Enjoy!

• License Interpretation: The formula for calculating royalties must be very clear. If the royalty clause is written in a vague or general definition, it can be interpreted in a number of ways. The result is a significant difference in royalty calculations between you and your licensee. For example, if the definition only says "sales" this could be interpreted as net sales after deduction of certain costs. Or the "sale price" is different than the "selling price". That's why I like to use deal memos to follow-up negotiations. It clearly states the definition of sales and how the royalties are calculated. And that definition is included in the licensing agreement.
• Under-Reporting Sales: The biggest reason for this error is a product list that is fluid and constantly changing. For example, if a licensee adds a new product or territory that wasn't originally in the agreement, it can be overlooked when reporting royalties. When Power Rangers was red hot, the studio audited licensees each year, and inevitably recovered "under-reported" sales. Typically these were on products added after the contract was issued. You can avoid this mistake with clarity on the specific products (or services) that can use your IP. Update the agreement with any new products (or extensions) and make sure these are included in the royalty reports.
• Non-Allowed Deductions: This error happens frequently. These are deductions from the royalties that are not allowed. Some of these include advertising, overhead, damaged goods, returns, warehousing, production or other selling costs. Often times the royalty report will only provide a general summary of deductions, so you won't know if it was allowed. Most of the agreements I negotiate have very limited deductions, and these are clearly spelled out in the agreement. You can also avoid this mistake by providing a royalty statement template that requires a clear explanation of deductions.

Best regards,

President & CEO 

Key Terms & Conditions - Quality Control

The QC clause must balance enough control for the IP owner, while allowing the licensee to use the IP without too much restriction.  

Many agreements also require the IP quality be equal to or better than the licensees other products or services. If the licensee doesn't meet and maintain these quality requirements, they can lose the rights.

When preparing or reviewing a licensing agreement, it's always best to seek qualified legal advice before you sign anything.