bvr/ktmine royalty rate benchmarking guide · research by ktmine and includes royalty rate informa...

BVR/ktMINE

Royalty Rate Benchmarking Guide2015/2016 Global Edition

Excerpt From:

Copyright © 2015 by Business Valuation Resources, LLC (BVR). All rights reserved. Printed in the United States of America.

No part of this publication may be reprinted, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher or authorization through payment of the appropriate per copy fee to the Publisher. Requests for permission should be addressed to the Permissions Department, Business Valuation Resources, LLC, 1000 SW Broadway St., Suite 1200, Portland, OR 97205; (503) 291-7963; fax (503) 291-7955; [email protected].

Information contained in this book has been obtained by Business Valuation Resources from sources believed to be reliable. However, neither Business Valuation Resources nor its authors guarantee the accuracy or completeness of any information published herein and neither Business Valuation Resources nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that Business Valuation Resources and its authors are supplying information but are not attempting to render business valuation or other professional services. If such services are required, the assistance of an appropriate professional should be sought.

BVR Staff:

Publisher: Sarah Andersen

Managing Editor: Janice Prescott

Chair and CEO: David Foster

President: Lucretia Lyons

Vice President of Sales: Lexie Gross

Customer Service Manager: Retta Dodge

ISBN: 978-1-62150-055-1

Library of Congress Control Number: 2015951285

ktMINE Staff:

President & CEO: David R. Jarczyk

Director of Operations: John Wiora

Sample License Agreement 81

© 2015 Business Valuation Resources, LLC, (503) 291-7963 3

BVR/ktMINE Royalty Rate Benchmarking Guide

Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Info about ktMine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Anatomy of a License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Alternative and Renewable Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Broadcast and Cable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Business Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Chemicals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Computers: Hardware and Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Consumer Durables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Consumer Non-Durables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Consumer Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Environmental Waste and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Financial Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Foods and Nonalcoholic Beverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Healthcare: Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Healthcare: Pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Healthcare: Products and Supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Industrial Equipment and Machinery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Internet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Oil & Gas, Mining, Metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Telecommunications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Transportation Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Sample License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Table of Contents

Foreword



I am pleased to introduce the BVR/ktMINE Royalty Rate Benchmarking Guide, 2015/2016 Global Edition. This guide provides a comprehensive report on global licensing royalty rates and an analysis of value within specific industries. The guide is based on in-depth research by ktMINE and includes royalty rate informa-tion published in the public domain between 2005-2014 and collected by ktMINE’s experts.

Thank YouIn response to the great feedback we received re-garding previous editions of the ktMINE Royalty Rate Benchmarking Guide, ktMINE and BVR recognized the need for a more detailed industry analysis on royalty rates. We worked closely together to develop this edition as a way to continue providing industry-level insights into licensing and royalty rate trends and dis-proving any idea that these insights do not exist.

Data VariationsktMINE is dedicated to providing the most recent filings from the public domain while maintaining the most comprehensive repository of IP data. These filings contain agreements with effective dates ranging from the filing date to years in the past. For instance, an agreement can be filed today but have an effective date from five years ago. This can be the case for agreements that have recently become ma-terial or are maintaining their materiality. Thus, prior-year results can change due to this phenomenon, and the variations in the data presented in different editions of the guide can be attributed to this.

The Increasing Importance of Intellectual PropertyIt is estimated that IP represents at least 80% of cor-porate value across the globe. Some market experts predict that number will soar even higher as corpo-rations focus on the competitive advantages offered

through the ownership, utilization, and commercial-ization of strategic IP portfolios.

With so much opportunity at stake, striking the right balance between IP exploitation and protection is an increasingly key business objective for many organi-zations. Yet even the fundamental step of deriving an accurate IP portfolio valuation can pose a significant challenge due to insufficient transactional insight and/or lack of a clear-cut methodology for analysis.

