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The major challenge for Licensors is to ensure that they maximise the value of their intellectual property by effectively and efficiently managing their licensing agreements and other contractual agreements. A Licensor is at risk of losing substantial revenue without effectively determining whether a Licensee is reporting revenues completely and accurately and that all the entitled contractual payments are being met. Industry wide millions of pounds of revenue is lost each year by the under or mis-reporting of royalties. Reasons for this may be down to differing interpretation of terms in the licensing agreement, such as gross versus net sales, exchange rates or when payments are to be made – or perhaps from lax processes and management by Licensees.

Potential income may also be lost by undervaluing the intellectual property to be licensed. Often royalty rates are based on previous or similar agreements and not reviewed despite changing economic or commercial factors. Not understanding the worth of a property can mean Licensors don’t demand (and aren’t able to justify) higher royalty rates from Licensees.

Multi-national groups too could potentially save millions of pounds in tax by identifying the best strategy for owning or licensing their intellectual properties within the groups’ world-wide subsidiaries.

Specialist organizations can advise Licensors whether Licensees or other business partners are compliant with the terms of their agreements and royalty reporting procedures and assist with any issues or arbitration. They can produce licensing management strategies and procedures, including the software to automate it. They can also advise on the value of intellectual property to help ensure your royalty rates are not understated.

The challenge for Licensees is to ensure that they comply with their contractual agreements and can accurately report and pay the relevant royalties to Licensors and other parties. Royalty and general licensing management can be extremely complex to implement and difficult to track without the right systems or procedures in place. This maybe especially so for those Licensees dealing with multi-currency transactions or sub-licensees or who perhaps those who have many different internal departments involved in their licensing activity.

Licensors normally always have the right to audit or examine royalty reports and processes used for calculating. Under or mis-reporting, however unintended, frequently happens and can give Licensees financial penalties as well as potentially damaging their reputation.

Specialist organisations can help with royalty administration systems and procedures, assisting Licensees with implementing the controls, procedures and design systems to facilitate the accurate and timely payment of royalties. Software too can help Licensees ensure all the data they need is easily accessible and accounted for and any deductions or adjustments can be easily calculated, allowing Licensees to easily see how they are performing on their contract.

LICENSING MANAGEMENT & IP VALUATION SOURCES