Accounting for Patent-Holding Companies in Infringement Litigation

For a variety of reasons, manufacturers owning patent rights may find it beneficial to assign their patents to a patent-holding company set up as a wholly owned subsidiary of the manufacturer. Using a holding company to manage a patent portfolio may permit the holding company to take advantage of favorable state tax treatment of licensing revenues. Through the use of a royalty-paying grant-back license to the manufacturer, placing patents in a holding company may help produce a tax deduction for the manufacturer. Administrative conveniences of having one corporate entity focus on maintaining and maximizing the return on patent rights may also justify transferring a manufacturer's patents to a holding company. Some also believe that having a holding company, rather than the manufacturer, enforce patent rights in litigation can make the litigation process easier on the manufacturer.

27 minute read April 01, 2005 at 09:46 AM

By

Robert A. Matthews, JR.