Legal Definitions - nonparticipating royalty

A nonparticipating royalty is a type of royalty payment made to an author or inventor for each copy of their work or article sold under a copyright or patent. This means that the author or inventor receives a set amount of money for each sale of their work, regardless of how much profit the seller makes.

For example, if an author has a nonparticipating royalty agreement with their publisher, they may receive $1 for every copy of their book sold, regardless of whether the book is sold for $10 or $100. This type of royalty is different from a participating royalty, where the author or inventor receives a percentage of the profits made from each sale.

In legal cases involving copyright, patent, or trademark infringement, the reasonable-royalty standard is often used to determine damages. This means that the court will consider what a licensee would be willing to pay the holder of the intellectual-property rights while still making a reasonable profit from its use.

For example, if a company is found to have infringed on a patent, the court may determine that a reasonable royalty for the use of that patent would have been $10 per unit sold. The company would then be required to pay the patent holder $10 for each unit sold, as well as any additional damages determined by the court.