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Date
Rule
801.21
Staff
Michael Verne
Response/Comments

Agree this is the acquisition of a cash equivalent - not reportable.

Update October 27, 2022: This no longer represents the position of the PNO. We do not view the revenue in this scenario as cash equivalents.

Question

04/12/2005 02:00 PM

To:mverne@ftc.gov

cc:

Subject: Sale of rights to a royalty stream



Dear Michael,

Per my voicemail, I am attaching four different advisory opinion letters that deal with the sale of royalty rights. The letters to : (redacted) and Nancy Ovuka are consistent with our understanding that a right to a royalty stream is basically a cash equivalent, which is non-reportable. However, your email from December 2001, may suggest otherwise. Can you let me know how we should reconcile these letters? Our client's potential transaction would consist of a sale for cash, of a right to receive an undivided interest in royalty income that will be paid by a third party that has licensed certain IP rights. The buyer in this transaction would be doing nothing more than paying a lump sum today as consideration for the incoming stream of royalty revenues that will trickle in over the coming years. Under 801.21 this would appear to be anon-reportable transaction, but we wanted to confirm this.

Thanks for your time and assistance. If you have any questions please let me know.

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