Royalty Structures Research Articles

The Simple Math of Royalties and Drug Competition During the 180-Day Generic Exclusivity Period

Abstract In drug patent litigation settlements, the plaintiff brand commonly licenses the defendant generic to sell before patent expiry. Some agreements require the generic to pay the brand royalties. Despite the superficial flow of payments, royalty terms may function as part of an anticompetitive “reverse payment” made to the generic in exchange for delayed entry. Typically, the brand launches its own authorized generic (AG) during the first-to-file generic’s 180-day exclusivity period so initially there are two generic competitors. A royalty structure that deters the brand’s AG launch reduces the number of entrants to one, conveying net value to the generic by allowing it to capture the entire generic market, potentially inducing it to delay its entry. Royalties usually have no place in a brand–generic agreement between rational actors. However, our simple model shows that when royalties are conditioned on the brand’s AG launch, a range of royalty rates exists that conveys net value to the generic by deterring the brand from rationally introducing an AG. Royalty terms that are conditioned on the brand’s AG launch thus raise a red flag that the agreement is a pay-for-delay. Although the numbers are small, publicly available materials on industry experience corroborate this conclusion.

Sports Licensing Development Between USA and China

This paper explores the intricacies of sports licensing in two major markets: the United States and China. It delves into the historical evolution of sports licensing, beginning with character-based merchandise and evolving into a multi-billion-dollar industry encompassing a wide range of products. The U. S. market, with its mature and standardized sports licensing industry, is contrasted with China's developing market, which is experiencing growth in brand value and sales. the paper also examines the current challenges in China’s sports licensing, such as limited product diversity, quality control issues, and the need for market expansion. Additionally, the unique aspects of licensing agreements, royalty structures, and the impact of key figures like Yao Ming on the global sports licensing landscape are discussed. A comparative analysis between the two countries reveals differences in market size, structure, and maturity, highlighting the potential for growth and development in China’s sports licensing industry.

Classroom experiments on technology licensing: Royalty stacking, cross-licensing, and patent pools

The authors present two classroom experiments on technology licensing. The first classroom experiment introduces the concept of royalty stacking. Students learn that noncooperative pricing of royalties for complementary intellectual property rights leads to a double-marginalization effect. Cooperation solves the problem and is welfare-improving. The second classroom experiment introduces students to cross-licensing. It shows that reciprocal royalty payments dampen competition. The classroom experiments stimulate discussions of technology licensing, intellectual property rights, different royalty structures, patent pools, and technology standards. The authors present the experimental procedures and suggest routes for the discussion.

Kaybolan Kültürel Bir Değer: Fuad Paşa Bahçesi

Osmanlı döneminde İstanbul’da saray ve kasır gibi saltanat yapılarının yanı sıra köşk, konak, yalı gibi sivil konutların bahçelerinde de bitkisel ve mimari elemanlarca zengin tasarımlar uygulanmıştır. Bu tür sivil konutların yüksek estetik değere sahip bahçelerinin çoğu maalesef korunamamıştır. Söz konusu bahçeler yaratıcılarının zevkini ve dönemin sivil konut bahçelerindeki tasarım anlayışını göstermesi bakımından önemlidir. Kaybolan bu tür nitelikli bahçelerden biri; uzun ömrü sayesinde Sultan Abdülaziz, Sultan Abdülhamid, Meşrutiyet ve Cumhuriyet devirlerine şahitlik eden ve çeşitli askeri ve siyasi görevler almış olan Müşir Fuad Paşa’nın, 19. yüzyılın sonlarında İstanbul’un Kadıköy ilçesi Fenerbahçe semtinde inşa ettirmiş olduğu ve kendi adıyla anılan bahçedir. Tarihi antik dönmelere kadar uzanan Fenerbahçe semti II. Abdülhamid döneminde en parlak günlerini yaşayarak halkın rağbet ettiği bir mesire yeri haline gelmiş, yerli ve yabancılardan oluşan semt halkı burada birbirinden güzel bahçeli köşkler içerisinde yaşamışlardır. Bu dönemde Fenerbahçe semtinde yer alan Fuad Paşa’nın bahçesi hem tasarımı, hem inşa süreci, hem de içerisinde gerçekleştirilen etkinlikleri ile hafızalarda yer edinen bir bahçe olmuştur. Her ne kadar Fuad Paşa’nın bahçesi yok olmaktan kurtulamamışsa da bahçe hakkında bilgi veren yazılı kaynaklar, arşiv belgeleri, eski bir fotoğraf, eski bir haritada gösterilen bahçe planı ve semtin eski sakinlerinin anlattıkları doğrultusunda söz konusu bahçenin tasarım özelliklerini, tarihsel süreç içinde geçirdiği değişiklikleri tespit etmek mümkün olmuştur. Böylelikle İstanbul’da Osmanlı dönemine tarihlenen ve bugün mevcut olmayan önemli bir sivil bir konuta ait nitelikli bir bahçenin özelliklerinin literatüre kazandırılması amaçlanmıştır. Yapılan araştırma Fuad Paşa’nın öncelikle bir bahçe inşa ettirdiğini içine ise ihtiyaca yönelik yapılar oluşturduğunu göstermektedir. Bahçenin tasarım özelliklerine baktığımızda ise tamamlanamayan Fuad Paşa Köşkü’nün önünde formal bir bahçe düzeni görülürken bu düzen bahçenin diğer kısımlarında informal bir yapı kazandığı anlaşılmaktadır.

Classroom Experiments on Technology Licensing: Royalty Stacking, Cross-Licensing and Patent Pools

We present two classroom experiments on technology licensing. The first classroom experiment introduces the concept of royalty stacking. The students learn that non-cooperative pricing of royalties for complementary intellectual property rights leads to a double-marginalization effect. Cooperation solves the problem and is welfare improving. The second classroom experiment introduces students to cross-licensing. It shows that reciprocal royalty payments dampen competition. The classroom experiments stimulate discussions of technology licensing, intellectual property rights, different royalty structures, patent pools and technology standards. We present the experimental procedures, and suggests routes for the discussion.

Converting Royalty Payment Structures for Patent Licenses

Basic economic techniques equip a damages expert with a reliable means of converting a royalty payment with one structure to a royalty of equivalent value under a different structure. I show that one can use reliable methodologies to convert royalty payments across structures both in cases where the parties have executed a one-way license — that is, a license in which the parties determine the conditions for the licensee’s use of the patent holder’s patents — and in cases where the parties have executed a cross license, which grants each party the right to use the counterparty’s patents. When the license uses a simple royalty structure, converting the royalty payment across different structures is also relatively simple. For example, information about the patent-practicing product’s projected price might suffice to convert a per-unit royalty fee to a derived royalty rate. However, when the license in question is a cross license or complex license, converting royalty payments to a derived royalty rate might be more burdensome, as it might require the estimation of additional parameters, such as relative portfolio strength. Nevertheless, with sufficient data, existing economic methodologies offer a reliable basis for estimating and comparing the derived royalty rates of different licenses. Courts can supplement the derived royalty rate with adjustments to account for a company’s bargaining power or market risk implicit in the different royalty structures.

Debating Unconventional Energy: Social, Political, and Economic Implications

The extraction of unconventional oil and gas—from shale rocks, tight sand, and coalbed formations—is shifting the geographies of fossil fuel production, with complex consequences. Following Jackson et al.’s ( 1 ) natural science survey of the environmental consequences of hydraulic fracturing, this review examines social science literature on unconventional energy. After an overview of the rise of unconventional energy, the review examines energy economics and geopolitics, community mobilization, and state and private regulatory responses. Unconventional energy requires different frames of analysis than conventional energy because of three characteristics: increased drilling density, low-carbon and “clean” energy narratives of natural gas, and distinct ownership and royalty structures. This review points to the need for an interdisciplinary approach to analyzing the resulting dynamic, multilevel web of relationships that implicates land, water, food, and climate. Furthermore, the review highlights how scholarship on unconventional energy informs the broader energy landscape and contested energy futures.

