ROYALTY
royalty. 1. A payment made to an author or inventor for each copy of a work or article sold
under a copyright or patent. [Cases: Copyrights and Intellectual Property 48; Patents 217.1.
C.J.S. Copyrights and Intellectual Property §§ 27, 29, 33–34, 93; Patents § 364.]
established royalty.A royalty set at an agreed-on price. • In the absence of an established
royalty, a court will determine a remedy for infringement based on what a reasonable royalty
would have been.
reasonable royalty.A royalty that a licensee would be willing to pay the holder of the thing’s
intellectual-property rights while still making a reasonable profit from its use. • The
reasonable-royalty standard often serves as the measure of damages in a claim of patent, copyright,
or trademark infringement, or for misappropriation of trade secrets. In deciding what royalty is
reasonable in a trade-secrets suit, courts consider the unique circumstances of the case, as well as
(1) how the use affected the parties’ ability to compete; (2) the cost of past licenses; (3) the cost to
develop the secret and its present value; (4) how the defendant intends to use the information; and
(5) the availability of alternatives. [Cases: Patents 319(1). C.J.S. Patents §§ 565, 567–568.]
2.Oil & gas. A share of the product or profit from real property, reserved by the grantor of a
mineral lease, in exchange for the lessee’s right to mine or drill on the land. — Also termed (in
sense 2) override. [Cases: Mines and Minerals 70, 79. C.J.S. Mines and Minerals §§ 218,
223–224, 289–290, 296, 298–299, 303.]
haulage royalty.A royalty paid to a landowner for moving coal via a subterranean passageway
under the landowner’s land from a mine located on an adjacent property. • The payment is
calculated at a certain amount per ton of coal.
landowner’s royalty.A share of production or revenues provided for the lessor in the royalty
clause of the oil-and-gas lease and paid at the well free of any costs of production. • Traditionally,
except in California, the landowner’s royalty has been 1/8 of gross production for oil and 1/8 of
the proceeds received from the sale of gas. But today the size is often negotiated. — Also termed
leaseholder royalty.
mineral royalty.A right to a share of income from mineral production. [Cases: Mines and
Minerals 70, 79. C.J.S. Mines and Minerals §§ 218, 223–224, 289–290, 296, 298–299, 303.]
nonparticipating royalty.A share of production — or of the revenue from production free its
costs — carved out of the mineral interest. • A nonparticipating-royalty holder is entitled to the
stated share of production or cash without regard to the terms of any lease. Nonparticipating
royalties are often retained by mineral-interest owners who sell their rights.
overriding royalty.A share of either production or revenue from production (free of the costs
of production) carved out of a lessee’s interest under an oil-and-gas lease. • Overriding-royalty
interests are often used to compensate those who have helped structure a drilling venture. An
overriding-royalty interest ends when the underlying lease terminates. [Cases: Mines and Minerals
74. C.J.S. Mines and Minerals § 308.]
shut-in royalty.A payment made by an oil-and-gas lessee to the lessor to keep the lease in
force when a well capable of producing is not utilized because there is no market for the oil or gas.
• Generally, without such a payment, the lease will terminate at the end of the primary term unless
actual production has begun. [Cases: Mines and Minerals 78.1(3). C.J.S. Mines and Minerals §§
269–270.] [Blacks Law 8th]