28 June 2016
A royalty is a payment to an owner for the use of property, especially patents, copyrighted works, franchises or natural resources. A royalty payment is made to the legal owner of the property, patent, copyrighted work or franchise by those who wish to make use of it for the purposes of generating revenue or other such desirable activities. In most cases, royalties are designed to compensate the owner for the asset's use, and they are legally binding
Royalties are often expressed as a percentage of the revenues obtained using the owner's property, but they can be negotiated to meet the specific needs of an arrangement. The use of royalties is common in situations where an inventor or original owner chooses to sell his product to a third party in exchange for royalties from the future revenues it may generate.
For example, computer manufacturers pay Microsoft royalties to be able to use the Windows operating system for the computers they manufacture. Royalties do not only apply for software giants. This type of payment may be non-renewable resource royalties, patent royalties, trademark royalties, franchises, copyrighted materials, book publishing royalties, music royalties and art royalties. Well-known fashion designers can charge royalties for the use of their names and designs by other companies. Authors, musical artists and production professionals are paid for the usage of their produced, copyrighted material. Television satellite companies provide royalty payments to air the most viewed stations nationwide. Royalties are also evident in the oil and gas industries, as companies provide royalties for landowners for giving them the permission to extract natural resources from the landowners' covered property.
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