united-states, accounting, patentMy startup is a C Corporation in the United States, and it filed for a utility patent this past fiscal year. Clearly a patent becomes a core intangible asset of the business, so its expenses need to be capitalized rather than deducted. However, the patent filing process is lengthy. At this point, of course, we don’t know if the patent will issue or not, and the expenses related to obtaining the patent have not ended yet.
The startup already has released a web service whose method embodies the pending patent. So my questions are:
Confirm: Since the patent is our company’s own creation (see IRS Publication 535), the patent is intangible, but not section 197, and its value gets amortized over its useful life, which extends until the expiration of the patent (typically 20 years after filing).
When does the useful life of the patent begin – upon issuance, or the filing date? (A book called the U.S. Master Depreciation Guide suggests it’s now the filing date.) If it starts on the filing date, do we start amortizing it before we know whether it issues?
Are both direct filing fees and legal fees treated the same way?
Not all the costs related to obtaining the patent are known at this point, even though we’ve already filed. Several months after filing, I paid an additional fee for the filing of an Information Disclosure Statement. In another year or two, I expect to pay fees for the first office action. Does each of these little expenses need its own line on Form 4562, with a different life span (the remainder of the supposed life of the patent)?
What would we do with the capitalization or amortization we’ve already done if the patent application later would get rejected?
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