Question
Topic: Strategy
How Do You Negotiate A Royalty Contract?
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Last year this artist provided free-lance design services for a set of dolls, for a new doll manufacturer.
For the first set of designs, the artist signed a contract for payment of a flat fee per design. This contract covered only a pre-defined set of designs.
The manufacturer would like to re-negotiate for another set of additional designs.
Our intent is to re-negotiate a new contract based upon a flat-fee plus royalties. The manufacturer is recommending an exclusive royalty contract and no flat-fee. A written offer (or royalty contract) has not yet been provided for us to review any terms & conditions of the manufacturer’s proposed royalty-only contract.
I have no experience with royalty contracts. Within the next week we are scheduled to re-negotiate the contract, for the new set of designs, with the owner.
How can we prepare in advance for this discussion? How are royalty contracts typically structured? How do we determine what is a fair royalty percentage? What terms & conditions should we be looking for in the royalty contract? What terms & conditions should we request for ourselves in the royalty contract? Are there standard guidelines or terms & conditions for establishing a fair and equitable royalty contract?