Legal Question in Business Law in California

Re: Royalty Fee

It would be easier to give you a good assessment of the situation if I had more information about the "marketer," your company, and the details of the terms offerred to you. But it sounds to me, that in any event, the percentage of 7.5% to an owner/developer is quite low.

However, a lot would depend on the size, reputation and abilities of the marketer, and whether you have given it the "exclusive" rights to manufacture and market your product, because if this marketer is the only one who gets the rights to promote your product, you'd better be sure they can do the job well!

To protect yourself in any contract you enter into in which you are giving someone a license to your product, or giving the rights to manufacture and market it, it is important that you put in some "benchmarks" so that if the marketer does not meet the required amount of sales, or breaches the contract (e.g. doesn't manufacture a quality product, doesn't do what they promise, etc.) you have certain recourse.

Also, what you might want to think about doing, is having the marketer put all the terms of its offer to you in writing in a Contract or a Letter of Intent, and taking this document to other reputable manufacturing/marketing companies in the same field, to see if you can get a better deal. Very often, when one company wants your product, others will want it too, enough to be willing to pay more for it, and/or give you better terms.

This is my field of specialty. If I can be of service, please don't hesitate to call. I wish you good luck with your product.