Royalties
Royalties are usually paid on net sales. They may be based on a percentage of sales, a per unit cost, an annual fee or as a one-time paid-up license. Royality rates depend on many factors. Here are a few examples of some average rates:
Toys: |
5% - 10% |
Software: |
15% - 25% |
Tools: |
3% - 7% |
Automotive: |
2% - 5% |
Baby goods: |
5% - 7% |
Michael Jordan: |
17.5% |
Strong patent protection: |
3% or more |
weak patent protection: |
0% |
invention promotion companies: |
0% |
Keep in mind that most highly profitable inventions have low royalty rates. That's what allows them to be price competitive in industry and readily received by licensees.
Inventions with weak patent protection will not be licensed. Last, since we know of no patents licensed by invention promotion companies that produced credible results, they are listed at 0%.