Royalties Pipe Dream?

Hi,

Has anyone ever successfully licensed their design here or are they mostly pipe dreams? I hear of many designers who go into royalty contracts but few ever get any actual money from them.

Anyone actually make it here that can share some insights?

I have a royalty for a product I worked on with another designer! In two years we’ve made 375$ each. Man this is the life!

thats a lot of money no wonder the big dog’s can afford to wear all white.

I have 5 royalty contracts in place. None of them ever panned out as they never made the products.

Sharpie: This may be a stupid question, but I assume you mean $375,000.00 by the explanation points. Correct?

I don’t know anyone who has made a fortune on one design, but I know of some designers who work with manufacturers on a consistent basis and keep releasing fresh products every year. While only a few of the designs remain on the market for substantial amount of time, they still make alot of money. The problem is establishing a relationship with a manufacturer. Very hard :frowning: Also, it has to be a manufacturer that sells in high volume or has a high royalty%.

Its a tough dream, but possible!

I am about to enter in to the royalty agreement. The work is for hire and the company has no money to pay my fee. However they offered some advance on the future royalties, which we still yet to negotiate.
Does anyone know where I can look up royaltyes range for the industry? Let’s say footwear.
Any info would be helpful.
Thanks.

Never work for free as the royalty thing is a promise of a pot of gold but usually never works out. Get something upfront at least to cover basic costs.

I don’t know about footware but I would hit them up for a precentage of projected annual profits so you don’t end up doing free design, in case they flop or won’t let your design see daylight. You broke sweat over this. Didn’t you? So get paid for it! I wish you lots of good luck. You can do it!

Thank you for your advise, but still, what the actual percentage number should be.
Neither I, nor they know the how many units they could sell. If there is a number range that I could look up. Let’s say if they sell for $500,000 I get 1 %, if they sell for less, my % goes up.
All I want to know if there is a science to that? I feel designers are clueless and that puts us in the begging position.
Any help?

figure out what covers your time and makes you not feel cheated. say $5000-10,000 (maybe 50% of what you would charge for purely fee-based). Ask for that as an advance on royalty so you are covered a little. Once they sell more than your $5-10k then you receive more. I would not let them scale your royalty down if your design is more successful. That is backwards. The better the shoe sells the more money they make and they should in turn pay you the same royalty or better. Many companies will try to put a cap or a period to the length of the royalty. If it has pottantiel to become a classic (in other industries) you should argue for lifetime. or at least 10-years. Typical royalties in many industries range from 3-5%. Not many royalty deals like this in footwear industry as far as I know. A couple of my friends pay 7-10% but they are really small and only work with known performers and have a hot brand at the moment…

youare also going to want a contract. i assume you have one to use as a boilerplate?

I will be signing “work for hire” contract today. The royalty agreement will be signed later (as they say, when we learn how it should be structured, meaning net, vs., gross, etc…)
3-5% you mentioned is net, I guess?

I hate to burst your bubble, but I smell bullshit. And I know it well, having been on the receiving end. I would definately get something up front or a promise of a certain amount before you do any major work. Otherwise you are working for free and unless you plan on designing the next Ipod chances are you won’t get poop!

My thoughts

This is no joke. You have to have a royalty contract in place BEFORE you start work. Also have an attorney draft the terms. It is not something you can do yourself. A license contract has to be specific. Is it an exclusive license? Is it an assignment of inventions? These all have to be defined BEFORE you start any work otherwise this is all B.S. I know cause I’ve been there done that when I was younger and naive.

There are complex issues like Cure Periods, Net Sales Percentages, Bankruptcy, Payment schedules, etc. It is not a walk in the park thing. Most licensing contracts involving royalties are at least 10+ pages long. What is the penalty for non-payment, how are teh funds drafted, who are your assigns, what happens if the company goes under. Do you retian rights etc…so much to consider. You can’t just cake walk into this if the other side is serious they will want a clearly defined contract as well so that all parteis know their responsibilities.

I would hesitate to bring an attorney in, usually that scares the potential client - you can write the contract yourself - but you have to do your homework a little - go down to your library and check out “the complete idiot’s guide to cashing in on your inventions” by Richard C. Levy and read the parts that are relevant - he touches on all the stuff that’ve been mentioned - it’s written by an old guy who licensed a lot of stuff. The book has a template for the contract I believe, and he talks about up front money. The book is pure gold and easy to read.

word to your mutha

I will defiantly check out this book.
Thanks.
I know I sound naïve, but sometimes you got to take risks and if project is interesting it is hard to resist.
Please let me know any other sources I can read on the subject.

I very much agree. This is exactly what I heard and experienced. I never seen a contract for 10% but 3 to 5 is common. I’ve seen 7% but that I consider luck. It also depends on the industry and volume. Now I think I am just being redundant.

GREAT ADVICE!!!