The Number on the Statement: Royalty Reporting, Under-Payment, and the Audit Nobody Exercises
By Casey Scott McKay ·
Almost every licence contains an audit right and almost nobody exercises it, which is why under-reporting is the norm rather than the exception. This article explains why royalty statements are systematically wrong in one direction, works through the definitional gaps that produce most of the shortfall, and sets out what an audit actually finds. It covers the audit clause and the terms that make it usable, the categories of error, the licensee's legitimate defences, the limitation problems that cap recovery, and the settlement dynamics that resolve almost every audit without litigation. It closes with the reason self-reporting fails and what to do about it.
IP and Technology > General IP | Article | Published 27 September 2023 - Updated 3 June 2025 | Casey Scott McKay - marksy.us
A system that runs on trust
A licence grants rights in exchange for a payment calculated as a percentage of something the licensee measures, records, and reports. The licensor receives a statement, a payment, and no visibility into either.
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