If I modify a patented idea by someone else, do I need to pay license feeds?

With respect to Mohamed's answer, his original statement is not quite correct but the remainder of his remarks is essentially correct. The rule is if your device, method, whatever, includes ALL of the features of any one of the claims of the patent in question, then you infringe that patent. So, as Mohamed noted, if the patent recites ABX, and your device comprises ABX, you infringe. If your device comprises ABXY, you still infringe because your device comprises at least ABX, regardless of the fact that you added Y. If your patent comprises ABY, you do not infringe because your device does not include ALL of the claimed features, namely x. So, if you infringe, you will need to reach some agreement with the patent holder. But here is another scenario - say, for example, your device comprises ABXY, whereby you infringe the patent in question and would need a license or other agreement from the patent holder so that you do not infringe or, in other words, the patent holder will not sue you for infringement because you are paying him a royalty or other fee, BUT by adding Y to the device, it renders the device more useful, easier to use, quicker to use, you can do more things with it, whatever - so you have actually improved the original device. The original patent holder may want to manufacture your device because it is better, faster, whatever, but he can't because he will infringe your patent, assuming that you obtain a patent. So he can't manufacture your device because he would infringe your patent, and you can't manufacture your own patent protected device because you will infringe his patent - what to do? You cross-license each other whereby you both agree that both of you can manufacture, for example, your improved device and neither party will sue the other for infringement.

Good point, Meg. Here is another scenario - when I was an examiner, an applicant was claiming a device which comprised ABCDE, and the claim was drafted such that B was related to or interacted with A, C with B, D with C, and E with D. I found a reference with ABCDE but the parts interacted in a different manner than claimed and it would not be obvious to rearrange the parts to interact the way the applicant claimed his components as interacting, and so I had to issue the patent. So, in order for there to be infringement, not only does your device or method have to comprise essentially the same components but also act in the same manner as claimed by the patent.

Have a look at the patent application of your competitor and look at the claims. This is the part that specifies what exactly they are protecting. If your product or technology includes all the things they have in any of their claims then this means that your invention is using their technology and you need a license.

But have a look at this example:

If your competitor's claim says: My invention is composed of A, B, and X
If your invention is composed of A, B, and Y = you are different
If your invention is composed of A, B, X, and Y = you are using the competitor's invention and adding a component of yours and you will need a license.

I tried to make it as simple as possible but i have to say that you might need to consult a patent attorney or an IP consultant in your country just to have a look at the competitor's claims and tell you whether or not your invention falls within their scope of protection.

NOTE: I edited the first paragraph to replace
"If your product or technology includes any of the things they have in any of their claims" with
"If your product or technology includes all the things they have in any of their claims". Thanks Steven for the note. This is what i meant to say in my example

I agree with the previous comments in terms of determining with you are infringing a patent on a device or system/machine. However, if the competitor patent claims a process - method of doing something that involves multiple sequential steps - you have to look at it a bit differently. If you cut out steps or do them in a different order than the way the claims read, you may have a different invention.
The patent system was put in place to do just what you are doing - improving the status quo. However, the original innovator doesn't get squeezed out until his patent term expires. You'd feel the same, if the situation was reversed.