Client recovers $2 million in underpaid royalties with Licensing and Contract Risk Services

Client recovers $2 million in underpaid royalties with Licensing and Contract Risk Services

Underpaid Royalties Client Story

Key to Success

Change Requested: 
Protiviti was approached by an existing client that received a portion of revenues from licensing intellectual property (IP)
Change Envisioned : 
Protiviti’s Licensing and Contract Risk Services professionals were able to provide our client with insight into several key areas
Change Delivered: 
As a result of quantitative analysis detailing erroneous reporting, unit sales by product, and variance between reported royalties and royalties owed

Change Requested

Protiviti was approached by an existing client that received a portion of revenues from licensing intellectual property (IP) and asked if we would audit a licensee to substantiate compliance with the existing licensing agreement.     
      

Change Envisioned     

Protiviti’s Licensing and Contract Risk Services professionals were able to provide our client with insight into several key areas after the team:

  • Reviewed the licensing agreement, performed analytical procedures on the royalties reported, and compared the royalties to contractual obligations.
  • Reviewed the current state royalty-capturing process, identified areas of risk and control weakness, and recommended process improvements.
  • Verified licensee products that contained the client’s IP and determined the percent of sales containing royalty-bearing IP.
  • Recalculated royalties per the contractual agreements and interest owed due to late payments.

Change Delivered

As a result of quantitative analysis detailing erroneous reporting, unit sales by product, and variance between reported royalties and royalties owed, we identified $3.7 million in undisputed, under-reported royalties. Within weeks of the audit’s conclusion, our client received a check for $2 million in settlement. In addition, we helped them to renegotiate the contract with the licensee, extending the life of the contract and gaining more favorable terms.

How We Help Companies Succeed

Effective revenue risk management requires a methodology and thought process focusing on those customer- and product-centered activities that have a significant impact on revenue, as well as the cost-drivers required to generate that revenue. Protiviti’s revenue risk management methodology helps clients reduce costs while increasing revenues, and strengthen partnering relationships. Protiviti helps provide a product strategy around profitability – increasing profits by as much as 3 percent to 5 percent of total sales, providing a focus on customer risk management, and reducing fraud.