Royalty

Royalty means:
the share of a product, or of the proceeds therefrom, reserved by an owner for permitting another to exploit and use his or her property; rental paid to the original owner of property, based on a percentage of profit or production and taxable as ordinary income. Payments of any kind received as consideration for the use of, or the right to use intellectual property, such as a copyright, patent, trade mark, design or model, plan, secret formula or process. Royalties are used for mining leases and conveyances as well as literary works, inventions, and other intellectual products.

Example of Royalty:

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Richman owns a 500-acre ranch in west Texas. An oil company negotiates a lease with Richman to explore for oil on the ranch. Under the agreement, Richman will receive a royalty in proportion to the number of barrels of oil pumped from the ranch.