Royalty Exceptions

Royalty Exceptions

When considering a royalty-payment provision in which the seller or licensor receives payment on a per-product or per-unit basis, the buyer or licensee should consider differentiating and excluding certain products from those that trigger payment, including units used for testing, training, demonstration, replacement, etc.:

Exemplar C65-1

No per-unit Distribution Licensee Fee shall be due for copies of the Licensed Software: (a) used internally by Licensee or its authorized contractors, (b) used or distributed for demonstration, marketing or training purposed, (c) distributed to a customer as a replacement for a defective copy or to fix a defect or error, (d) used to repair or maintain a customer’s system not in exchange for consideration.

Exemplar C65-2

No “royalty fee” will be due on copies of the Licensed Software which are used within the Customer’s Premises for development purposes, or which are included in demonstration software.

Exemplar C65-3

No royalties shall be due for copies of the Licensed Software: (a) used or distributed internally by Customer or its authorized resellers, (b) used or distributed for demonstration, marketing or training purposes, (c) distributed to a customer as a replacement for a defective copy or to fix an error, (d) used to repair or maintain a customer’s system, (e) used for backup or archival purposes, (f) returned by a customer, or (g) used for manufacturing or testing purposes.