The pandemic has prompted various companies to donate patents to research facilities and similar organizations in order to help combat the coronavirus. While donating patents to research organizations and universities can accomplish something truly good for society, it needs to be done responsibly.
A Chance to Do Something Good – If Done Wisely
Often, businesses will hold patents for inventions that they aren’t currently using or developing. They may not find it worthwhile to maintain these patents themselves, in which case they have the option of donating them to nonprofit organizations.
Not only does this make it possible to get a useful new technology or device developed—thereby benefiting society as a whole—but it also represents an opportunity for the party receiving the patent since they can potentially profit from developing a new product.
However, it’s worth noting that donating patents is only truly beneficial when the receiver has the means to develop the patented invention while also covering the patent maintenance costs. If the receiver is unable to cover those costs, the donation is ultimately worthless.
Those who donate patents may qualify for tax benefits since it can be counted as a charitable donation. However, the IRS puts limits on how much can be deducted for donating intellectual property, and the value of the IP itself needs to be calculated properly.
An additional benefit that businesses can gain from donating a patent is a reduction in overhead. Patents can be costly to maintain year after year, so donating them can save on those costs.
What to Remember when Donating Patents
When donating patents, there are a few items worth remembering. These include limits on how much can be deducted and methodologies for calculating the value of patents.
Tax deduction limits
The limits placed by the IRS on how much can be deducted from patent donations vary depending on whether the donor is a corporation or an individual. For corporations, up to 10% of their net taxable income can be deducted. On the other hand, individuals, including owners of an LLC or partners in a partnership, can deduct up to 50% of their taxable income.
Calculating the value of donated patents
Calculating the actual value of a donated patent can be tricky since it’s often uncertain how much that patent will actually be worth to those receiving it. If they’re not able to develop it or profit from it, it won’t be of much use to them.
To calculate the worth of a patent, it may be either compared to the market value of similar items, or potential revenues could be determined, such as from royalties or selling the patent. Alternatively, the worth could be determined by the cost of developing the patent itself.
Ultimately, the purpose of donating a patent should be to further the greater good, especially in these difficult times. If IP is contributed to those who would benefit most from developing it, and if the development of that IP would be beneficial to society as a whole, then it may be a good idea to donate it.
If you have questions about donating intellectual property, an attorney can help you navigate the process successfully.