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IBA: Indiana Patent Owners Not Interested in Saving Money?

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By Cedric A. D’Hue, D’Hue Law, LLC

Indiana Code § 6-3-2-21.7 aims to encourage innovation by giving Indiana entrepreneurs and small businesses a break on Indiana state income tax. Several articles and blog posts initially notified the public about this unique Indiana tax benefit. A recent posting argued that all indications suggest this law is underutilized, essentially saying that Indiana patent owners are leaving money on the table. While I agree with some of the initial indications, I am encouraged by increased use of the law.

In my devotion to this law, I researched Indiana-based patents which may qualify for the Indiana patent income tax exemption. My search criteria involved identifying U.S. utility patents issued in the year 2008 to at least one Indiana individual or Indiana based business. My search criteria sought to exclude patents owned by large Indiana businesses or non-Indiana based businesses.

From this labor of love, my informal research identified two hundred and thirty seven (237) relevant Indiana based patents. It is reasonable to hypothesize that the law is underutilized when there are 237 potentially relevant patents and only ten Indiana taxpayers taking advantage of the law.

There are several reasons why so many patents might qualify for the exemption but only ten Indiana taxpayers took advantage of the law. First, it is unknown how many Indiana patent owners are aware of the tax law advantage. Second, I don’t know if each of the ten Indiana taxpayers utilized one or more patents when claiming their exemption.

Several factors might cause Indiana patent owners to not take advantage of this tax law. Not all U.S. patents immediately generate income. Another reason could be the cost associated with compliance of this law. For example, determination of fair market value of the licensing fees or other income generated from the sale of a product covered by the patent could easily exceed the tax savings provided by the first years of patent income. Intangible asset valuation firms may choose to charge $7,500 to $8,000 for an uncertified patent valuation and $20,000 to $25,000 for a certified patent valuation. A third reason is there can be a several year lag between filing a patent application and issuance of a U.S. patent. After notification about this unique tax benefit, Indiana entrepreneurs or small business owners may have filed for patent protection but have yet to receive an issued U.S. utility patent.

As illustrated in the Table, the sum of claimed exemptions almost doubled from 2008 to 2009 during one of the most challenging eIBA-chart-2col.jpgconomic environments since The Great Depression. The increase has been encouraging. In my opinion the almost doubling indicates increased utilization in this unique Indiana tax benefit. I am interested to see if a pattern emerges and the increase continues upward for 2010.

In conclusion, the initial number of Indiana taxpayers utilizing this unique tax benefit seems to be small. Immediate and optimal use of this law would provide maximum benefit. Realistically, we may not see the full impact of this unique Indiana law for several years. Let us make the most of this opportunity by: (1) ensuring that all Indiana entrepreneurs and small business owners are aware of this exemption, (2) increasing our reporting on this law and continuing to evaluate its benefit to Indiana, and (3) assisting Indiana patent owners to take advantage of this unique tax benefit.•

Cedric D’Hue is a patent attorney and sole member of D’Hue Law LLC (www.dhuelaw.com). The opinions expressed in this article are those of the author.
 

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  1. For the record no one could answer the equal protection / substantive due process challenge I issued in the first post below. The lawless and accountable only to power bureaucrats never did either. All who interface with the Indiana law examiners or JLAP be warned.

  2. Hi there I really need help with getting my old divorce case back into court - I am still paying support on a 24 year old who has not been in school since age 16 - now living independent. My visitation with my 14 year old has never been modified; however, when convenient for her I can have him... I am paying past balance from over due support, yet earn several thousand dollars less. I would contact my original attorney but he basically molest me multiple times in Indy when I would visit.. Todd Woodmansee - I had just came out and had know idea what to do... I have heard he no longer practices. Please help1

  3. Yes diversity is so very important. With justice Rucker off ... the court is too white. Still too male. No Hispanic justice. No LGBT justice. And there are other checkboxes missing as well. This will not do. I say hold the seat until a physically handicapped Black Lesbian of Hispanic heritage and eastern religious creed with bipolar issues can be located. Perhaps an international search, with a preference for third world candidates, is indicated. A non English speaker would surely increase our diversity quotient!!!

  4. First, I want to thank Justice Rucker for his many years of public service, not just at the appellate court level for over 25 years, but also when he served the people of Lake County as a Deputy Prosecutor, City Attorney for Gary, IN, and in private practice in a smaller, highly diverse community with a history of serious economic challenges, ethnic tensions, and recently publicized but apparently long-standing environmental health risks to some of its poorest residents. Congratulations for having the dedication & courage to practice law in areas many in our state might have considered too dangerous or too poor at different points in time. It was also courageous to step into a prominent and highly visible position of public service & respect in the early 1990's, remaining in a position that left you open to state-wide public scrutiny (without any glitches) for over 25 years. Yes, Hoosiers of all backgrounds can take pride in your many years of public service. But people of color who watched your ascent to the highest levels of state government no doubt felt even more as you transcended some real & perhaps some perceived social, economic, academic and professional barriers. You were living proof that, with hard work, dedication & a spirit of public service, a person who shared their same skin tone or came from the same county they grew up in could achieve great success. At the same time, perhaps unknowingly, you helped fellow members of the judiciary, court staff, litigants and the public better understand that differences that are only skin-deep neither define nor limit a person's character, abilities or prospects in life. You also helped others appreciate that people of different races & backgrounds can live and work together peacefully & productively for the greater good of all. Those are truths that didn't have to be written down in court opinions. Anyone paying attention could see that truth lived out every day you devoted to public service. I believe you have been a "trailblazer" in Indiana's legal community and its judiciary. I also embrace your belief that society's needs can be better served when people in positions of governmental power reflect the many complexions of the population that they serve. Whether through greater understanding across the existing racial spectrum or through the removal of some real and some perceived color-based, hope-crushing barriers to life opportunities & success, movement toward a more reflective representation of the population being governed will lead to greater and uninterrupted respect for laws designed to protect all peoples' rights to life, liberty & the pursuit of happiness. Thanks again for a job well-done & for the inevitable positive impact your service has had - and will continue to have - on countless Hoosiers of all backgrounds & colors.

  5. Diversity is important, but with some limitations. For instance, diversity of experience is a great thing that can be very helpful in certain jobs or roles. Diversity of skin color is never important, ever, under any circumstance. To think that skin color changes one single thing about a person is patently racist and offensive. Likewise, diversity of values is useless. Some values are better than others. In the case of a supreme court justice, I actually think diversity is unimportant. The justices are not to impose their own beliefs on rulings, but need to apply the law to the facts in an objective manner.

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