Intellectual Property Rights and Canadian Wheat Breeding for the 21st Century

AbstractAlthough wheat is the largest field crop in Canada, the intellectual property rights for the self‐pollinated, nongenetically modified crop have been too weak to allow significant royalty flow to plant breeders. The sector heavily relies on resource‐constrained public breeding programs for new variety development. This long‐standing situation could change with the 2015 Agricultural Growth Act, which strengthens Canadian plant breeders’ rights to be consistent with the UPOV 91 convention. We explore the potential implications for Canada by examining the experience with UPOV 91 implementation in the United Kingdom, France, and Australia. Using the royalty structures in these countries as potential pathways for Canada, an ex ante benefit–cost framework is used to illustrate the choice of pathway is important. Over a 40‐year period, the Australian, French, and U.K. implementation pathways generate 4.8, 4.0, and 1.5 $CDN billion in net benefit (respectively) over the status quo. Over shorter time horizons of 20 and 30 years, France is quicker to establish uniform endpoint royalties that provide the highest net benefits. Proactive industry engagement to develop a more robust royalty collection system is required to realize these potential benefits.

Emerging challenges for branded budget hotels in India

Purpose– The purpose of this study is to identify the emerging challenges that are faced by branded budget hotels in India. The paper aims to do this by exploring the expectations as well as challenges faced by the customers and hospitality managers of branded budgets hotels in India.Design/methodology/approach– Utilizing a multi-method approach, data were collected through literature review, eight in-depth interviews and 422 customer reviews. Thematic analysis using the hybrid approach brings out the challenges faced by hospitality managers of branded budget hotels in India.Findings– Hospitality managers face the following challenges – dipping gross operating profits, higher global distribution systems productivity for international hotel brands, location constraints, high royalty structures for management contracts, regulatory issues, business poaching and unorganized growth, bureaucracy among vendors and contactors and lack of trained manpower. Customer expectations include poor check-in/check-out services, inefficient service management, inconsiderate personnel, poor management of feedback and instances of theft.Originality/value– This work adds to the body of knowledge using real customer data and thematic analysis. The authors have not come across any scholarly work, especially in the Indian context, which looks at two stakeholders of the branded budget hotel industry. Hence, recommendations from this work are valuable for hospitality managers as well as researchers.

Brief Amicus Curiae of the Motown Alumni Association in F.B.T. Productions v. Aftermath, No. 09-56069 (9th. Cir.)

This case involved an important issue of contract interpretation majorly affecting the market for digital music downloads with serious implications for the welfare of many recording artists. At issue was the "Masters Licensed" clause and the usage of standard terms in a deal involving the artist Eminem that paralleled the terms in a great many recording agreements. And while the recording label Appellees tried characterize these contracts as unique to these parties, the interpretation of the basic terms at issue — especially "license" and "sale" — affected nearly every American recording artist signed to a major record label, including many members of amicus Motown Alumni Association. For example, one agreement between Motown Records and The Temptations drew exactly the same distinction in its royalty structure between records sold and recordings that were licensed to third parties.During the proceedings below, the District Court failed to give adequate consideration to the broader context of the contractual terms at issue and the role they play in the music industry. In this appeal, amicus urged the Court not to make the same mistakes and, in particular, to consider three key factual and legal aspects of the music industry that are relevant to resolving the dispute: (1) the major labels’ frequent and repeated use of strained contractual interpretations, abstruse royalty structures, and strategic accounting practices to deny artists proper notice and fair compensation, including the historical failure to pay out accurate royalties earned under artist contracts; (2) the incentives record labels have to contort contractual terms in order to avoid paying higher “license” royalties to artists, given their changing role in a music market rapidly shifting to digital distribution; and (3) the specific context and meaning of common copyright terms such as “license” and “sale” in the federal Copyright Act.In light of these considerations, amicus urged the Court to adopt a strong presumption that when music contracts conveying copyright interests use terms derived from within the Copyright Act, such as "license" or "sale," the Act's default terminology should apply, and only in rare cases where there is substantial evidence that the parties unambiguously agreed to deviate from these common statutory meanings should these terms be susceptible to different interpretations. This practice comports with well-settled principles of contract law, the proper allocation of risks in recording contracts, and the reasonable expectations of artists, enabling them to rely on common industry understandings and the plain meaning of the terms, regardless of changes over time in technology, distribution methods, or the labels' business models.* This brief was written with the assistance of Berkeley Law students Adam Blankenheimer, Amber Burroff, Jade Jurdi, and Joel Wallace.

