Royalty-free vs. Fully Paid-up

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May27

Royalty-free vs. Fully Paid-up

Linda Chan

Know More: Licensing 2.0, Licensing

Is there a difference between a royalty-free and a fully paid-up license? Can these terms be used interchangeably? Does fully paid-up imply a release for past infringement? Does use of one term over the other result in different interpretations? What are the tax and payment implications?

Fully paid-up seems to suggest that there are payment obligations, but that there will not be any additional payment obligations. Care should be taken when using the term such that non-monetary consideration is not included in the interpretation if that is not the intention. A license that is fully paid-up could imply that there would not be any future non-monetary consideration from the licensee, including for example, an obligation by the licensee to extend a license for licensor-created work product back to the licensor.

Royalty-free appears to suggest that the licensee will not ever have to pay any royalties on a per unit basis. If the payments are lump sum, and not on a per unit basis, there would not seem to be a conflict between the royalty-free license grant and payment provisions.

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