U.S. Royalties and Fees Generated From Intellectual Property
- U.S. Royalties and Fees From All Transactions
- U.S. Royalties and Fees From U.S. Trade Between Unaffiliated Companies
Companies trade intellectual property when they license or franchise proprietary technologies, trademarks, and entertainment products to entities in other countries. Trade in intellectual property can involve patented and unpatented techniques, processes, formulas, and other intangible assets and proprietary rights; broadcast rights and other intangible rights; and the rights to distribute, use, and reproduce general-use computer software. These transactions generate revenues in the form of royalties and licensing fees. The exception is contract manufacturing, which may permit the use of intellectual property without a licensing fee.
U.S. Royalties and Fees From All Transactions
In contrast to the country’s merchandise trade position, the United States runs a surplus from its trade of intellectual property
In 2005, U.S. trade in intellectual property produced a surplus of $32.9 billion, up 12% from the $29.3 billion surplus recorded a year earlier
U.S. Royalties and Fees From U.S. Trade Between Unaffiliated Companies
Data on intellectual property transactions between unaffiliated companies, in which prices are set through market-based negotiation, may better reflect the value of U.S. intellectual property than data on exchanges between affiliated companies. About 80% of receipts and payments from trade of U.S. intellectual property with unaffiliated foreign companies are generated by licenses for manufacturing know-how and computer software
Trade in manufacturing know-how as described above consists of U.S. trade in industrial processes (including patents and trade secrets) used in the production of goods. Trade in computer software consists of cross-border software licensing agreements, such as on-site licensing. When receipts (sales of manufacturing know-how and software license agreements) consistently exceed payments (purchases), these data may indicate a comparative advantage in the creation of industrial technology and licensing of computer software. These data also provide an indicator of trends in the production and diffusion of these technologies as intellectual property.
U.S. Royalties and Fees From Trade in Manufacturing Know-How
The United States is a net exporter of manufacturing know-how sold as intellectual property
The U.S. surplus from trade in manufacturing know-how is driven largely by trade with Asia (BEA 2007)
China’s and Taiwan’s shares of total receipts are much smaller than those of Japan or South Korea, although they have increased over the past decade
Unlike trade with Asia, U.S. trade with the EU in manufacturing know-how is much more balanced
U.S. Royalties and Fees From Licensing of Computer Software
The United States is also a net exporter when licensing computer software
Incomplete data suggest that Asia is a large licensor of U.S. computer software
The EU accounted for 30% of U.S. receipts from licensing of computer software in 2005. About three-fourths of the EU’s receipts originated from France, Germany, and the UK
 The U.S. government and U.S. corporations have long advocated the establishment and protection of intellectual property rights. The Office of the U.S. Trade Representative monitors countries with reported violations and reports on the status of intellectual property protection in its annual report, Foreign Trade Barriers.
 An affiliate refers to a business enterprise located in one country that is directly or indirectly owned or controlled by an entity in another country. The controlling interest for an incorporated business is 10% or more of its voting stock; for an unincorporated business, it is an interest equal to 10% of voting stock.
 In addition, data on the destination of multinational corporate sales to foreign affiliates also suggest that market access is an important factor in the firms' decisions to locate production abroad. See Borga and Mann (2004).
 The Bureau of Economic Analysis (BEA), the source of U.S. royalty and fees data, collects data on the following Asian countries/economies: China, Hong Kong, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand, and other unspecified Asian countries. See BEA (2007).
 Asia has purchased more manufacturing know-how than the EU since 1987, the first year data were collected on manufacturing know-how. See BEA (2007).