Tuesday, September 10, 2013
Profits v Royalties
There's a fascinating case involving Princeton University, patents, and profits/royalties, and the implication to its tax-exempt organization. Here's one tidbit:
He said Princeton misled the municipal tax assessor on a form called the “Initial Statement of Organization Claiming Property Tax Exemption.” It directs an organization to name individuals receiving profit or, if none, to “state none.”
Over several years, Princeton never stated “none.” It replied, “Only the officers & employees of the corporation receive normal compensation for their services. The trustees do not receive any compensation.”
“They’ve deliberately avoided acknowledging that they give profits to faculty,” he said. “They simply omitted the information and came up with an answer that avoids the question. It’s not only bad faith but it’s a form of deception.”
...
Payments to inventors, he said, are not profits. Rather, he said they are recognition that faculty members have property rights to inventions that they lose because, under the Bayh-Dole Act, they must assign them to the university.
“The royalty-sharing program is not a sharing of profits; it’s simply recognition in the form of just compensation for ownership interests that the faculty inventor would otherwise have,” said Lynott, of McCarter & English LLP.
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