There is no shortcut to undertaking a detailed analysis of the transaction and intellectual property involved. Using an average industry royalty rate should only be used as a guide and care should be taken, as royalty rates differ from transaction to transaction.
During the detailed analysis of the transaction and the intellectual property involved, a number of factors should be taken into account, as they can influence the royalty rate applicable to your transaction. These factors include:
Whether you are the licensor or the licensee, there are certain characteristics of the licensor that normally have a bearing on royalty rates and these inter alia include:
An application of the above principles should provide you with an objective assessment of the value received by the licensee from the licensor when negotiating the royalty rate for your transaction. Such royalty rate should be fair for both parties. Where the factors driving the royalty rate are complex and numerous, multiple rates or tiered royalty structures should be considered.