The myth of the early aviation patent hold-up--how a US government monopsony commandeered pioneer airplane patents

The prevailing historical accounts of the formation of the US aircraft �patent pool� in 1917 assume the US government necessarily intervened to alleviate a patent hold-up among private aircraft manufacturers. We show these accounts to be inconsistent with the historical facts. We show that despite the existence of basic aircraft patents, aircraft manufacturers faced no patent barriers in the market dominated by government demand. We show that the notion of the aircraft patent hold-up is a myth created by government officials and used to persuade the Congress to authorize eminent domain condemnation of basic aircraft patents. Government officials used the threat of condemnation to impose a depressed royalty structure on aircraft patents and induce key patent owners to enter a cross-licensing patent pool. We show that this cross-licensing agreement was not an archetypical private patent pool, but had been structured to suit the preferences of the government as monopsonist; it imposed on private suppliers to the government a nearly costless technology transfer.

National Oil Companies: Business Models, Challenges, and Emerging Trends

This paper provides an assessment and a review of the national oil companies' (NOCs) business models, challenges and opportunities, their strategies and emerging trends. The role of the national oil company continues to evolve as the global energy landscape changes to reflect variations in demand, discovery of new ultra-deep water oil deposits, and national and geopolitical developments. NOCs, traditionally viewed as the custodians of their country's natural resources, have generally owned and managed the complete national oil and gas supply chain from upstream to downstream activities. In recent years, NOCs have emerged not only as joint venture partners globally with the major oil companies, but increasingly as competitors to the International Oil Companies (IOCs). Many NOCs are now more active in mergers and acquisitions (M&A), thereby increasing the number of NOCs seeking international upstream and downstream acquisition and asset targets. Asian state-owned companies of NOCs, most prominently from China and India, are at the forefront of strategic cross-border investments as their governments seek to prepare for long-term energy supply challenges. At the same time, increasing oil wealth brought about by rising oil prices has encouraged governments as diverse as Russia, Venezuela, Bolivia, and Ecuador to give greater political and economic leverage to their national energy champions. This is achieved in their local market through revisions to constitutional laws, contracts, tax and royalty structures. Also, the NOCs have begun to enter the international market, engaging in strategic investment activities and acquiring full or partial control of foreign companies in sectors of strategic interest for national development. Within the GCC region, there are a number of national oil companies that have capabilities to expand beyond serving their domestic markets. This process is, in part, being hindered by the inadequacy of corporate structures and the lack of information in the GCC region. Globally, it is being hindered by the rise of economic nationalism and the debate around economic sovereignty, security, and ownership of assets, and the perception in the west that NOCs should not seek to acquire international oil companies and assets. Undoubtedly, political considerations influence and impact the international investment policy of NOCs.The emerging trend driven by the rise of NOCs has shifted the balance of control over most of the world’s hydrocarbon resources. In the 1970s, the NOCs (super majors) controlled less than 10% of the world’s hydrocarbon resources, while in 2012 they control more than 90%. This shift has enabled NOCs to increase their ability to access capital, human resources and technical services directly, and to build in-house competencies. Further, NOCs have been increasing their ability to conduct outsourcing activities for many operations through the oilfield services companies (OFSCs), thus increasing their range of competence.

