A royalty-based license is an agreement where one party (the licensee) pays the other party (the licensor) a fee based on the sales or usage of a product. This type of licensing is common in industries like music, software, and pharmaceuticals, where the licensor allows the licensee to use their intellectual property, such as patents or trademarks, in exchange for ongoing payments. These payments, known as royalties, are typically calculated as a percentage of revenue generated from the licensed product. This arrangement benefits both parties: the licensor earns income from their intellectual property, while the licensee gains access to valuable resources without the need for upfront costs.