United States: Exploitation of Intellectual Property

Last Updated: June 28 2004
Article by Suzanne Ross McDowell

Originally published April 2004

TABLE OF CONTENTS

I. INTRODUCTION

II. WHAT IS INTELLECTUAL PROPERTY?

A. In General

B. Patents

C. Trademarks and Servicemarks

D. Copyrights

E. Trade Secrets

III. ISSUES RELATING TO TAX-EXEMPT STATUS

A. Primary Purpose Test

B. Scientific Research

1. Public Interest Requirement
2. Relevance of Ownership of Intellectual Property
3. Exploitation of Intellectual Property as Primary Purpose
4. Exploitation of Intellectual Property as an Insubstantial Purpose

C. Publishing

D. Private Benefit Test

E. Prohibition Against Private Inurement

IV. UNRELATED BUSINESS INCOME TAX ISSUES

A. Overview

B. Imposition of UBIT

C. "Relatedness" of Intellectual Property Commercialization Activities

1. Scientific Research
2. Broadcasting
3. Publishing

D. Exclusions from UBTI

1. Research Income
2. Royalties

V. STRUCTURES FOR COMMERCIALIZING INTELLECTUAL PROPERTY

A. Licensing Intellectual Property in Exchange for a Cash Royalty

1. Business Aspects of Licensing
2. Typical Arrangements
3. Tax Aspects

B. Licensing Intellectual Property in Exchange for a Non-controlling Equity Interest

1. Business Considerations
2. Typical Arrangements
3. Tax Aspects

C. Using Controlled Subsidiaries for Commercialization of Intellectual Property

1. Business Considerations
2. Tax Aspects
3. Tax Planning for Controlled Subsidiaries

D. Joint Ventures

1. Overview
2. UBIT Issues
3. Tax Exempt Status Issues

VI. SHARING ROYALTIES WITH CREATORS OF INTELLECTUAL PROPERTY

A. Impact of the Bayh-Dole Act

B. Private Inurement and Private Benefit Issues

1. Reasonable Compensation
2. Incentive Compensation

I. INTRODUCTION

Many exempt organizations own valuable intellectual property rights that can be used by the organization to achieve the exempt purposes for which it was established or to provide an additional source of revenue for the organization. Where the value lies in an organization’s intellectual property will depend to a large extent on the nature of the organization and its activities. For example, many large public charities that are well known and widely supported have valuable trademarks, reflecting the value of the organization’s goodwill. Many scientific organizations and universities own valuable patents. This has been particularly true since the passage of the Bayh-Dole Act in 1980, which permits nonprofit organizations and universities to patent inventions resulting from federally funded research. Finally, organizations that accomplish their exempt purposes through publishing, broadcast, or other media may own valuable copyrights.

As with any business or investment transaction, a transaction involving intellectual property can be structured in many different ways, and many business and tax considerations are taken into account in deciding on the appropriate structure. Thus, an exempt organization may transfer or assign its intellectual property to a corporation or joint venture in exchange for an equity interest, or it may license its intellectual property to a third party for a royalty payment.

This outline discusses some of the business and tax issues that arise in connection with the exploitation of intellectual property by exempt organizations and considerations in structuring such transactions.

II. WHAT IS INTELLECTUAL PROPERTY?

A. In General

The most common types of intellectual property are trademarks and servicemarks, copyrights, patents and trade secrets. Each of these types of intellectual property is governed by a different set of laws.

B. Patents

A patent issued by the United States Patent and Trademark Office ("USPTO") confers on the inventor certain exclusive rights in his or her invention. To obtain a patent, an application must be filed with the USPTO showing that the invention is patentable. A patent generally will not be granted if the invention has already been patented or described in a publication more than one year prior to the filing of the patent application. The inventor is entitled to own the patent unless he or she has entered into an agreement providing otherwise. Universities, for example, frequently enter into agreements with faculty members regarding the ownership of patents for any inventions arising from university-sponsored research projects and the division of any income earned from such patents.

The property right conferred by the patent grant is, in the language of the statute and of the grant itself, "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or "importing" the invention into the United States. What is granted is not the right to make, use, offer for sale, sell or import, but rather, the right to exclude others from making, using, offering for sale, selling or importing the invention.

