NCPA - National Center for Policy Analysis

The Gift of a Patent

November 18, 2002

Many corporations find themselves with patents on their hands for products and processes they will never commercialize. They have found that by donating the patents to nonprofit organizations, they can do good while receiving tax write-offs.

The practice of donating inventions to universities, hospitals or other nonprofit institutions originated in the mid-1990s and has become increasingly common.

  • Experts say that even well-run companies use only about 20 percent of the patents they develop.
  • While no one is tracking the donations, appraisers say the total in the past several years has exceeded several hundred million dollars.
  • Companies can have many reasons for concluding that patents are useless to them but potentially valuable others -- such as covering an application that is outside the patent-holder's business interest, or a profitability prospect too small to be of interest to a large firm.
  • Managers of intellectual property say successful donations require close attention to the expertise and interests of recipients.

Here are a few examples of recent patent donations:

  • DuPont donated a method of making a common drug compound without creating acidic waste to the University of Florida.
  • Proctor & Gamble donated a patent that could help doctors reduce skin discolorations from burns, wounds and grafts to the Cincinnati Children's Hospital Medical Center.
  • Cargill developed a new method of storing road salt and gave the patent to the University of Iowa.

The practice has aroused the curiosity of the Internal Revenue Service as a possible tax avoidance scheme, but intellectual property experts say it can free up hundreds of thousands of patents that would otherwise just gather dust.

Source: Barnaby J. Feder, "Patent Donations Are Novel Corporate Gift," New York Times, November 17, 2002.


Browse more articles on Government Issues