LES High Tech Deal Term and Royalty Surveys: Descriptive Statistics and Analysis of the Financial Terms (2008 to 2017)

LES High Tech Sector Royalty Rates & Deal Terms Survey Report 2017, Licensing Executives Society USA Canada, March 2019

Posted: 2 Apr 2019

See all articles by Jack Lu

Jack Lu

Intellectual Property Market Advisory Partners(IPMAP), LLC

Manta Zhang

Independent

Date Written: March 11, 2019

Abstract

The 2017 Licensing Executives Society (USA Canada) (LES USA Canada) High Tech Deal Term and Royalty Survey was launched on July 28, 2017 and closed on September 30, 2017. The Survey received 155 complete deals from 70 companies and organizations. Since the inaugural Survey in 2011, LES High Tech Royalty Surveys have collected a total of 477 samples.

This paper presents the descriptive statistics and analysis of the financial terms stipulated in the samples from the 2017 Survey and from the combined samples of all three surveys. Several different payment methods have been adopted by the collected transactions, including flat and tiered percentage rates, flat and tiered unit rate, upfront lump sum payment, and milestone payments, among others. Our analysis focuses mainly on flat running royalty rates as percentages of sales and lump sum payments, which together account for more than two thirds of the combined samples.

The 2017 Survey reports an average royalty rate of 5.69% and a median rate of 5%. Over the 10-year period from 2008 to 2017, the average rate is calculated to be 5.73%, and the median rate, 5%. Average and median rates are tabulated for major features and characteristics of the reported deals, including the organization type and size of licensors/licensees, technology features such as technology field and development stage, field of use, type of IP, and exclusivity, among various others. Similar analysis is conducted and presented for the deals with lump sum payments.

Our analysis also sheds light on certain specific issues arising from the surveys. As an example, to explain the seemingly counterintuitive royalty rate behavior across exclusive and non-exclusive deals, we take a deeper dive into the data and calculate average royalty rates by exclusivity and by licensor organization types, which offers a tentative explanation to the initially puzzling rate pattern.

Keywords: High tech, royalty survey, the average royalty rate, median royalty rate, license term, running royalty rate, lump sum payment, patent sales

JEL Classification: O32, O34, C13

Suggested Citation

Lu, Jiaqing and Zhang, Manta, LES High Tech Deal Term and Royalty Surveys: Descriptive Statistics and Analysis of the Financial Terms (2008 to 2017) (March 11, 2019). LES High Tech Sector Royalty Rates & Deal Terms Survey Report 2017, Licensing Executives Society USA Canada, March 2019. Available at SSRN: https://ssrn.com/abstract=3350154

Jiaqing Lu (Contact Author)

Intellectual Property Market Advisory Partners(IPMAP), LLC ( email )

13785 Research Blvd,
Suite 125
Austin, TX 78750
United States
(512)238-3088 (Phone)

HOME PAGE: http://www.ipmapllc.com

Manta Zhang

Independent ( email )

No Address Available
United States

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