Tax Planning for âInboundâ Licensing of Intellectual Property
Tax Planning for âInboundâ Licensing of Intellectual Property
Tax Planning for âInboundâ Licensing of Intellectual Property
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U.S. Inbound <strong>Intellectual</strong> <strong>Property</strong><br />
Transactions<br />
– Typical Features<br />
• FCo. “licenses” IP to USCo. on an exclusive and worldwide<br />
basis (or <strong>for</strong> a particular territory) in exchange <strong>for</strong> cash in the<br />
<strong>for</strong>m <strong>of</strong>:<br />
– down payment at closing<br />
– regulatory milestone payments<br />
– royalty payments<br />
– sales milestone payments<br />
• Sale <strong>for</strong> a fixed payment is not a typical way to transfer IP --<br />
owner can usually maximize value by making payments<br />
contingent on the level <strong>of</strong> exploitation/use <strong>of</strong> the property<br />
• Agreement labeled “assignment” may be a license <strong>for</strong> tax<br />
purposes, and vice versa, depending on whether all<br />
substantial and valuable rights in the IP have been<br />
transferred <strong>for</strong> the legal life <strong>of</strong> the IP<br />
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