Generally, the term of a new patent is 20 years from the date on which the application for the patent was filed in the United States or, in special cases, from the date an earlier related application was filed, subject to the payment of maintenance fees. U.S. patent grants are effective only within the United States, U.S. territories, and U.S. possessions. Under certain circumstances, patent term extensions or adjustments may be available.

There are three types of patents:

  • Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or compositions of matters, or any new useful improvement thereof;
  • Design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and
  • Plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new plant variety.

C. Trademarks and Servicemarks

A trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A servicemark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product. The terms "trademark" and "mark" are commonly used to refer to both trademarks and servicemarks.

Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark.

The basis for enforcing a right to a trademark arises from its use in commerce, not from registration. Trademarks may be registered on the basis of actual use or a bona fide intent to use. If registered on the basis of intent to use, the registrant may file for an extension of time for successive six-month periods up to a period of three years and then must file a Statement of Use, showing actual use.

Trademarks that are used in interstate or foreign commerce may be registered with the USPTO. Registration is not required, but it offers certain benefits.

D. Copyrights

Copyright is a form of protection provided to the authors of "original works of authorship" including literary, dramatic, musical, artistic, and certain other intellectual works, both published and unpublished. The 1976 Copyright Act generally gives the owner of a copyright the exclusive right to reproduce the copyrighted work, to prepare derivative works, to distribute copies or phonorecords of the copyrighted work, to perform the copyrighted work publicly, or to display the copyrighted work publicly. The owner of a copyright is the creator unless the work is a "work made for hire" as defined in the Copyright Act. "Works made for hire" include works prepared by an employee within the scope of his or her employment and certain specially commissioned works if the parties agree in writing prior to creation of the work that it will be treated as a work made for hire. The copyright for a work made for hire is owned by the employer or commissioner of the work.

Unlike a patent that protects an idea, a copyright protects the form of expression rather than the subject matter of the writing. For example, a description of a machine could be copyrighted, but this would only prevent others from copying the description; it would not prevent others from writing a description of their own or from making and using the machine. Copyrights are registered by the Copyright Office of the Library of Congress.

Copyright also differs from a patent in that copyright ownership arises upon the creation of a work and registration is optional. As with trademarks, however, there are certain benefits of registration.

E. Trade Secrets

Comment b to Section 757 of Restatement of Torts (1939) sets forth a definition of a "trade secret" that has been adopted by a number of courts. Section 757 provides, in relevant part:

A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.

The subject matter of a trade secret must be secret. Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret.

Whereas patents, trademarks and copyrights find protection under federal law, trade secrets have historically enjoyed no such protection. Moreover, because trade secrets must be kept secret, there is no uniform procedure for approval or registration of trade secrets.

Notwithstanding the lack of federal protection, most states have enacted laws that define trade secrets and provide for remedies in the event of misappropriation. Common law in many states also recognizes the right of businesses to protect confidential information. As a general matter, if a business has taken reasonable measures to maintain secrecy, valuable business information will be protected.

III. ISSUES RELATING TO TAX-EXEMPT STATUS

The principal issues relating to tax-exempt status that are raised by organizations engaged in the exploitation of intellectual property are whether the organization: (1) meets the primary purpose test; (2) provides more than an incidental private benefit; and (3) engages in prohibited private inurement.

A. Primary Purpose Test

In order to be exempt under Section 501(c)(3), the Code requires that an organization must be organized and operated exclusively for one or more of the purposes specified in Section 501(c)(3), among which are charitable, educational, and scientific purposes. Although the Code provides that a Section 501(c)(3) organization must be operated "exclusively" for exempt purposes, the Treasury Regulations provide that:

An organization will be regarded as "operated exclusively" for one or more exempt purposes if it engages primarily in activities which accomplish one or more of such exempt purposes specified in section 501(c)(3). An organization will not be so regarded if more than an insubstantial part of its activities is not in furtherance of an exempt purpose.

Treas. Reg. § 1.501(c)(3)-1(c)(1) (emphasis added).

In determining whether an organization is operated primarily for exempt purposes, the courts look, not to the activities themselves but, rather, to the purposes for which the activities are conducted. As the Tax Court has stated: "Under the operational test, the purpose towards which an organization’s activities are directed, and not the nature of the activities themselves, is ultimately dispositive of the organization’s right to be classified as a section 501(c)(3) organization . . . ." B.S.W. Group, Inc. v. Commissioner, 70 T.C. 352, 356-57 (1978) (emphasis added).

