Royalty Sharing
KSURF takes the financial risk in protecting and commercializing K-State-owned IP. When successful, the returns are shared with the inventors/creators, their department or administrative unit, and the University. In addition, KSURF’s commercialization partner, NISTAC, shares in the return.
All K-State inventors/creators must agree upon how they will split the inventor/creator share of licensing revenue prior to any distribution.
For patented IP, the inventors/creators must also agree upon the department split if they are from more than one department or administrative unit. For non-patented IP, the University will determine how funds remaining after normal distributions will be shared.
These allocations are documented through the Intellectual Property Assignment and Royalty Agreement which is signed by all inventors/creators, their respective department heads, deans and the Vice President for Research. No distributions will be made until the agreement is completed.
Royalty Distribution
KSURF distributes licensing revenue according to the Kansas Board of Regents’ IP Policy and the K-State Intellectual Property Policy along with certain policies enacted by the KSURF Board. Distributions are based on license income less direct out-of-pocket costs such as legal fees. In general, distributions are made according to the following schedules.
| PATENT ROYALTY DISTRIBUTION SCHEDULE | ||||
| Annual Royalty Income | Inventor Income | Inventor Department Income | Licensing Contractor | Research Foundation |
License Signing Fees < $100,000 > $100,000 Ongoing Licensing Revenue < $100,000 > $100,000 |
25% 35%
25% 35% |
10% 10%
10% 10% |
20% 20%
10% 10% |
45% 35%
55% 45% |
| NON-PATENTABLE ROYALTY DISTRIBUTION SCHEDULE | ||||
| Annual Royalty Income | Creator Income | University | Licensing Contractor | Research Foundation |
License Signing Fees < $100,000 > $100,000 Ongoing Licensing Revenue < $100,000 > $100,000 |
25% 35%
25% 35% |
40% 30%
50% 40% |
20% 20%
10% 10% |
15% 15%
15% 15% |
The KSURF Board increased the inventor/creator share to 35% of annual royalty income for agreements that generate $100,000 and above beginning with calendar year 2008. The increase is intended to better compensate those inventors with high value technologies.
KSURF distributes cash royalties quarterly on April 1, July 1, October 1 and before the winter break.
While KSURF prefers cash payments from licensees, equity may be accepted as partial consideration for a license. When equity is received, it is held by KSURF until it becomes liquid (e.g. the company goes public or is sold). Upon liquidation, equity is distributed to the inventors according to policy.
Distributions are not affected should the inventor leave the University. The inventor will continue to receive his/her share as will the appropriate department or administrative unit.
Tax Treatment
Royalties are considered personal income and as such, inventors are responsible for any taxes owed. Section 1235 of the Internal Revenue Code of 1986, as amended, permits an inventor of a patent right to receive capital gains treatment for income derived from the patent right if he/she transfers substantially all rights to the patent to a third party, e.g. when an inventor assigns ownership of the patent to KSURF. Payments relating to patents are reported as “Other Income” in Box 3 of Form 1099-MISC.
Special rules apply to non-resident aliens that may require a different form of reporting, or even tax withholding, depending on the individual’s country of residence. Most payments to non-resident aliens will be reported as “Industrial Royalties” on Form 1042-S.
This information does not constitute tax advice; recipients of royalty distributions should consult their personal tax professional for such advice.
Non-KSU Inventors/Creators
In some instances, inventions are co-owned with other institutions. Co-inventors at other institutions will receive revenue under their institutions’ policies. KSURF will enter into an Inter-Institutional Agreement with the other institution under which expenses and income will be shared and responsibility for patenting and commercialization will be assigned.
This explanation covers the customary distribution process. For more detailed information, please go to the Policies section of our website.