Chronic miscalculations may signal serious problems. Low performance of licensed product compared to other licensee products. The royalty report requires the licensee to provide the sales figure that forms the basis of the royalty calculation. Low performance of the licensed product is present if the growth rate of license sales falls short of overall sales as reported in the company's annual report. Inconsistency of sales with market performance in the field.
Competition ensures that there are always other products vying for the market.
These may be similar or substitute products. The growth rate of the reported sales should not be significantly below market rates. Indication of dilution of royalty base because of product combinations. A licensee may attempt to improve product sales by combining the licensed product with other products not covered by the license. This can cause difficulties for royalty accounting.