Treasury department and IRS launch review of cross licensing arrangements: detailed information requested from business community

On Mar 15, 2006, the US Department of the Treasury and the Internal Revenue Service issued Notice 2006-34 requesting public comments on cross licensing arrangements (CLAs). The Notice requests information across a broad range of issues, including the commercial circumstances that underpin the decision for companies to enter into CLAs, the parameters of CLAs, other agreements to which CLAs might be analogized, the methods by which industry sets values on the rights to CLAs and the appropriate US federal tax treatment and consequences of CLAs. The Notice requests the public to provide information on more than a dozen subjects, along with sample agreements and any corporate policy guidelines relating to the strategy and negotiation of CLAs. Authorities in the field of intellectual property law indicate that CLAs have been a routine part of business operations for decades. The Notice strongly suggests that the guidance process is well underway.