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What is the 25 percent rule?

There are a few different rules known as the "25 Percent Rule", but the most common one is connected to intellectual property rights. It governs the way in which the right to use these pieces of intellectual property -- such as a logo or a patent -- should be paid for.

Essentially, the rule states that the person who is buying the rights needs to project how much he or she is planning to earn off of those rights -- the gross profits -- and then pay 25 percent of that total amount to the person who owns the property. This can also be done between businesses and corporations, rather than individuals, or vice versa.

For example, if a company wanted to use the logo of a sports team to make and market shirts, and they thought they could make a profit of $1 million per year from the sale of these shirts, then they would need to pay $250,000 for the rights to use the logo.

This is just a rule of thumb and not anything that is truly established and must be followed in all cases. Those selling the rights have the ability to ask for as much money as they would like, and a contract can then be written up that is based around those desires. The "25 Percent Rule" is often a good place to begin, though, when it's hard to do another valuation.

When using any sort of contract to buy or sell the rights to intellectual property, businesses and individuals in Florida must know what is legally required to protect their investments.

Source: BU.edu, "Use Of The 25 Per Cent Rule In Valuing IP," Robert Goldsheider, John Jarosz and Carla Mulhern, accessed July 15, 2016

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