Licensing intellectual property can be a lucrative stream of revenue. However, businesses need to have procedures in place to ensure accurate reporting and royalty payments.

According to Invotex’s 13th Annual Royalty Compliance Report, many companies are being shortchanged. It found that 89 percent of audited licensees underreport and underpay royalties. In addition, 56 percent underreport sales, while dubious license interpretation accounts for 44 percent of the shortfall.

Even more concerning, the errors tend to add up. Invotex found that 25 percent of licensees underreport the royalties they owe by more than 100 percent of the total amount reported.

Below are the most common oversights by licensees:

  • Disallowed deductions: Unpermitted deductions comprised 20 percent of the unpaid royalties.

  • Unreported sublicenses: The failure to account for sublicenses made up 6 percent of the total dollar amount that is misreported

  • Incorrect royalty rates: Royalty rate errors accounted for 3 percent of the total misreported royalties.

  • Calculation mistakes: Simple math errors comprised two percent of the unpaid royalties.

As this report highlights, mistakes frequently happen. While most are not intentional, they can still hurt your bottom line. To make sure you and your licensees are on the same page, it is important to establish clear expectations, monitor compliance, and act quickly to rectify issues.

How Can I Help?

If you, or someone you know, need any help with Intellectual Property issues, from filing a patent, trademark or copyright, or just need advice regarding how best to protect your inventions, ideas or your brand, please contact me for a free 30 minute consultation at or call TOLL FREE at 1-855-UR IDEAS (1-855-874-3327) and ask for Norman.

– Ex astris, scientia –

I am and avid amateur astronomer and intellectual property attorney in Pasadena, California and I am a Rising Star as rated by Super Lawyers Magazine.  As a former Chief Petty Officer in the U.S. Navy, I am a proud member of the Armed Service Committee of the Los Angeles County Bar Association working to aid all active duty and veterans in our communities. Connect with me on Google +