Royalties can be calculated in several ways, depending on the terms of the licensing agreement. The most common methods include:
Percentage of Revenue: The licensee pays a set percentage of the revenue generated from the sale of the licensed product or service. Fixed Fee: A pre-determined amount is paid, irrespective of the sales volume or revenue generated. Per Unit: Payments are made based on the number of units sold or produced.
The specific terms of royalty calculation are usually negotiated and outlined in a licensing agreement.