Market Size, Franchisee’s Marketing Activity, and Two Royalty Structures as Incentive Schemes: Margin-Based Royalty Versus Sales-Based Royalty

This paper studies the two royalty structures: Sales-based Royalty (SBR) and Margin-based Royalty (MBR). From the standpoint of a franchisor, if it is necessary for a franchisee to engage in a marketing activity, the SBR grants a more high-powered incentive scheme to the franchisee than the MBR does. On the other hand, the latter plays a role in alleviating the double markup problem. This paper analyzes how the optimal royalty structures will change according to market size. It is shown that when the market size is large, the franchisor should choose the SBR structure in order to provide its franchisee the high-powered incentive scheme. Consequently, if the market size is small, the franchisor should implement the MBR structure to alleviate the double marginalization problem. This study also shows that the franchisee’s marketing activity level under the SBR is always larger than that under the MBR, regardless of the market size.

The Optimum Contract in Franchising: A Comparison of the Two Royalty Structures Taking into Account the Option for the Franchisee to Return Commodities to the Franchisor

The Optimum Contract in Franchising: A Comparison of the Two Royalty Structures Taking into Account the Option for the Franchisee to Return Commodities to the Franchisor

Royalty Rate and Industry Structure: Some Cross-Industry Evidence

This paper continues where Kemmerer and Lu (2008) left off, and explores the relationship between royalty rates and market structure among industries. Economists have studied innovation, R&D, and market structure for decades, and also have investigated patent licensing methods across industries. However, there is very little research on the relationships between market structure and royalty rates. In this paper, we first show that royalty rates are positively associated with price markup, a market power and market performance measure, and then move to explore the relationship between royalty rates and market structure. Two complementary sets of market structure factors are discussed. The first one is technology intensiveness or technology opportunity, on which we demonstrate that technology intensive sectors tend to have higher royalty rates than other sectors. The second set covers the traditional measures of barriers of entry. Regression analysis reveal that royalty rates exhibit a negative linear relationship with two measures of barriers to entry, the ratio of sales to capital invested and the ratio of sales to operating costs. Finally, cluster analysis is conducted to reveal group pattern among the industries studied, using royalty rate, markup, and the ratio of sales to capital invested as variables. The analysis yields four distinguishable groups of industries, and the characteristics of each group are discussed. Cluster analysis also corroborates our conclusion that while both traditional barriers of entry and technology intensiveness contribute to determining market power, one set of factors can exert more dominant and pronounced impact than the other one in a specific industry, as evidenced by media and internet/software sectors, in which market power is mainly created by their technology and know-how embedded in legally-protected IP.

SUSTAINABILITY OF THE COMMERCIAL EXPLOITATION AND MANGEMENT OF THE CHORE FOREST RESERVES IN BOTSWANA

ABSTRACT This paper reviews and assesses the sustainability of the management and commercial exploitation of the Chobe Forest Reserves in Botswana. The inefficient way in which timber was harvested combined with low timber royalties, lead led to the ‘mining’ of the valuable timber species; B. plurijuga and P. angolensis. This scenario was worsened exacerbated by the damage of to trees by elephants and the uncontrolled fire damages fires. The high substantial short-term economic benefits associated with the from logging were likely to be unsustainable in the long-term due to environmental degradation. Logging was also associated with limited social benefits due to low employment opportunities and value added to the district. The above problems prompted the Government to halt the logging activities in 1994. A review of the forest policy is on-going, and The fForestry policy is currently being reviewed. Once it is completed, it will provide a the framework of the to review of the Forest Act of 1968. The royalty structure has been changed in order to charge prices that to reflect the scarcity value of timber. These recent developments are supported as they may contribute significantly to the management of the forest reserves. There is need to conserve the forests and to exploit them in a sustainable way. In addition, options for alternative land-use systems which are commensurate with the ideals of sustainable development should be considered. The forest resources need to be conserved since they are natural habitats and sanctuaries to the diverse fauna and flora.

