Royalty benchmarking reports

The most appropriate methodology for determining a reasonable royalty rate is that which leaves the least number of questions unanswered. Unfortunately, databases such as give insufficient information about the licensee to pass a thorough inquiry wholly intact. For example:

Accordingly, despite the OECD and IRS' apparent support of this methodology, benchmarking reports are seldom an appropriate method for determining a reasonable royalty. In my opinion, benchmarking reports should always be used in conjunction with a determination of royalty rates using first principles. Put another way: they should be used in support of a royalty rate and not as its foundation stone.

(Updated 2007)

Articles: Valuation