HOTco, a U.S. C corporation, invents a control panel to make furnaces heat up faster. HOTco sells these control panels exclusively in the U.S. HOTco does not wish to operate abroad and, therefore, HOTco licenses its control panel know-how to FORco. Under this license, FORco manufactures control panels in Belgium for sale throughout Europe. FORco pays HOTco a royalty on each foreign sale made.
What is the source of the royalty from FORco to HOTco?