Fight for Survival

Webcasting is an alternative to terrestrial radio stations. Online radio allows listeners to swap local radio fare for more exotic programming, turning everyday PCs into world receivers, and offers a large variety of special-interest Webcasts catering to very genre-specific tastes. For independent music labels whose content would never be played on mainstream terrestrial radio, Webcasting has become a major source of exposure. Unlike filesharing, however, Webcasts remain largely ephemeral: no permanent copy of radio content can be created on the user’s computer unless authorised by the Webcaster, or unless users specifically seek out software like Streambox VCR which circumvents such restrictions.

Royalty Systems, Government Revenues, and Forest Condition: An Application from Malaysia

Royalty structure has been linked to deforestation through non-sustainable harvesting and high grading. Yet royalties are an important rent generation mechanism for governments. In this paper, a dynamic model of government policy choice is used to compare different royalty systems with respect to government revenue generation and high grading. Empirical analyses of the various royalty systems is then undertaken for forest concessions in Malaysia. One unique aspect of our study is an examination of how different royalty systems impact harvesting of highand low-valued timber species, government rent capture, and concessionaire profits. The results should help with future royalty design.

A comparative analysis of two royalty structures in franchising under demand uncertainty

The objective of this paper is to systematically compare two royalty structures widely used in Japanese convenience store industry: margin-based royalties and sales-based royalties. In particular, we investigate if the margin-based royalties induce the franchisee to order a higher quantity of perishables and promote them more aggressively than the sales-based royalties do. Using a three-stage model incorporating demand uncertainty, we show that the margin-based royalties lead to a lower retail price, higher order quantity and higher total channel profits.

Horizontal drilling assessment in Western Canada

The first horizontal well was drilled in Saskatchewan in 1987. Since then, the number of horizontal wells drilled has escalated rapidly, averaging approximately 500 per year since 1993. When combined with horizontal wells drilled in Alberta, the major Canadian oil-producing province, the total number drilled in 1995 was 978. This total exceeds the National Energy Board (NEB) projected maximum of 816 wells per year. The NEB projections were based on a break-even point for the drilling of horizontal wells of a return of CDN $285,000 using a discount rate of 15%. This corresponded to a cumulative production from each individual well of some 11,000 m3. The introduction of a royalty-free production volume of 12,000 m3 per horizontal well in Saskatchewan was instrumental in stimulating the rapid expansion in the use of horizontal wells and helping Canada to exceed the forecasted drilling level. Within Saskatchewan, daily production from 1964 active horizontal wells is in excess of 20,000 m3. Comparative analysis indicates that the average daily production per well has increased from approximately by 40% with the advent of horizontal wells. In total production terms, provincial production has increased from 11.7 million cubic metres in 1989 to 20.9 million m3 in 1996. This represents an increase of almost 79% based primarily on the extensive use of horizontal wells. In 1996, horizontal wells produced 36% of the province's oil from 12% of the active wells. In the southeastern producing area of Saskatchewan, the Williston Basin, declining oil-production has jumped 100%, with horizontal wells accounting for approximately 50% of total regional production. Pay zones in this area, as in most of the province, tend to be relatively thin, with net pay frequently less than 5 m. The modest investment of some CDN $5 million in government research funding 10 years ago to simulate the development of horizontal wells, combined with a favourable royalty structure, has been at least partially responsible for very significant benefits to the provincial economy. In Saskatchewan, horizontal wells have (i) paid over CDN $400 million in royalties since 1990, (ii) annually generated CDN $525 million in investment and (iii) sustained 4350 jobs. Details pertaining to the Winter Cummings Sand Pool and others as examples of the success of the horizontal well program in Saskatchewan are discussed in this paper.