What useful life is used to amortize legal costs related to the successful defense of a patent?
It is important to understand that legal fees for a patent that is successfully defended can be capitalized. The estimated useful life should be the lesser of the economic life or the remaining legal life of the patent.
For example, if the patent has 10 years left but the company thinks the patent will only be valuable for 8 more years, then the company should amortize the legal costs over 8 years.
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In a patent infringement lawsuit, should the legal fees be capitalized?
If a company incurs legal fees related to a patent infringement lawsuit, the legal fees should only be capitalized if the company successfully defends their patent (i.e. they win). If the company unsuccessfully defends, then the company expenses the legal fees in the period incurred.
If a company loses a patent infringement lawsuit, should the legal fees be expensed or capitalized?
When a company loses a patent infringement lawsuit, meaning they unsuccessfully defended their patent, then any legal fees should be expensed in the period incurred. A company would only capitalize the legal fees if they successfully defended their patent.