The determination of whether an organization is operated primarily for exempt purposes generally depends upon an analysis of all the facts and circumstances. In the context of scientific research and publishing, there is significant guidance as to the facts that will be considered in determining the organization’s primary purpose.

B. Scientific Research

1. Public Interest Requirement

The regulations state that "scientific," as used in section 501(c)(3) means "carrying on of scientific research in the public interest." Treas. Reg. § 1.501(c)(3)-1(d)(5)(i). Under the regulations, scientific research will be regarded as carried on in the public interest –

(a) If the results of such research, including any intellectual property derived through the research, are made available to the public on a nondiscriminatory basis;

(b) If the research is performed for the federal government or a state government; or

(c) If the research is directed toward benefiting the public.

Treas. Reg. § 1.501(c)(3)-1(d)(5)(iii). The regulations provide the following examples of the types of scientific research that will be regarded as directed toward benefiting the public:

(1) Scientific research carried on to aid in the scientific education of college or university students;

(2) Scientific research carried on for the purpose of obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form that is available to the interested public;

(3) Scientific research carried on for the purpose of discovering a cure for a disease; or

(4) Scientific research carried on for the purpose of aiding a community or geographical area by attracting new industry to the community or area or by encouraging the development of, or retention of, an industry in the community or area.

Id.

2. Relevance of Ownership of Intellectual Property

a. Commercially Sponsored Research

Research that meets the requirement of benefiting the public, as described in Treasury Regulation Section 1.501(c)(3)-1(d)(5)(iii), will still be so regarded even where such research is performed pursuant to a contract or agreement under which the sponsor or sponsors of the research have the right to obtain ownership or control of any patents, copyrights, processes, or formulae resulting from the research. Id. In order to meet the requirement of benefiting the public, the results of the research must be published within a reasonably short time after completion of the project. Rev. Rul. 76-296, 1976-2 C.B. 141. If patent rights are involved, publication may be delayed for a reasonable time to provide an opportunity to file patent applications. Id.

b. Making Intellectual Property Available to the General Public; Exclusive Licenses

On the other hand, organizations that retain the ownership or control of more than an insubstantial portion of the patents, copyrights, processes, or formulae resulting from its research and do not make such intellectual property available to the general public will not be regarded as conducting research in the public interest. Treas. Reg. § 1.501(c)(3)-1(d)(5)(iv). Thus, scientific research organizations that routinely retain ownership of intellectual property from research must make such research available to the public. Generally, the patent, copyright, or formula must be made available on a nondiscriminatory basis. However, intellectual property will be considered made available to the general public even if it is exclusively licensed to one party if the granting of such exclusive license is the only practicable manner in which the intellectual property can be utilized to benefit the public. In the case of an exclusive license, the research also must be carried on for a governmental entity, as defined in Treasury Regulation Section 1.501(c)(3)-1(d)(5)(iii)(b), or carried on for the public benefit, as defined in Treasury Regulation Section 1.501(c)(3)-1(d)(5)(iii)(c).

3. Exploitation of Intellectual Property as Primary Purpose

As the authorities described below demonstrate, the legal landscape regarding when, and under what circumstances, technology transfer and commercialization activities may constitute exempt section 501(c)(3) activities is not altogether clear.

First, in Washington Research Foundation v. Commissioner, T.C. Memo 1985-570 (Nov. 21, 1985), the Tax Court held that a separate organization formed "to assist the transfer of technology from research departments to universities and nonprofit research institutions to industry" did not qualify as a Section 501(c)(3) organization. In the organization’s application for exemption, the organization stated that its three main goals were: (1) to financially support scientific research at colleges, universities, and research institutions; (2) to increase the rate of technology transfer from research departments of universities and nonprofit research institutions to industry, particularly industry in the State of Washington; and (3) to strengthen and diversify the economy of Washington State. The court found that the organization’s activities were not "scientific" within the meaning of Section 501(c)(3), although the organization did engage in modest educational activities. The court nevertheless concluded that the organization’s major activities were aimed at the production or maximization of profits and the facilitation of commercial development of scientific research for private industry. Therefore, the organization’s activities were not in furtherance of an exempt purpose.

