Learn how the Liquid Relative Percentage royalty policy works.
The Liquid Relative Percentage (LRP) royalty policy defines that each parent IP Asset can choose a minimum royalty percentage that only the direct derivative IP Assets in a derivative chain will share from their monetary gains as defined in the license agreement.
In the image below, IPA 1 and IPA 2 - due to being ancestors of IPA 3 - have a % economic right over revenue made by IPA 3. Key notes to understand the derivative chain below:
The “License Royalty %” in this diagram corresponds to the same value as the commercialRevShare
on the PIL terms.
Let’s show an example where a payment is made to IPA 3. In the below diagram, you can see that initial payment is forwarded to the Royalty Module. The Royalty Module then splits the payment based on the Royalty Stack determined by the LRP policy:
After this initial payment is complete, IPA 1 and 2 can claim their revenue from the LRP policy contract. The LRP policy contract will then distribute the revenue to the parents based on the negotiated revenue share percentages: