IRS Issues Guidance on Use of Net Consideration Method for Certain Patent Cross Licensing Agreements (Rev. Proc. 2007-23)
In response to its request for comments in Notice 2006-34, I.R.B. 2006-14, 705, the IRS has provided rules that allow taxpayers to change to or to continue to use the net consideration method for a qualified patent cross licensing agreement (QPCLA). A QPCLA is a nonexclusive, nontransferable patent cross licensing arrangement among uncontrolled parties, the subject matter of which is limited to the parties' present or future patent rights as specified in the arrangement. If the parties to an arrangement also engage in more than de minimis licensing or other transfer of other intangible property, including copyrights, trademarks and know how, pursuant to the arrangement, the arrangement is not a QPCLA.