Market Transparency Fuels Better DealsThe BVR/ktMINE Royalty Rate Benchmarking Guide, 2015/2016 Global Edition, was developed to help ana-lysts seeking clarity in this new valuation frontier. The industry insights in this guide are meant to provide better transparency from licensing transactions in a global marketplace that is often murky. The statis-tics in this guide are best used as a starting point in questioning the selection of royalty rates and should be counterbalanced by analyzing the specific market, industry, and other factors pertinent to the particular IP under examination. The information provided here is not intended to replace thorough economic analy-sis; rather, it is meant to serve as an aggregated, big-picture indication of trends within industries.

ktMINE and BVR release the BVR/ktMINE Royalty Rate Benchmarking Guide, 2015/2016 Global Edition, in the renewed effort to provide market transparency and pricing efficiency through transactional insights. Our ultimate goal is to help IP owners and stakeholders generate better deals across the globe.

David R. Jarczyk President and CEO, ktMINE

‘ktMINE and BVR release the BVR/ktMINE Royalty Rate Benchmarking Guide, 2015/2016 Global Edition, in the renewed effort to provide market transparency and pricing efficiency through transactional insights.’

David R. Jarczyk President and CEO, ktMINE

Foreword

Info about ktMine



Info about ktMine

1. OverviewktMINE is an interactive intellectual property database that provides direct access to royalty rates, actual license agreements, and detailed agreement summa-ries. With precise search functionality and data mining capabilities, ktMINE helps practitioners quickly find and analyze market comparables from over 15,000 IP license agreements with over 60,000 royalty rates.

ktMINE was envisioned and developed by a team of valuation and transfer pricing professionals who had spent many long hours hunting for the right market comparables. They were all looking for a way to get better, faster results and joined together to create a solution that finally answered this need. Through a pro-prietary process, experts at ktMINE review and enter intellectual property license agreements, patents, and trademarks from publicly available sources, such as the SEC. ktMINE’s mission is to find, analyze, and add into the database any public document with viable royalty rate information and to make the search for these documents as fast and accurate as possible. ktMINE experts analyze over 30-plus checkpoints that identify and capture key licensing terms for each agreement, such as effective date, industry, and rights being granted. Two of the most important checkpoints are to ensure that each document contains actual royalty rate data and has associated keywords that reflect the true context of each agreement.

2. Accessing the DataBusiness Valuation Resources distributes ktMINE, which can be found at www.bvresources.com/ip. Ana-lysts can also access more information about the data-base at the same website. Access to the database can be purchased as a 24-hour pass or as a subscription. Prepaid accounts are available. The ktMINE database is accessed through a portal at www.bvmarketdata .com/ktmine. For further information, you may call, fax, email or mail us as follows:

Phone: 503-291-7963Fax: 503-291-7955Email: [email protected]: Business Valuation Resources1000 SW Broadway, Suite 1200Portland, OR 97205

3. Sample Transaction ReportA typical “transaction report,” called a results summary in ktMINE, consists of an analysis of each agreement found within a search set. The analysis contains a syn-opsis of the agreement, written by a ktMINE analyst, and a list of the search criteria assigned to that agree-ment. (See below for further discussion of the available search criteria.) In addition, the variable royalty rate data in each agreement in the search set are extracted, with contextual language from the agreement provid-ed. Exhibit 1 is typical. This is the results summary of one agreement in a search set of 87 such agreements. The results summary in each of the 87 agreements follows the same format.

4. What Is Included in the Transaction Data?ktMINE’s data repository houses thousands of public agreements and contains license agreements, as well as service contracts, referral agreements, and more. ktMINE users can run unlimited searches and see un-limited results, which include all royalty rates and full text for various agreement types, including:

• Patent agreements;

• Know-how agreements;

• Process agreements;

• Trademark agreements;

• Trade name agreements;

• Copyright agreements;

• Cross-license agreements;

• Joint development agreements;

Info about ktMine



• Distribution agreements;

• Sales agent agreements;

• Franchise agreements;

• Advertising agreements;

• Service agreements; and

• Software agreements.

5. General Steps to Follow When Using the Data1. All searches for royalty rates in ktMINE begin

at the Search Center page, and most begin with a determination of Agreement Type and Industry. (See Exhibit 2.)

Searches can be narrowed by SIC, effective date, licensor and licensee, exclusivity, and keyword.

