Recoupling Founders with Their IP – Improving Innovation by Rationalizing IRC Section 351 (Licensing vs. Assignment of Founders’ IP in VC Backed Start-Ups)

31 Pages Posted: 18 Apr 2018

See all articles by Mira Ganor

Mira Ganor

University of Texas at Austin - School of Law

Date Written: March 31, 2018

Abstract

This Article questions the conventional wisdom of the U.S. practice of early assignment of founder’s intellectual property to the venture capital backed startup-company. The Article shows that certain U.S. tax rules motivate founders to rush to assign their individually owned intellectual property to the startup-company rather than license it to the company. This tax enhanced distortion of the founders’ choice may have socially inefficient effects that under certain circumstances hinder innovation by decoupling the intellectual property from those who are most apt to exploit it. Thus, this Article offers for consideration, proposals to reform the current tax treatment of intellectual property transfers. The proposed reform will level the playing field from a tax perspective and prevent distorting the founders’ choice between intellectual property assignment and intellectual property licensing.

Keywords: innovation, venture capital, start-ups, intellectual property, tax

JEL Classification: G24, G30, G32, H25, K22, M13

Suggested Citation

Ganor, Mira, Recoupling Founders with Their IP – Improving Innovation by Rationalizing IRC Section 351 (Licensing vs. Assignment of Founders’ IP in VC Backed Start-Ups) (March 31, 2018). U of Texas Law, Law and Econ Research Paper, Available at SSRN: https://ssrn.com/abstract=3153839 or http://dx.doi.org/10.2139/ssrn.3153839

Mira Ganor (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

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