Royalty Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Royalty, written in plain English, along with examples of how it is used.

What is Royalty?

(n) Royalty is the consideration paid to the creator of a property, idea, inventions etc, as a percentage of the revenue collected from sale of the products created, manufactured or developed using the idea, inventions or creations made by the creators.

History and Meaning of Royalty

Royalty refers to the payment made to the owner or creator of intellectual property, such as inventions, music, or books, for the right to use their property. It is a form of compensation for the use of someone's ideas, property or creations. The concept of royalty has been around since the Middle Ages when monarchies would collect payment from landowners for the use of the land that had been granted to them.

The term royalty is broadly used in various industries such as music, publishing, software, and technology. The agreement between the owner or creator of the intellectual property and the user typically outlines the percentage of revenue that will be paid as royalty to the owner or creator.

Examples of Royalty

  1. A songwriter receives a royalty for each copy of their song that is sold or used in a commercial performance.
  2. An author receives a royalty for each copy of their book that is sold.
  3. A patent owner receives a royalty each time a company uses their patented technology.
  4. A software developer receives a royalty for each copy of the software that is sold.
  5. A landowner receives a royalty for the extraction and use of the resources found on their land.

Legal Terms Similar to Royalty

  1. License fees - this refers to the cost paid to use protected intellectual property.
  2. Franchise fees - the cost paid by a company to use a franchisor's intellectual property, such as trademarks or business models.
  3. Sponsorship fees - the cost paid by a sponsor of an event, team or company to receive advertising rights and branding privileges in return.