covered in an NDA or confidentiality agreement.

• Indemnification clause: This provides protection to one or both parties in case of legal action resulting from the agreement.

• Dispute resolution: This section of the royalty license agreement template will explain the procedures to follow if a disagreement arises, such as arbitration or mediation processes

• Governing law and jurisdiction: This section states which country's laws will apply if there's a dispute, and where any legal proceedings will take place.‍

• Force Majeure: This section protects the parties in case of unforeseen or uncontrollable events like natural disasters or pandemics.

What is the manual process for managing royalty agreements?

The manual process for agreeing royalty agreements can be a long and admin-heavy one, with friction throughout.

1. Contract drafting

‍Legal teams typically start by creating a contract from scratch. During the contract drafting process, they outline the specific terms and conditions, taking into account the unique needs and requirements of the licensor and licensee.

This drafting process tend to happen in an editor like Microsoft Word, and it often takes a long time.

2. Internal review and approval

‍Once the initial draft is ready, it goes through an internal review process. What this looks like will vary from business to business.

However, the typical process sees various departments or stakeholders review and feedback on the contract's terms to ensure that it aligns with the company's objectives and legal requirements.

This can be a repetitive and tiring process, with different stakeholders sharing their feedback in different places and formats.

3. Sending the contract for negotiation

Once it's received the seal of approval from your team, the contract is sent to the counterparty for negotiation.

Parties often have different interests and objectives, meaning that negotiations involve a lot of back and forth. Proposed changes and revisions are usually shared through email threads or as tracked changes (redlines) in separate Word documents.

Lots of different versions of a contract are created at this stage of the contract lifecycle, making it difficult to track the progress of negotiations.

4. Contract signing

‍Once both parties have finalized the terms, the royalty license agreement is approved by the internal teams and signed by all the signatories. Contracts can be signed two ways at this stage: with wet ink signatures or with eSignatures.

How can a royalty agreement template help?

The process is far more manageable for teams that have a solid royalty agreement template in place, though.

Instead of manually drafting royalty agreements from scratch, companies can host their royalty agreement templates in a contract management tool like Juro as automated contract templates.

This allows legal and commercial teams to initiate contracts within seconds. Teams can create a contract from the pre-approved template with just a few clicks. The templates are then automatically populated using a straightforward Q&A workflow, or by importing contract data from other business tools through an integration.

This means that airtight royalty agreements can be generated in no time, within minimal manual work required.

Automate royalty agreements in Juro

Juro doesn't just automate the contract creation process for royalty agreements. Juro's AI contract collaboration software can be used to minimize the administrative workload throughout the contract lifecycle. This is achieved through the following features.

Rich-text contract editor and AI assist

Juro's rich-text, dynamic contract editor makes it quick and easy for commercial teams to generate royalty agreements.

Juro makes it simple to populate a free royalty agreement template by pulling your answers from a short Q&A form into the contract. It can also pull data from other platforms via an integration.

You can even ask Juro's legal AI Assistant to generate new clauses for your contracts, allowing non-lawyers to customize royalty agreement templates with ease.

Browser-based contract negotiation

Juro offers the convenience of negotiating terms right from your browser, specifically tailored for royalty agreements. This eliminates the need for never-ending email threads or the tracking of revisions across various document versions.

All parties involved can work within the same document in real-time. This feature allows for transparent and efficient negotiations for royalty agreements.

Native electronic signing

The platform is also equipped with native eSignature capabilities. This eliminates the need for printing, scanning, or mailing documents to get your royalty agreements signed. Instead, parties can sign contracts from anywhere in the world, on any device.

Secure, data-rich contract storage

Contracts created in Juro are stored securely in a data-rich contract repository. This allows you access to valuable data from your agreements at any point in time. This data can be instrumental for tracking obligations, performing contracts, and informing strategic decisions.

Agree royalty agreements faster with Juro

Juro’s AI contract collaboration platform enables your team to create, execute and manage contracts up to ten times faster than traditional tools. With Juro, you can:

• Safely automate 75 per cent of routine contract admin
• Keep control of contracts as volumes grow
• Get instant insight into your contracts’ data

To find out more about how Juro can speed up the process of creating, signing and managing royalty agreements (and other contracts), hit the button below.