Royalty clause
A royalty clause is a term in a contract, such as a licence, franchise or publishing agreement, that sets out the royalties one party must pay another for using intellectual property or other assets, including the rate, the base, timing, reporting and audit rights.
How BC law treats it
Intellectual property law in Canada is federal (Patent Act, Copyright Act, Trademarks Act), but royalty clauses are governed by provincial contract law. There are no statutory penalties for a poorly drafted clause; the consequences are contractual disputes.
What it means for your business
A clear royalty clause reduces the risk of disputes and makes payment easier to enforce.
Risks and common mistakes
Failing to address royalties on sublicences or after termination can leave significant revenue unaccounted for.
For the full explanation, see our entry on Royalty agreement.
General information about British Columbia and Canadian law, current to October 2026. It is not legal advice.
