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Definition of 'Royalty'

A royalty is a payment made by one party (the licensor) to another party (the licensee) for the right to use a particular asset. The asset in question could be anything from intellectual property (such as a patent, copyright, or trademark) to physical property (such as a building or piece of land).

Royalties are typically paid on a regular basis, such as monthly or annually. The amount of the royalty payment is usually based on a percentage of the licensee's sales or profits.

Royalties can be a significant source of income for the licensor. For example, the music industry generates billions of dollars in royalties each year.

There are a number of different types of royalties. Some of the most common types include:

* **Copyright royalties:** These are payments made for the use of copyrighted material, such as books, music, and movies.
* **Patent royalties:** These are payments made for the use of patented inventions.
* **Trademark royalties:** These are payments made for the use of trademarks.
* **Franchise royalties:** These are payments made by franchisees to franchisors for the right to use the franchisor's brand name and business system.

Royalties can be a complex financial arrangement. It is important to have a clear understanding of the terms of the royalty agreement before entering into it.

Here are some additional things to keep in mind about royalties:

* Royalties can be paid in a variety of ways, including cash, equity, or a combination of the two.
* Royalties can be paid upfront, or they can be paid over time.
* Royalties can be fixed, or they can be variable.
* Royalties can be exclusive, or they can be non-exclusive.

If you are considering entering into a royalty agreement, it is important to consult with an experienced attorney to make sure that you understand all of the terms and conditions of the agreement.

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