[ossiblue]

Not a lawyer, but I'll get the ball rolling.

We need to know the wording of the agreement as it applies to a royalty. Does it specify that the royalty is simply for their use of your idea, or does it specify that they are to pay a royalty from the net income/revenue from their use of your idea (or words to that effect?) I suspect this is where the dispute arises because the wording is open to interpretation, either way. However, from your post, it appears that a royalty is expected to be paid regardless of the company making a profit. The royalty is for their right to exclusive use your product, in lieu of others, and as a payment for your "loss" of potential revenue by the exclusivity. The royalty payment should be considered part of cost of production, similar to any payment to a subcontractor or supplier.

I don't which court your case would best be decided, but I would think you have a good chance of prevailing, depending on the terms in the contract.

Perhaps you can post the exact wording of the contract with regards to the royalty so we can focus on where the dispute lies.