Joff Wild at the IAM blog has a posting on a new study on royalty reporting. The report It's Just Not Fair: Unintended and Unforeseen Interpretations of License Agreement Language by the IP consulting group Invotex claims that only 14% of royalties are correctly. As Joff goes on to explain:
In 50% of cases, Invotex says, the underreporting is caused by licensees not disclosing all sales connected to the licence, while in over 30% of cases, it results from what is described as "questionable licence interpretation". Other causes include non-disclosure of sub-licensing agreements, mathematical errors and royalty rate errors. So, it looks like there is a combination of honest mistakes and not-so-honest lack of candour. The bottom line is that all of it will have an impact on the licensor's bottom line - and in many cases potentially a very significant (and therefore damaging) one, especially if the licensor is an SME.It also has an impact on our economic statistics. Even if the Invotex data is on the worst case side (as Joff points out Invotex is going to do all it can to highlight the potential problems since they are trying to drum up business), these figures are of concern. If a significant portion of sales connect to a license are not reported (which Invotex claims are the reasons for half of the underreporting), then our data on the size of the economic trade in royalties is also off.
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