Royalty Agreement Contract Template for Philippines

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Royalty Agreement Contract

"I need a Royalty Agreement Contract for licensing my software patent to a Philippine manufacturing company, with quarterly payments of 5% of net sales and audit rights every six months, to commence from March 2025."

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What is a Royalty Agreement Contract?

The Royalty Agreement Contract is a crucial document used when intellectual property owners wish to monetize their IP while maintaining ownership rights. This agreement type is particularly important in the Philippine context, where it must comply with the Intellectual Property Code of the Philippines (Republic Act No. 8293) and the National Internal Revenue Code's provisions on royalty taxation. The document is commonly used for licensing patents, trademarks, copyrights, and other forms of intellectual property, providing a structured framework for revenue sharing between IP owners and users. It includes essential provisions for protecting both parties' interests, ensuring compliance with Philippine regulations, and establishing clear mechanisms for royalty calculations, payments, and dispute resolution. The agreement is particularly relevant for both domestic Philippine transactions and international licensing arrangements involving Philippine entities.

What sections should be included in a Royalty Agreement Contract?

1. Parties: Identifies and defines all parties to the agreement, including their legal status and principal places of business

2. Background: Explains the context of the agreement, including the ownership of the intellectual property and the parties' intentions

3. Definitions: Defines key terms used throughout the agreement for clarity and consistency

4. Grant of Rights: Specifies the exact rights being granted, including scope, territory, and any restrictions

5. Royalty Payments: Details the royalty rates, calculation methods, payment schedule, and reporting requirements

6. Payment Terms: Specifies payment mechanics, currency, bank details, and handling of taxes

7. Audit Rights: Establishes the right to audit royalty calculations and related records

8. Intellectual Property Protection: Outlines obligations regarding IP protection, including registration and infringement actions

9. Warranties and Representations: States the parties' warranties, particularly regarding IP ownership and right to contract

10. Term and Termination: Specifies the duration of the agreement and circumstances for termination

11. Confidentiality: Establishes obligations regarding confidential information

12. Governing Law and Jurisdiction: Specifies Philippine law as governing law and defines jurisdiction for disputes

13. General Provisions: Includes standard boilerplate clauses such as force majeure, notices, and assignment

What sections are optional to include in a Royalty Agreement Contract?

1. Quality Control: Required when the IP involves trademarks or brands requiring quality standards maintenance

2. Minimum Guarantees: Used when establishing minimum royalty payments or performance requirements

3. Sub-licensing Rights: Included when the licensee is permitted to sub-license the intellectual property

4. Development Obligations: Necessary when the agreement includes obligations to develop or improve the IP

5. Marketing and Promotion: Required when specific marketing obligations or restrictions apply

6. Export Controls: Included for international agreements involving regulated technologies or materials

7. Competition Compliance: Required when the agreement needs specific provisions to comply with competition laws

8. Source Code Escrow: Included in software-related royalty agreements for source code protection

What schedules should be included in a Royalty Agreement Contract?

1. Schedule A - Licensed Intellectual Property: Detailed description of all IP covered by the agreement, including registration numbers

2. Schedule B - Royalty Rates and Calculations: Detailed breakdown of royalty rates, including any variable rates or tiers

3. Schedule C - Reporting Template: Standard format for royalty reports and calculations

4. Schedule D - Territory Definition: Detailed description of geographical territories covered by the agreement

5. Schedule E - Quality Standards: Specific quality requirements and testing procedures if applicable

6. Appendix 1 - Approved Sub-licensees: List of pre-approved sub-licensees if applicable

7. Appendix 2 - Technical Specifications: Technical details of the licensed IP, particularly for patents or software

8. Appendix 3 - Authorized Use Examples: Examples of permitted uses of the licensed IP, particularly for trademarks

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions
Clauses
Relevant Industries

Technology and Software

Entertainment and Media

Manufacturing

Pharmaceuticals

Consumer Goods

Fashion and Luxury

Publishing

Biotechnology

Telecommunications

Research and Development

Gaming and Interactive Entertainment

Industrial Design

Food and Beverage

Retail

Relevant Teams

Legal

Finance

Intellectual Property

Business Development

Research and Development

Tax

Compliance

Commercial

Product Development

Brand Management

Innovation

Technology

Operations

Relevant Roles

Legal Counsel

Intellectual Property Manager

Chief Financial Officer

Business Development Director

Licensing Manager

Contract Administrator

Tax Manager

Compliance Officer

Research and Development Director

Innovation Manager

Commercial Director

Chief Technology Officer

Product Manager

Brand Manager

Finance Director

Industries
Intellectual Property Code of the Philippines (Republic Act No. 8293): Primary legislation governing intellectual property rights, including patents, trademarks, and copyrights. Essential for defining the intellectual property subject to royalties and the scope of rights being licensed.
National Internal Revenue Code of the Philippines: Governs the taxation of royalty payments, including withholding tax requirements and tax treaties if international parties are involved.
Civil Code of the Philippines (Republic Act No. 386): Provides the fundamental principles of contract law, including formation, validity, interpretation, and enforcement of contracts.
Foreign Investments Act of 1991 (Republic Act No. 7042): Relevant if the royalty agreement involves foreign parties, governing foreign investment and technology transfer arrangements.
Technology Transfer Act of 2009 (Republic Act No. 10055): Regulates technology transfer arrangements and intellectual property rights generated from government-funded research and development.
Bureau of Internal Revenue (BIR) Regulations on Withholding Tax: Specific regulations governing the withholding tax obligations on royalty payments, both domestic and international.
Philippine Competition Act (Republic Act No. 10667): Ensures that royalty agreements do not contain anti-competitive provisions or create unfair market advantages.
Securities Regulation Code (Republic Act No. 8799): May be relevant if the royalty agreement involves publicly listed companies or affects securities transactions.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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