Legal Definitions - reasonable royalty

A reasonable royalty is a payment made to the holder of intellectual property rights, such as a patent or copyright, for the use of their invention or creation. It is the amount that a licensee would be willing to pay while still making a reasonable profit from its use.

For example, if a company wants to use a patented technology, they would negotiate with the patent holder to determine a reasonable royalty for the use of that technology. If they cannot come to an agreement, a court may determine a remedy for infringementbased on what a reasonable royalty would have been.

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 industry standards and practices.