(Previous discussion continued)
Re: Payouts to Creators of Intellectual Property (IP) Herbert B. Chermside 15 Jun 1998 15:13 EST

Re: Payouts to Creators of Intellectual Property (IP) Herbert B. Chermside 15 Jun 1998 15:13 EST

At our institution there was significant discussion of this matter.  We
even involved an IRS representative.  It was resolved that payments would
be made of royalties, on a 1099.  This is legally possible because our
policy explicitly states that a) royalties will be shared with the
creators, and b) institutional ownership of the invention is the result the
use of institutional resources (space, effort, etc.) in creating the
property (as opposed to a contractual obligation that all intellectual
properties belong by virtue of employment).  The mechanism of payment is up
to your accountants, but I suspect that payment by payroll would
automatically do it wrong!!

This has been in effect for about 8 years.  In fact, it is now moot, as we
have created a foundation and contracted the handling of IP's on the
institution's behalf to it.

Chuck

At 11:52 AM 6/15/98 -0700, Terry A. May wrote:
>Our University like many others has provisions for returning a portion of
>the net income from sale or licensing of the IP to the creators.  I am now
>involved in a discussion about how to make these payments from the
>institution to the employee.  No one disagrees that this is taxable income
>to the employee; the only debate is about the administrative process to
>process the payment.  The two alternatives seem to be 1) through accounts
>payable along with a 1099 at the end of the year OR 2) through payroll and
>subject to withholding, FICA, etc.
>
>Payouts through a payroll process are certainly legal but may not be
>necessary.  Payouts through Accounts Payable may violate the rule that a
>W-2 form and a 1099 form should not be generated for an employee in the
>same year.  My impression is that the majority of institutions accomplish
>this through Accounts Payable, but I might be wrong about that.  I would
>like to get a general sense of how this is usually accomplished at other
>institutions along with issues that have resulted.  Also, for those more
>directly involved in maintaining financial systems/integrity for your
>institutions, can anyone provide written documentation or published
>determination notices or letters of guidance concerning this issue.
>
>
>Terry A. May, Ph.D.                       Voice:    520-523-6788
>  Director of Research Administration     FAX:      520-523-1075
>  Office of Grant & Contract Services     INTERNET: xxxxxx@nau.edu
>  100 Babbitt Admin. Ctr., Box 4130
>  Northern Arizona University
>  Flagstaff, AZ  86011-4130
>
Herbert B. Chermside, CRA
Director, Sponsored Programs Administration
Virginia Comonwealth University
PO BOX 980568
Richmond, VA  23298-0568
Express Delivery Only:
        Sanger Hall, Rm. 1-073
        11th & Marshall Streets
        Richmond, VA  23219
Voice:  804-828-6772
Fax     804-828-2521
OFFICE e-mail   xxxxxx@VCU.EDU
Personal e-mail xxxxxx@vcu.edu
http://views.vcu.edu/views/ospa/