Tag Archives: Allergan

Tax Cuts and Jobs Act: Some IP holders may benefit, most won’t

The Tax Cuts and Jobs Act of 2017 places some IP rights holders squarely in the sights of the tax collector, while providing others with an opportunity to license overseas without having to resort to international asset transfers to maximize returns.

Patent, trademark and copyright owners of all sizes would be wise to revisit the nature and tax implications of their transactions, including direct patent sales, as well as where their IP assets are best located. This is a direct result of the Tax Cuts and Jobs Act of 2017 (TCJA), the impact of which on IP holders is starting to be understood.

The new law is partly a response to businesses that hold massive amounts of revenue-producing assets outside the United States in so-called ‘patent boxes’ – devices which allow revenue on assets held within them to escape most local and all domestic taxes derived from IP-related revenue.

Like Wildfire

“Patent boxes have spread like wildfire,” Edward Kleinbard, former chief of staff of the US Congress’s Joint Committee on Taxation, now a law professor at the University of Southern California told the Intangible Investor. “Their success was doomed from the start. The international environment for intangibles and tax has evolved. With more products to license from sources worldwide and more revenue derived from them, these devices, which originally were restricted to a handful of nations, have become diffuse.”

The most famous (or infamous) product of the IP asset tax avoidance schemes, known as the “double Irish,” has been used by large corporations, including Facebook Inc, Google parent Alphabet, Inc and drug maker Allergan PLC.

The TCJA aims to lure IP locations back to the US, but whether the benefits are sufficiently attractive is still unclear. The Wall Street Journal coverage of the TCJA can be found here. For the American Enterprise Institute take on the Act, go here.

Rana Foroohar, a journalist who reports for the Financial Times, says in a video that a growing “tech-lash” (backlash) against the imbalance of power generated by U.S. tech giants extends to how they use proceeds from overseas licensing revenues to buy foreign bonds. Curtailing this activity has the potential to cause disruption in the bond market and interest rates, she says. Foroohar’s video clip on the potential ramifications of tax increases can be found here.

Self-Licensing

Rather than licensing to themselves (or the entities they control) to generate income that avoids taxes and use those proceeds to invest in corporate bonds, techcos might consider generating genuine IP revenues, as well as taking, and paying for, licenses they need from other holders.

For the full Intangible Investor story, “Identifying the impact of the US tax act,” in the May IAM magazine out this week, go here.

Image source: brodyberman.com

Top patent defendants have faced far fewer suits in 2016, so far

The size of businesses sued most frequently for patent infringement in 2016 were significantly larger than in 2015, when five little-known patent holders were among the top defendants. The amount of litigation also is much lower this year.

Pharmaceutical company Eli Lilly (341) is the top patent litigation defendant in 2016, with a ten-fold lead over number two Samsung (31). No doubt much of Lilly’s defense is the result of ANDA procedures brought by generic drug manufacturers against branded competitors to establish bio-equivalent drugs.

The rest of the list – Amazon, Actavis, AT&T Mobility I, Huawei Technologies, LG Electronics, AT&T, T Mobile USA and Motorola Mobility – all have 21 or fewer suits filed against them so far this year.

2016

This represents a significant drop over last year, according to data supplied by Patexia.com.

Actavis, which acquired Allergan in 2014, is another diversified pharmaceutical company. Actavis is based in Dublin, Ireland, and is a subsidiary of Teva, an Israeli company. Five of the top ten defendants this year are foreign companies. Absent from the 2016 list is Apple and Google, which owns Motorola Mobility.

More Suits Filed Against Unknowns

For the entire 2015, Lilly had 977 patent suits filed against it. That is in contrast with the 341 filed so far this year. Samsung was again number two last year, with 49 cases filed against it.

The rest of the top-ten defendants for 2015 had some less-known names, including: Spin Screed, Sandi Scales, Conlin Properties, Amneal Pharmaceuticals and Lupin Pharmaceuticals. Rounding out last year’s list was H-P, Actavis and Amazon. Only three companies, Samsung, H-P and Amazon, appear to be IT pure-plays.

The number of suits filed against Lilly last year was almost three times higher than 2016 to date, and those for companies in the two through ten spots were about two times higher.

2015

Response to Increased Risk?

The increase in litigation filings against more established patent holders may have to do with the greater likelihood of favorable settlement or payout of damages from them as opposed to smaller players.

It may also have to do with the changing economics of patent litigation which must anticipate the likelihood, time and costs associated with inter partes reviews.

For access to the top-ten patent litigation defendants and the number of suits filed against them from 2007-20016,  go here.

Image source: patexia.com


%d bloggers like this: