Royalties

Gilbert Fabian Moreno Moreno

Group 212032_42
October 25 2020

Definition

It is the payment that the owner of a license receives in exchange

for its usufruct, and reflects the value of the technology for the
owner of the license

Royalties have two key components:

• the royalty base is a fixed value that is agreed either for each
unit sold or for the total gross or net sales. These conditions can
be reviewed from time to time
• and the royalty rate: It is a percentage agreed between the
licensor and the licensee, and that can increase or decrease when
certain established conditions are met (time, units sold, etc.)

Process

In the royalty process, you must initially have the license or patent
(franchises, copyrights, research, etc); subsequently, when there is an
interested licensee, the payment conditions for said license are
agreed.

In Colombia, the best known royalties are those of hydrocarbons.

According to the political constitution of Colombia, every company
that extracts non-renewable resources is obliged to pay royalties.
This type of royalties are determined by the amount of production but
not by time, therefore in the exploration and drilling stages no
royalties are received. These are divided into direct and indirect.

Direct: are those that directly Indirect are to all other

benefit the territorial entities
that intervene in the entire
process of exploration, refining
and transportation of
hydrocarbons
municipalities that are not
benefited in direct and is
administered by the national
royalty fund.

How can companies create value from their innovation,

applying the method selected?

Companies must patent their innovations, so that if someone is

interested in such a patent, they can agree to a royalty with the licensee.
It is important that companies understand the importance of obtaining
licenses for their innovations, as they are a recognition of their
ingenuity and additionally financial compensation can be obtained
when there is an interested licensee.