The court also noted that the organization performed a function that the research institutions, which were exempt under Section 501(c)(3), could have performed for themselves. However, as a general matter, performing activities for exempt organizations that such organizations could perform themselves is not an exempt purpose. See, e.g., B.S.W. Group, Inc. v. Commissioner, 70 T.C. 352 (1978) (holding that organization that planned, as its sole activity, to offer consulting services for a fee to exempt organizations did not operate exclusively for charitable, educational or scientific purposes); HCSC-Laundry v. United States, 450 U.S. 1 (1981) (holding that an organization that provides laundry services on a centralized basis to exempt hospitals does not qualify for exemption under Section 501(c)(3)).

In the Tax Reform Act of 1986, Congress provided a specific exemption for technology transfers by the Washington Research Foundation. Pub. L. No. 99-514, 100 Stat. 2085 (1986). However, the legislative history of the Act makes clear that Congress intended no general inference regarding whether technology transfer can be a valid Section 501(c)(3) purpose. See Staff of Joint Comm. on Tax’n, 100th Cong., 1st Sess., General Explanation of the Tax Reform Act of 1986, 1331 (Joint Comm. Print 1987). Therefore, although Congress overturned the result in the Washington Research Foundation case insofar as the case applies to the organization at issue there, the case may remain good law.

Notwithstanding the Washington Research Foundation case, it appears that the Service believes that the performance of technology transfer activities – such as managing intellectual property and facilitating the commercialization of intellectual property – may, under certain circumstances (though not all circumstances), qualify as the performance of exempt Section 501(c)(3) activities. In Private Letter Ruling 9604019 (Oct. 30, 1995), for example, the Service approved of a structure involving a Section 509(a)(3) supporting organization ("N") formed, in part, to "participat[e] and assist[] in technology transfers." N formed a for-profit subsidiary to commercialize technology owned by N and transferred all its rights, title and interests in the technology to the for-profit subsidiary. After concluding that the activities of the subsidiary would not be attributed to N, the Service suggested that N would remain entitled to exemption under Section 501(c)(3) at least in part because of its technology transfer activities:

[B]ecause N [the supporting organization] will continue to administer and develop educational programs and educational materials for M [the supported organization] and participate and assist in technology transfers and the development of small business enterprises including research parks for M’s benefit, N will continue to be a public charity described in section 509(a)(3).

(Emphasis added.) See also PLR 200326023 (Apr. 4, 2003) (involving supporting organization formed to manage intellectual property). Unfortunately, the Service did not discuss the differences between "participating and assisting in technology transfer," which is what N did, and "commercialing" technology, which is what the for-profit subsidiary did.

In its Exempt Organizations Continuing Professional Education Text for Fiscal Year 1999, the Service warned that a Section 501(c)(3) organization’s exempt status may be threatened if it becomes "too deeply involved" in "commercialization projects" that themselves do not satisfy the requirements for treatment as scientific research in the public interest. See Roderick Darling and Marvin Friedlander, "Intellectual Property", IRS Exempt Organizations Continuing Professional Education Technical Instruction Program for FY 1999, Section B [hereinafter "1999 CPE Text"]. The Service reasons that, if commercialization projects consume a substantial portion of the exempt organization’s money, time and efforts, "a plausible argument could be made that [the organization] has a substantial nonexempt commercial purpose." However, the Service notes that, [t]o avoid this possibility, [the organization] may decide to spin off its commercialization efforts to a separately incorporated for-profit subsidiary." (This technique is discussed in greater detail below.)

Without knowing specifically what the Service means by "participating and assisting in technology transfer," as that phrase is used in Private Letter Ruling 9604019, and "commercialization," as that term is used in the letter ruling and the 1999 CPE Text, it is difficult to reconcile the various existing authorities.

4. Exploitation of Intellectual Property as an Insubstantial Purpose

If an organization’s scientific research does not meet the public benefit requirements, whether it will nevertheless qualify for tax-exempt status will depend upon its other activities and whether those activities meet the primary purpose test. The regulations provide:

The fact that any organization (including a college, university or hospital) carries on research which is not in furtherance of an exempt purpose described in section 501(c)(3) will not preclude such organization from meeting the requirements of section 501(c)(3) so long as the organization meets the organizational test and is not operated for the primary purpose of carrying on such research.

