4 ms·

Usually the tricky part is when you have to decide licensing. Eg for Amazon, most of (all?) the site is developed in the US, so every local subsidiary has to li

by tonfa 11y ago

Usually the tricky part is when you have to decide licensing. Eg for Amazon, most of (all?) the site is developed in the US, so every local subsidiary has to license it. How much this license is worth is the whole question. Some gov would like to say 0, so they can get a higher share of the tax, companies might say it is worth all their local income (so they pay 0 tax locally). The truth is probably in between. Other issue might be that this IP often ends up being owned in a tax heaven, instead of the US which would be the logical owner.

sokoloff 11y ago
Exactly. To put it even more explicitly, imagine that Google adwords system is solely created in the US. Now, Google wants to start selling ads in Spain. Should google.es pay anything for the IP underlying adwords? (I think they should; otherwise, there's a massive distortion in profitability and the US would cry foul that all the expenses are being borne in the US subsidiary and google.es is artificially highly profitable.) Now, in order to manage that licensing activity (which can be very lucrative, but also requires specialized expertise and some risk), Google decides to set up a licensing division to manage all this. In researching this, suppose they hypothesize that that IP labor and expertise is available in Ireland and decide to setup the IP licensing activity in Ireland. Google's Irish licensing division could negotiate a sub-licensable license from Google in US, then turn around and license it to Google (and perhaps other) companies around the world. Every player in that chain is creating value and it is perfectly proper for Google to create IP, to create a subsidiary to license that IP, and to license and deploy that IP in Spain; the question is "how much value did each entity contribute?"

4 ms·

Usually the tricky part is when you have to decide licensing. Eg for Amazon, most of (all?) the site is developed in the US, so every local subsidiary has to li

by tonfa 11y ago

sokoloff 11y ago
Exactly. To put it even more explicitly, imagine that Google adwords system is solely created in the US. Now, Google wants to start selling ads in Spain. Should google.es pay anything for the IP underlying adwords? (I think they should; otherwise, there's a massive distortion in profitability and the US would cry foul that all the expenses are being borne in the US subsidiary and google.es is artificially highly profitable.) Now, in order to manage that licensing activity (which can be very lucrative, but also requires specialized expertise and some risk), Google decides to set up a licensing division to manage all this. In researching this, suppose they hypothesize that that IP labor and expertise is available in Ireland and decide to setup the IP licensing activity in Ireland. Google's Irish licensing division could negotiate a sub-licensable license from Google in US, then turn around and license it to Google (and perhaps other) companies around the world. Every player in that chain is creating value and it is perfectly proper for Google to create IP, to create a subsidiary to license that IP, and to license and deploy that IP in Spain; the question is "how much value did each entity contribute?"