METHOD OF DETERMINING ROYALTY RATE IN TECHNOLOGY TRANSFER CONTRACTS

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METHOD OF DETERMINING ROYALTY RATE IN TECHNOLOGY TRANSFER CONTRACTS

Journal Title: Проблеми системного підходу в економіці - Year 2018, Vol 4, Issue 66

Abstract

The competitiveness of Ukraine’s economy is now impossible without creating a real basis for stimulating intellectual and innovative activities. The reproduction of an equitable remuneration system for the authors of intellectual work products is an urgent task. The research results showed that there is a problem in using a common methodology for determining royalty rates under technology transfer agreements. The practice of concluding such agreements demonstrates a variety of approaches when determining royalty rates. Therefore, this issue is one of the most difficult when determining the price of a license and needs further resolution. International license trading is the main economic mechanism of international technological exchange, which has become widely and rapidly spread. By selling a license, we mean giving permission to the buyer to use the object of intellectual property rights (technology or technical decision, trademark). When purchasing innovative products under a technology transfer agreement, the licensee (buyer of the license) pursues the economic and other benefits that he intends to gain in the competition: to lower the production cost, start production of a new product, get rid of extra expenses for own research, use cheaper raw materials or materials. The results of the study found that there is currently a problem in using a common methodology for determining royalty rates under license agreements. The practice of concluding such agreements shows the diversity of approaches in determining the initial royalty rates. Therefore, this issue is one of the most difficult in determining the license price and needs further resolution. The article investigates the categories of “royalty”, “lump payment”. Studies have shown that the lump payments are usually convenient for the licensor since it is not necessary to control the activity of the licensee and once receive quite large amounts. But sometimes the licensor may lose it because he does not profit from the significant expansion of the licensee’s volume of production of licensed products. Advantages and disadvantages of the mechanism of licensing of innovative products are explored. The spectrum of factors influencing the royalty rate is outlined. The international and domestic practice of determination of royalty rates in licensing agreements in the process of commercialization of innovative products is analysed. It is established that the definition of the price of a license for today is one of the most difficult stages of the transfer of technology because the commercial price of the intellectual property transferred under the license can be determined only during the process of its use by the buyer. An urgent solution requires the development and improvement of a methodology for calculating royalties for the use of intellectual property rights in the conclusion of contracts for the transfer of technologies.

Authors and Affiliations

H. A. Chugrii, N. A. Chugrii

Keywords

EP ID EP562158
DOI 10.32782/2520-2200/2018-4-17
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