You need to set up a license acquisition contract with one IP that uses a quantity scale to determine the royalties rate. In this instance, you want the system to take into account the order in which the transactions occur. The example below demonstrates how the calculation differs in the standard system as compared to a system with transaction tiering activated.
Royalty agreement:
For up to 1,000 units: 8% of the sales
For more than 1,000 units: 10% of the sales
Sales:
You initially sell 600 units for 20 USD each.
You then sell 600 units for 10 USD each.
If transaction tiering is inactive, you can still use scales in the system, but the system does not take into account the order of the transactions. Instead, a sort of averaging is performed in the calculation. In this case, the calculation is as follows:
Total number of units: 1,200
Condition basis (total sales): [600 (units) x 20 (price)] + [600 (units) x 10 (price)] = 18,000
Royalties calculation: [15,000 USD (sales) x 8%] + [3,000 USD (sales) x 10%] = 1,500 USD (total royalties)
If you activate the transaction tiering feature, the system then takes the order of the transactions into account. For the same royalty agreement and sales, the calculation is now as follows:
Condition basis (total sales) for the first 1,000 units: [600 (units) x 20 USD (price)] + [400 (units) x 10 (price)] = 16,000
Condition basis (total sales) for the next 200 units: 200 x 10 = 2,000
Royalty calculation: 8% of 16,000 + 10% of 2,000 = 1,480 USD (total royalties)