Treas. Reg. § 1.501(c)(3)-1(d)(5)(v).

C. Publishing

Another context in which exempt organizations frequently engage in the exploitation of intellectual property is publishing. Often at issue is whether an organization’s publishing activities constitute exempt educational activities or are instead commercial in nature.

In Revenue Ruling 67-4, 1967-1 C.B. 121, the Service considered whether an organization that published a scientific journal qualified for exemption under Section 501(c)(3). The organization was formed to encourage scientific research in, and to disseminate information about, certain disorders. The organization accomplished this objective by publishing and selling below cost a journal containing abstracts of information compiled from other medical and scientific publications. The organization’s staff consisted of leading scientists and teachers, most of whom donated their services. The organization received income from subscription sales, contributions and grants, with its operating deficits covered by contributions.

In the context of analyzing the organization’s publication activities, the Service stated that the publishing of scientific and medical literature qualifies as an exempt Section 501(c)(3) activity if:

(1) the content of the publication is educational,

(2) the preparation of material follows methods generally accepted as "educational" in character,

(3) the distribution of the materials is necessary or valuable in achieving the organization’s educational and scientific purposes, and

(4) the manner in which the distribution is accomplished is distinguishable from ordinary commercial publishing practices.

Id. The Service concluded that distribution of the journal was "charitable" in nature because it provided a public benefit and because the journal was published below cost.

In General Counsel Memorandum 38845 (May 4, 1982), the Service again considered whether publication activities were exempt educational activities. There, a nonprofit corporation was established to publish a literary magazine that had previously been published on a "for-profit" basis (though at a loss). In considering whether the publishing of the magazine constituted an exempt educational activity, the Service applied the four factors set forth in Revenue Ruling 67-4. First, the Service concluded that the organization’s activities are educational "because they provide an effective means for the increased diffusion and application of knowledge." Second, the preparation of material followed methods generally accepted as "educational" in character, because: the governing body consisted of leading experts; the articles to be published were selected by an independent advisory board; the articles would be on issues of public policy rather than topics of popular mass appeal; and the articles would be written by leading authors, journalists, etc. Third, the distribution of the materials was necessary or valuable in achieving the organization’s purposes, because, without the publication, the organization’s goal of promoting public appreciation of policy questions in the arts and humanities could not be served. Fourth, the Service concluded that the activity satisfied the final requirement of Revenue Ruling 67-4, i.e., that the manner in which the distribution is accomplished is distinguishable from ordinary commercial publishing practices.

In performing the analysis under this fourth factor, the Service described five practices or characteristics that have been considered to reflect a purpose to engage in publishing for ordinary commercial gain:

(1) conducting as its sole activity publishing activities using standard commercial techniques which generate ongoing profits;

(2) pricing its materials ‘competitively’ with other commercial publications or to return a profit;

(3) conducting an enterprise in a manner in which all participants expect to receive a monetary return;

(4) publishing its materials almost exclusively for sale, with only a de minimis amount of material donated to charity;

(5) existing or accumulated large profits[] and accumulating profits from sales activities which are greatly in excess of the amounts expended for educational programs.

Id.

The presence of a profit, however, will not necessarily cause an organization engaged in publishing to fail to qualify for exempt status. See, e.g., Presbyterian & Reformed Publ’g v. Commissioner, 743 F.2d 148 (3d Cir. 1984); Elisian Guild, Inc. v. United States, 412 F.2d 121 (1st Cir. 1969).

Moreover, Revenue Ruling 67-4 deals with an organization whose sole activity was publishing. To the extent that an organization engages in activities in addition to publishing, the four factors in Revenue Ruling 67-4 are arguably of less importance.

D. Private Benefit Test

The regulations further provide that an organization is not organized and operated for one or more of the specified purposes unless it serves a public rather than a private interest. Treas. Reg. § 1.501(c)(3)-1(d)(1)(ii). Thus, an organization will not qualify for exempt status under Section 501(c)(3) if it confers more than an incidental private benefit. An incidental benefit is one that is a necessary concomitant of benefiting the public at large. For example, payment of reasonable compensation to faculty members, employees or third parties is an incidental benefit. A private benefit could result, for example, where a private company receives, without charge, the results of research performed by an exempt organization. See, e.g., Universal Oil Prods. Co. v. Campbell, 181 F.2d 451 (7th Cir. 1950).

