Intangible Asset Valuation

Royalty Rate Analysis

valuation_royalty_analysis

Read-onlyIdempotent

Benchmark royalty-rate ranges by IP type and industry, adjust a base rate for deal factors, or apply the 25% rule to select and support a royalty rate before valuation.

Instructions

Royalty analysis: benchmark royalty-rate ranges by IP type and industry, adjust a base rate for deal factors, and apply the 25% rule of thumb. Method selects the formula. Use to select and support a royalty rate before a relief-from-royalty or royalty-capitalization valuation. To apply the chosen rate in a valuation use valuation_income_methods (relief_from_royalty) or valuation_market_approach (royalty_capitalization); for transfer-pricing pricing use valuation_compliance. Per method: benchmark needs ip_type + industry (optional: comparable_database); adjust needs base_royalty_rate + adjustment_factors; twenty_five_percent_rule needs licensee_expected_profit (optional: profit_attribution_to_ip). adjustment_factors multiply the base rate, so values above 1.0 raise the rate. Only method is required; other parameters are method-dependent, so supply those named for the selected method and omit the rest (documented defaults apply where defined). Pure arithmetic: no I/O and no external calls, and numeric results are returned rounded to 2 decimals. Parameters belonging to other methods of this tool are accepted and ignored. Supplying an unknown method, or leaving unset a parameter that the chosen method requires, returns an error instead of a value.

Input Schema

TableJSON Schema

Name	Required	Description
`method`	Yes	Formula to apply. Options: benchmark = Benchmark royalty-rate range by IP type and industry.; adjust = Adjusted rate = base rate * product of factors.; twenty_five_percent_rule = Royalty = licensee profit * IP attribution * 25%.
`ip_type`	No	Intellectual-property type, e.g. "patent", "trademark", "copyright", "trade_secret".
`industry`	No	Industry, e.g. "software", "pharmaceutical".
`base_royalty_rate`	No	Base royalty rate before adjustment, as a decimal (0.05 = 5%).
`adjustment_factors`	No	Multiplicative adjustment factors, e.g. {"profitability": 1.1, "market": 0.9}.
`comparable_database`	No	Optional comparable licenses, each {rate} or {royalty_rate}.
`licensee_expected_profit`	No	Licensee expected profit, in currency units.
`profit_attribution_to_ip`	No	Fraction of profit attributable to the IP, in [0,1].

Output Schema

TableJSON Schema

Name	Required	Description
`error`	No	Error message when the call fails.
`steps`	No	Intermediate calculation steps for traceability (one string per step).
`value`	Yes	Computed valuation, rate, or metric.
`method`	No	Formula / method name that produced the result.
`assumptions`	No	Modelling assumptions applied (list of strings or key/value object).
`formula_reference`	No	Mathematical formula or reference applied.

Schema Changelog

Changes observed during successful MCP inspections.

Changed2 schema fields changedv0.1.4Sep 30, 2026

changedOutput schema / properties / steps / description

Previous value: -"Intermediate calculation steps for traceability."New value: +"Intermediate calculation steps for traceability (one string per step)."

removedOutput schema / properties / steps / items / type
```
Removed value: -"object"
```

First observedv0.1.0Sep 30, 2026

TDQS

A4.8/5.0

Behavior5/5

Does the description disclose side effects, auth requirements, rate limits, or destructive behavior?

Annotations already cover read-only, idempotent, non-destructive, and closed-world behavior. The description adds valuable context beyond that: pure arithmetic with no I/O or external calls, results rounded to 2 decimals, errors on unknown method or missing required parameters, and other method parameters being accepted and ignored.

Agents need to know what a tool does to the world before calling it. Descriptions should go beyond structured annotations to explain consequences.

Conciseness4/5

Is the description appropriately sized, front-loaded, and free of redundancy?

Front-loaded with purpose and usage, then method-specific parameters and behavior. Dense but every sentence earns its place; it could be slightly more scannable with bullets, but there is no filler.

Shorter descriptions cost fewer tokens and are easier for agents to parse. Every sentence should earn its place.

Completeness5/5

Given the tool's complexity, does the description cover enough for an agent to succeed on first attempt?

Given 3 methods, 8 parameters, and an output schema, the description covers required and optional parameters per method, error behavior, rounding, and routing to sibling tools. It is complete enough for an agent to invoke this tool correctly.

Complex tools with many parameters or behaviors need more documentation. Simple tools need less. This dimension scales expectations accordingly.

Parameters4/5

Does the description clarify parameter syntax, constraints, interactions, or defaults beyond what the schema provides?

Schema description coverage is 100% so the baseline is 3, but the description adds method-to-parameter mapping (benchmark needs ip_type and industry; adjust needs base_royalty_rate and adjustment_factors; twenty_five_percent_rule needs licensee_expected_profit) and explains that adjustment factors are multiplicative. This meaningfully clarifies which parameters matter for each method.

Input schemas describe structure but not intent. Descriptions should explain non-obvious parameter relationships and valid value ranges.

Purpose5/5

Does the description clearly state what the tool does and how it differs from similar tools?

States specific verbs and resources: benchmark royalty-rate ranges, adjust a base rate, apply the 25% rule. It explicitly names sibling tools to distinguish itself from valuation_income_methods and valuation_market_approach, so an agent can identify its role without opening either schema.

Agents choose between tools based on descriptions. A clear purpose with a specific verb and resource helps agents select the right tool.

Usage Guidelines5/5

Does the description explain when to use this tool, when not to, or what alternatives exist?

Explicitly says when to use it (select/support a royalty rate before a relief-from-royalty or royalty-capitalization valuation) and names the alternative tools for applying the rate and for transfer-pricing use. No inference is left to the agent.

Agents often have multiple tools that could apply. Explicit usage guidance like "use X instead of Y when Z" prevents misuse.

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