By Dennis Crouch
Like many universities, Princeton University (my Alma Mater) receives millions of dollars in patent royalty revenue. By agreement, some of that money goes directly to individual inventor/professors as an equity-type profit distribution compensation. In an interesting lawsuit, a coalition of local citizens has partially challenged the private university’s New Jersey Non-Profit status based upon this profit-sharing arrangement and other commercial activities of the University. The basic idea here is that Princeton should be paying local property taxes on facilities used for commercial profit-making. In the plaintiff’s words, “under the law they are not even entitled to a tax exemption because they are engaged in commercial patent licensing, and the school give out a percentage of profits to faculty. Under the law in New Jersey, if a nonprofit gives out profits, it is not entitled to an exemption at all.” The case is now moving forward after the NJ court denied Princeton’s motion on the pleadings.