2. As search criteria are added, researchers can follow the effects on the results of each. (See Exhibit 3.)

For the Search Summary above, note that Step 1 represents the results of overlaying the filter Marketing Intangible Agreement Type

onto the database, resulting in a search set of 3,942 agreements. Adding keyword “Agribusi-ness” to the search reduces the search set to 87 agreements. Note also the circled column: Once a second step is added to a search, a Boolean option is added. A researcher could have chosen “And Not” Agribusiness, in this example.

6. Gathering Transaction Data for a Valuation AssignmentOnce an analyst has refined a search to a manageable number of agreements, summaries of those agree-ments are one click away. In the above example, Marketing Intangibles in Agribusiness, we know 87 agreements match the search criteria. The Results Summary tab yields summaries for those 87 agree-ments, with each summary including a Synopsis of the agreements, a list of all of the search filters assigned to the agreement, and an extraction of royalty rate data. Agreement 4 in the set of 87 agreements can be seen in Exhibit 4.

If this agreement is interesting/relevant to the analyst, one click produces the full text of the agreement. Key

Exhibit 1. Variable Royalty Rate Data With Contextual Language

Info about ktMine



Exhibit 2. ktMINE Search Filters

Exhibit 3. Effects on the Results of Each Search Criterion

Info about ktMine



point: ktMINE is a Web-based system, and therefore the Find function on your browser (Control F) allows you to efficiently search the full text of the agreement for relevant royalty rate information, terms, milestone arrangements, etc.

If the agreement works as a comparable for the analyst, he or she can create a folder in which to save the document and its summary. The best way to look at it is computer logic got the analyst to the 87 agree-ments; the analyst’s judgment and expertise need then be applied.

Again, looking at Agreement 4, the analyst can create his or her own set and save the agreement into that set by accessing the circled area as shown in Exhibit 5.

Full text is printable for documentation.

Finally, analysts can enlist the help of ktMINE’s Analy-sis Center for a look at the royalty rates in a search set, analyzed by quartiles. It is not uncommon for analysts to copy and paste these data into reports.

Exhibit 4. Synopsis of Agreement 4 of the 87 Agreements

Info about ktMine



Exhibit 5. Saving the Agreement Into the Analyst’s Own Set

Exhibit 6. ktMINE’s Analysis Center

Info about ktMine



Exhibit 7. Finding and Analyzing Royalty Rates

Alternative and Renewable Energy



3.63%

10.01%

5.00%

8.00%

0%

2%

4%

6%

8%

10%

12%

1st Quartile Average Median 3rd Quartile

Net

Sal

es (%

) N

et S

ales

(%)

Exclusive Deals—Last 10 Years (2005-2014)

Deal Type

Alternative and Renewable Energy Royalty Rate Trends (2005-2014)

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

Year

Net

Sal

es (%

)

Includes:

• Alternative energy, defined as energies that are nontraditional and have low environmental impact

• Solar power

• Wind power

• Hydroelectric power

• Biofuels

• Products, equipment and software used by this industry’s establishments

• Other related products and activities

Highlights:

• Licensed rights ranged across many industries including:

❍ Biomass-derived fuels and energy

❍ Solar panel technology

❍ Water and waste desalination

❍ Electric car batteries.

• There are similar royalty rates as a percentage of sales for marketing or technology agreements, with median rates around 5% of net sales.

• Agreements typically contain technology intangibles more often than marketing intangibles.

• There are more North American territory rights compared to other territories.

• Stable median royalty rates over the past 10 years.

Industry Royalty Rates


Lower Quartile Upper Quartile Median2005 3.5% 5.6% 5.8%2006 2.0% 5.6% 3.8%2007 3.3% 6.5% 4.6%2008 2.5% 5.6% 4.6%2009 4.1% 7.0% 4.1%2010 3.2% 50.0% 30.0%2011 3.8% 3.8% 3.8%2012 8.0% 10.0% 8.0%2013 0.0% 0.0% 0.0%2014 0.0% 0.0% 0.0%

Interquartile Range

Median

*Yearly percentages at “0,” indicate insufficient data for analytical purposes.




