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Posted by Seth on October 14, 2007, 10:11 pm
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> An inventor has a patent that he wishes to sell to a
> company. So far so good, IRC sec 1235 says that if an
> inventor sells "all substantial rights", it's treated as a
> capital asset and capital gains rates apply.
>
> He'd like to keep making his patented widgets, which
> presumably can be handled by the company granting back a
> license. The question is whether that disqualifies the sale
> for capital gains treatment.
It seems to me that if the licensing back is part of the
transaction, he didn't really sell all the rights. If the
licensing back is a separate arms-length transaction (e.g.
if he gets the same terms as someone unrelated who wanted to
license would get, or better, did get) then he did sell all
the rights.
My opinion is worth twice what you paid for it.
Seth
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