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Let's say that I as a single individual invent something. Can I sell this invention to a non-profit company, (as in the rights, patents, and/or other protections)? If I can sell it, is there a limit on how much I should ask for? I know that donations can be tax deductible if the "bulk" of them are not solely reserved for a single person; however since this would be a large amount of money to a sole individual I'm not sure. Would that negate any of the donations made by donators? Could the non-profit raise money solely for this purchase and have all of the donations still be tax deductible?

Most of my searches returned results for paying staff or executives; which I am neither.

As an afterthought, could I potentially create some legal entity with me and someone/people I really trust so that the whole stipulation of "bulk of the donation must not be for a single individual" can be avoided?

Edit: Found one of the pages I was looking for: Exemption Requirements - 501(c)(3) Organizations

To be tax-exempt under section 501(c)(3) of the Internal Revenue Code, an organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3), and none of its earnings may inure to any private shareholder or individual.

This is where I get hesitant as I don't really know tax laws at all. It says that a nonprofit's earnings can't inure to an individual.

quid seems to have had a good idea. Could becoming some kind of commercial/corporate business keep the nonprofit safe for this kind of purchase? I'm leaning towards yes since they would be selling to a legal entity and not an individual; however there's that whole "I don't know tax laws at all" statement hanging about.

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    Do you have a specific nonprofit in mind, and why would they want to buy your invention? – Henning Makholm Jun 16 '18 at 10:55
  • I was trying to avoid specifics so that the question could be usable by anyone else in my situation. Specifically though, the EFF would be the nonprofit and my technology would help protect users on the internet. Whether or not they would want to purchase the technology is a different question. I've considered just releasing the technology, but I've been unemployed for almost 20 months now, so I'm looking to sell it right now. I'm also afraid of others patenting the idea since it's very novel right now. The law is first to patent currently and not first to invent anymore. Last I looked. – Blerg Jun 18 '18 at 5:51
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A nonprofit can own, buy, and enforce patents if its competent bodies (e.g. its board of directors) decide that doing so is an appropriate way to further its mission.

As far as tax rules go, spending money to buy a patent is not in principle different from paying a vendor for office supplies, or paying a staffer wages for their time.


That being said, your plan of selling a patent to EFF doesn't sound like it has much chance of succeeding. They certainly wouldn't want to buy a patent as an investment; on the contrary EFF is an outspoken critic of the patent system.

The only arguable benefit EFF would get from owning a patent would be if you have a credible threat that if they don't pay you, you would start suing them or others for royalties for using your wonderful idea (or that you would instead sell the patent to someone else who would). And if you did have such a threat, giving in to it doesn't strike me as the way the EFF usually rolls. If they even cared about the idea, it would seem more likely that they'd decide to put their legal mojo to work on getting the patent invalidated.

  • See If I don't want to patent something, what can be done to ensure the patent office doesn't unintentionally grant the patent to someone else?... it's conceivable (though probably unlikely) that they may want to own the patent to prevent others from doing so, so that they can then allow free use of what's been patented. Whether they'd pay money to achieve this is debatable. – TripeHound Jun 18 '18 at 15:23
  • A good example of a nonprofit holding, enforcing, and licensing patents are universities, who often patent their researchers' inventions and then license them. – PersonX Jun 18 '18 at 16:30
  • From that EFF link: "Below, we explain these problems in more detail, and why we believe it’s time to start over. Patents are supposed to help encourage the development and sharing of new technologies. In the coming months, we will be rolling out a set of new tools and techniques that we believe can help shift the patent system in the right direction." They're critics of BAD patents. – Blerg Jun 19 '18 at 5:13
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It is for exactly this reason that one cannot simply decide to be a non-profit. There is a vetting process and if your charitable mission is "to allow people to 'donate' money to me instead of buying something from me" it's not likely to be approved.

Odds are, if someone is buying some inventions from you on a scale large enough for you to begin to think this way, it's probably a business expense to them anyway which would be deductible from income anyway; so there's nothing to be gained from this scheme here. The proceeds from the sale would be income to you, from which you could then deduct your business expenses; again if this is at the scale that you're concerned about the tax consequences of this transaction, you've likely incurred some deductible expenses through the process of this asset's creation.

For business, taxes are due on income net of expenses. For non-profit organizations, they're simply required to deploy earnings for the furtherance of their charitable mission which results in no taxable income. To your point donors couldn't deduct their expense, but in this situation, it's not likely your IP will sell to a group of strangers.

  • I'm not looking to be a non-profit at all. As a single entity, I want to sell some IP specifically to a non-profit. I'm looking to see if that would be viable without harming the non-profit by selling them something. – Blerg Jun 16 '18 at 1:03
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    Obviously non-profits have vendors... – quid Jun 16 '18 at 1:24

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