Royalty rate trends in patent and technology licensing

Patent licensing revenue has grown from an estimated $15 billion in 1990 to an estimated $100 billion in 1999 and an estimated $150 billion in 2003. Many methods have been developed to attempt to deal with the problem of valuing intellectual property assets. In fact, different methods may be combined with one another in order to value a particular asset. There is virtually no case law to guide a valuation analysis, but accounting methods are helpful. On the other hand, many court opinions discuss specific royalty rates for the technology involved in the lawsuit as well as guidelines for information to be considered in establishing a royalty rate. Once a method of valuation has been determined and applied to the intellectual property, a basis for measuring the royalty rate also must be determined. Typically, the royalty rate is based on a percentage of either the sales or profits of the product that is the subject of the license agreement.