Royalties - Term Overview

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Royalties are compensation that must be made in exchange for making use of the intellectual property that belongs to someone else.

That is, the royalty is a mandatory payment for the right to use or exploit someone else's creation.

In this sense, it should be noted that royalties seek to reward creators or innovators. In this way, your work is recognized.

We must also clarify that intellectual property can be defined as that regulation that seeks to protect the rights over works or inventions. Thus, the idea is that they generate profits to their respective authors, or to whom they have assigned their rights.

Also, it's important to note that royalties can be calculated as a percentage of sales or consist of a fixed amount. This will depend on the regulation of each country.

Assets that generate royalties

Some assets that generate royalties are:

- Trademarks: Commercial identifier of certain goods or services. It not only includes a name, but the design of a logo.
- Patents: Right to exploit or make exclusive use of an invention or an industrial process. That is, it can be a patent on a material or intangible asset.
- Literary works: Books and other types of literary creations have copyrights that can generate royalties when reproduced for sale.
- Audio, video or cinematographic records: Songs, even separate musical composition and lyrics, generate profits for their creators. The same happens with audiovisual short films and feature films.
- Software: Computer programs, video games and other digital creations are also subject to royalties.

A separate mention deserves the royalties charged for the development of extractive activities. In this case, the disbursement is justified by the property right that the State has over the natural resources of the subsoil (which doesn't exist in all countries).

The resources captured by mining or oil royalties can then be allocated to the budgets of the respective local or regional governments. This, in order to benefit the populations impacted by the exploitation.

Purpose of royalties

The goal of royalties is for individuals to be paid for their creations. That is, it is, in simple terms, the payment for a job done.

The above works as an incentive for innovation. Thus, if everyone could make free use of the creations of others, there would be (or would be less) motivation to create.

An additional point to clarify is that royalties don't always go to the original creator, but to those who have bought or inherited the intellectual property rights.

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