In addition to the general prohibition against conferring more than incidental private benefit, the regulations regarding scientific research organizations describe certain organizations that, per se, will not be regarded as carrying on scientific research in the public interest. By implication, the activities of such organizations may be regarded as serving private interests more than incidentally, in violation of Section 501(c)(3). These include organizations that:

(1) will perform research only for persons which are (directly or indirectly) its creators and which are not described in Section 501(c)(3); or

(2) retain the ownership or control of more than an insubstantial portion of the patents, copyrights, processes, or formulae resulting from its research and do not make such intellectual property available to the general public.

Treas. Reg. § 1.501(c)(3)-1(d)(5)(iv).

E. Prohibition Against Private Inurement

An additional requirement for exemption under Section 501(c)(3) is that no part of the net earnings of the organization inure to the benefit of any private shareholder or individual. For this purpose, private shareholder or individual refers to persons having a personal and private interest in the activities of the organization – persons who are sometimes referred to as "insiders." This issue most typically arises in the context of compensation and is discussed below in connection with sharing royalties with inventors.

IV. UNRELATED BUSINESS INCOME TAX ISSUES

A. Overview

If exploitation of intellectual property does not jeopardize an organization’s exempt status, the question then becomes whether the income derived from commercialization of intellectual property is subject to the unrelated business income tax ("UBIT"). The first inquiry is whether the activity constitutes an unrelated trade or business. If the answer is no, then the income is not subject to UBIT, and that is the end of the analysis. If the answer is yes, then the income is unrelated business taxable income ("UBTI").

Nevertheless, the income may not be subject to UBIT because, in computing UBTI, there are a number of exclusions that are applicable to intellectual property transactions. See Section 512(b). Thus, the income may be excluded from UBTI even though it is derived from an unrelated trade or business. This favorable tax treatment creates an incentive to structure transactions to fall within these exclusions.

B. Imposition of UBIT

UBIT is imposed on the UBTI of most organizations described in Section 501(c). Section 511(a). UBTI is defined as the gross income derived by any organization from any unrelated trade or business. Section 512(a). There are three criteria for an "unrelated trade or business," all of which must be met in order for income derived from the activity to be subject to UBIT. To be an "unrelated trade or business," an activity must be (a) a trade or business; (b) that is regularly carried on; and (c) that is not substantially related (aside from the organization’ need for funds) to the exercise or performance of its charitable, educational, or other purpose constituting the basis for its exemption. Section 513.

In determining whether an activity is an unrelated trade or business, each factor must be separately evaluated. (Of course, if it is clear that income fits within one of the exclusions, then the question of whether the activity is an unrelated trade or business is academic.) Where commercialization of intellectual property is the activity in question, the trade or business requirement and the regularly carried on requirement will normally be satisfied and the analysis will turn on whether the activity is related to the organization’s exempt purposes. This determination requires an examination of the relationship between the business activities which generate the particular income and the accomplishment of the organization’s exempt purposes. Treas. Reg. § 1.513-1(d)(1). To avoid characterization as income from an unrelated trade or business, the activity from which the income is generated must contribute importantly to accomplishment of the organization’s exempt purposes. Treas. Reg. § 1.513-1(d)(2). These determinations are very fact specific, and it is impossible to generalize even about categories of exempt organizations. An activity that is related to the exempt purposes of one organization is not necessarily related to the exempt purposes of another organization. For example, the Service held that the sale of scientific books by a folk art museum was not related to the museum’s exempt purpose, although such sales might be related to another organization’s exempt purpose. Rev. Rul. 73-105, 1973-1 C.B. 264.

If an unrelated trade or business is conducted by a partnership or a limited liability company treated as a partnership for tax purposes, the exempt organization’s share of partnership income is included in UBTI. Section 512(c). This is true even if the exempt organization is a limited partner with an entirely passive stance toward the partnership. Rev. Rul. 79-222, 1979-2 C.B. 236. Of course, as with income earned directly by an exempt organization, income from a partnership may, under certain circumstances, be excluded in computing UBTI under Section 512(b).

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however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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