One of the USC Stevens Institute’s objectives in commercialization of USC technologies is to generate royalty income. The Innovation Advancement team balances the negotiation for revenue with USC’s research and education mission and market limitations.

Types of Licensing Revenue

License Issue Fee

The up-front license issue fee is a one time fee due at the execution of the license agreement, or on an otherwise agreed to date or payment schedule. The amount of this fee is related to the value of the invention and rights granted to the licensee. These fees can range from a few thousand dollars to millions or more, depending on a number of factors. For start-ups, an issue fee might be postponed while capital is raised.

Annual Maintenance Royalties

License agreements require an annual royalty payment each year, due on the anniversary date of the execution of the license.  This fee is typically 100% creditable toward earned royalties otherwise due in a given year. The annual fee is essentially a “diligence” provision. For example, this fee, together with other written diligence, ensures that a licensee can’t sit on a technology and not continue to develop and sell it.

Earned Royalties

An earned royalty is a percentage of the net sales price of a licensed product, and is negotiated and reflected in the license agreement.  An earned a royalty is expected in every license agreement.

Sublicensing Income

Some license agreements allow the licensee to further license, or sublicense, the technology to others. In this case, USC expects the same earned royalty it negotiated with the licensee, and a share of any other sublicense revenue.  The sublicense terms will be negotiated and agreed upon in the license agreement.

Equity

USC may accept an equity position in a third party licensee as part of the license issue fee. 

How much money will one license agreement generate?

Most license agreements will not be big money makers and no revenue is ever guaranteed.  The USC Stevens Innovation Advancement team will do the best they can to negotiate fair royalties, but the actual monetary success depends on a number of factors, including but not limited to:

• The licensee
• The industry
• The market
• The competition
• The projected cost and time to commercialization
• Price of similar products
• Product develop risk
• Patent strength
• Scope of license (exclusive/nonexclusive, narrow/broad fields of use, US/worldwide).

Revenue Distribution to Inventors

For inventors employed after April 3, 2001, the net licensing income is shared among the school, department, university and inventors, with the inventors getting a third.

(Net revenues = revenues after all expenses and 15% for the commercialization incentive fund)

33% to the Inventors
33% the University
16% Inventors’ School
16% to Inventors’ Department

For inventors employed at USC before April 2001:

50% to the inventors

50% to USC

If you have specific questions about your invention, contact our Innovation Advancement team.