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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. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  2. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  3. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  4. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  5. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

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