A royalty agreement is used when a transaction involving intellectual property occurs. It's a document concerning two parties, typically referred to as a licensor and licensee, granting the licensee the right to use intellectual property for a predetermined length of time. A royalty is a payment made for the sale or use of an intellectual product.
Such an agreement may be utilized for the use of a company's name or trademark, such as if a vendor wanted to display a certain company's logo on their website or marketing materials. A developer of an invention may sell their product to a corporation and receive a royalty for each sale of their product for a lifetime set by their mutual agreement.
The document covers the royalty amount to be paid to the company and what date the royalty should be paid by the licensee. These documents also may include term length of the agreement, the scope of use for the licensee, what constitutes as authorized use, and confidentiality clauses. Indemnification information, particularly on agreements for consumer products, is often included in a royalty agreement as well.