A lawsuit in the Tax Court of New Jersey could throw a very large wrench into university-based technology transfer operations. The suit, against Princeton University, says its technology commercialization operations are functionally equivalent to a for-profit research institute, and that the millions a year it brings in from licensing and then distributes, in part, to faculty inventors should disqualify it from state property tax exemption. Princeton counters that its primary mission remains educational, not profit-focused, and that it’s thus entitled to tax-exemption despite its licensing income and its mandated compliance with the Bayh-Dole Act’s revenue distribution requirements.
The suit has been lingering for some time, but recently has become a more realistic threat not only to TTOs in New Jersey, but across the U.S. Princeton has failed twice in attempts to have the lawsuit dismissed, and now the court is weighing its latest attempt — which says the plaintiffs, residents of Princeton who case the court can address. The court’s ruling on that motion is due in mid-January — and tech transfer offices may not like the result. The judge overseeing the case — the one who just refused to dismiss it — said in so doing that “there’s a lot riding on this, not just for this university or for every university in the country, but for non-profits as a whole.” The case, the judge added, “is going to have a very, very deep” impact.
The gist of the case, says plaintiff attorney Bruce I. Afran, is this: “Princeton is engaging in very extensive commercial activity, literally to the tune of hundreds of millions of dollars every year, yet it’s claiming a complete property tax exemption. The suit challenges that exemption because Princeton is using much of the campus for commercial activity and because it gives profits out to faculty.”
If Princeton loses its property tax exemption, Afran calculates, it would owe the state about $30 million to $40 million a year minimum — an amount he says would be “a very fair exchange for the right to earn royalties.” An article detailing the claims and counter-arguments being made in the case, and addressing its potential implications for all TTOs, appears in the December issue of Technology Transfer Tactics. To subscribe and access the full article, CLICK HERE.