Like any other property, patents and know-how can be donated to a charity and a tax deduction taken. Transaction costs are variable but are usually small compared to the value of the tax deduction. The process includes identification of the assets to be donated, identification of the donee (which helps to maximize the value of the deduction), execution of the agreement, and legal compliance. This strategy is most effective for companies which have not done a good job of managing their intellectual asset management portfolio and have serendipitously acquired technically interesting art in areas of possible long-term future commercial interest.
Unutilized and underutilized patents and know-how add nothing to the capitalization or share price of the company and may have serious costs associated with them such as patent maintenance fees and security costs for know-how. By identifying these assets of low or no value to the company and donating them to a charity such as a university or research Institute to which it may have value as a licensable property, the company can send dollars directly to the bottom line equal to its marginal tax rate times the independently obtained value of the donated patents and know-how. Note that the tax laws require that the donee be a so-called 501(C)(3) charity. These are universities, research institutes and the like. The law also requires that the donated property be valued at its fair market value.
Giving the company’s patents and know-how to the correct recipient is important to the ultimate value of the donations. The best donees are universities or research Institutes with an active licensing program, good industry contacts and other patents, researchers or know-how that make the companies donated patents and know how valuable in the hands of the donee. It is also important that the donee be able to articulate its value to the independent evaluator and to the IRS if the valuation of the donation is challenged.