by Mark Malek

Professor Dennis Crouch of Patently-O recently posted an article about the difficulties in collecting royalties pursuant to a patent licensing agreement.  In his post, Professor Crouch referenced a report by Invotex, which noted that 86% of licensees misreported their royalties to their licensor.  This, unfortunately, is not surprising, and is part of the reason why the process of entering into a patent (or any IP) licensing agreement can be so time consuming.

The Invotex report sets forth some of the very issues that a patent licensing attorney tries to avoid when entering into a licensing agreement on behalf of a client that is the licensor.  Often times, however, the negotiation process does not allow for the “tight” agreement that the licensor’s attorney wants.  Instead, licensing agreements can often be open to interpretation.

Some of the royalty reporting errors indicated in the Invotex report include questionable license interpretation, underreported sales, disallowed deductions, underreported sublicenses, and math errors.  There are, of course, ways to avoid these various debacles in the contracts.

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