4.10%

7.75%

5.00%

8.00%

0%1%2%3%4%5%6%7%8%9%


Net

Sal

es (%

) N

et S

ales

(%)

Alternative and Renewable Energy Marketing Intangibles—Last 10 Years (2005-2014)

Agreement Type

License for the right to utilize a combination of manufacturing/process intangibles and marketing intangibles.License for the right to utilize intangibles such as:

• Trademarks;• Trade names;• Trade dress;

• Copyrights;• Service marks; and• Logos.

61%21%

18%Technology / Manufacturing Intangibles

Marketing Intangibles

Combination Intangibles (Both Marketing and Technology Intangibles)

13%

8%

40%5%

1%

33%Asia PacificEuropeNorth AmericaSouth AmericaAfricaWorldwide

Agreement Type Analysis

Territory Analysis

Alternative and Renewable Energy Patent/Technology Intangibles—Last 10 Years (2005-2014)

License is likely to grant the right to use any of the following in the manufacture of a product:

• Patents;• Processes;• Know-how;• Technical information;

• Recipes;• Formulations; and• Training materials (confirm

correct description).

3.03%

9.09%

4.10%

7.00%

0%1%2%3%4%5%6%7%8%9%

10%


Net

Sal

es (%

) N

et S

ales

(%)

Alternative and Renewable Energy Combination Intangibles—Last 10 Years (2005-2014)

4.10%

8.27%

5.00%

7.00%

0%1%2%3%4%5%6%7%8%9%


Net

Sal

es (%

) N

et S

ales

(%)

License for the right to utilize a combination of manufacturing/process intangibles and marketing intangibles.

Median Royalty Rate: 5.0% of Net Sales(% of net sales, 10-year median for exclusive deals)




Summary Agreement for Alternative and Renewable Energy Industry

ktMINE Royalty Rates provides an organized gateway to canvass the landscape of IP licensing payments and terms. Full licensing details are captured and complete license agreements are viewable to enable thorough due diligence.

Data Coverage▲ Over 60,000 royalty and market rates,

representing nearly 16,000 intangible licenseagreements

▲ Agreements representing cross-border licensingrights, including Manufacturing and Marketingintangibles, Software, Service, Asset Purchase,Distribution, Franchise, Joint-Development andCross License licensing terms

▲ Over 200 countries represented in licensingterritories

▲ Licensing records continually added, with themost recent filings added first

Advantages▲ Unlimited access to full intangibles licensing

agreements for each summary▲ Ability to quickly locate relevant information▲ Full royalty and market rate detail that can be

integrated into analysis models▲ Access to the same intangibles licensing data

and documentation used by many governmentagencies and tax authorities across the globe

▲ Access to hard-to-find compensation termssuch as cost-plus and profit-split payments

▲ Complete royalty rate detail, including all tiers

ktMINE Search Center

▲ Begin by combiningany number of searchfilter criteria

▲ Use Boolean logicconditions to furtherrefine your search

▲ View number of searchresults before viewingResults Summary

ktMINE Royalty RatesPresented by Business Valuation Resources ®

©2012-15 ktMINE. All rights reserved.www.ktMINE.com

Key agreement details are captured and made available in one convenient location for more efficient analysis.

ktMINE Royalty RatesPresented by Business Valuation Resources ®

©2012-15 ktMINE. All rights reserved.www.ktMINE.com

REQUEST INFORMATION/QUOTEFor more information or to learn about subscription options, please visit bvresources.com/ktMINE or contact us at (503) 291-7963 ext. 2 or [email protected].

Analysis Features▲ Organize projects by client and engagement

▲ Combine multiple searches to find the bestintersection of comparables

▲ Accept and Reject individual agreements

▲ Select individual royalty rates and rightsby agreement

▲ Archive prior projects for backup andeasy updates

View the big picture of your data set with Analysis Center.

About Business Valuation ResourcesEvery informed stakeholder in business valuation, performance benchmarking, or risk assessment turns to Business Valuation Resources (BVR) for authoritative deal and market data, news and research, training, and expert opinion. Trust BVR for unimpeachable business valuation intelligence. BVR’s data, publications, and analysis have won in the boardroom and the courtroom for over two decades.

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