We have bought copyrighted artwork. We use images of this artwork to
produce PC boards. We treat this copyrighted artwork as capital property
for IRS purposes. Are there any tax cases or rulings that relate to this
or prohibit this treatment? We were audited by the Feds five years ago
on this and passed. We were audited by the state last year and passed.
We are preparing for another federal audit in which they are questioning
our capital treatment of this artwork. If they have changed the rules, I
need to know before we go in.
Below are some messages posted to the IPC TechNet forum on this
subject. If you have any further insight into this matter, your reply
will be appreciated.
Thanks,
--- Chris Stack
--- Ext. 231
--- [log in to unmask]
--- CD Electronics, Inc.
--- Printed Circuit Board Designer and Purchasing Agent
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Originally From: Pamela Samuelson -- Cornell Law School -
Forum: Copyright Law
Date: Thu Apr 25 09:21:43 1996
Subject: Copyright on Wiring Boards
There is, in my view, no chance whatsoever to claim copyright
protection on the layout you describe. Recall that back in the
late 1970's and early 1980's, Intel tried to get copyright
protection for the layout of semiconductors in chips by first
claiming copyright in the drawings of the chip layout (no
problem), then trying to register copyright in the masks made from
the drawings as a derivative work of a copyrighted work that
embodied the same expression (the Copyright Office refused), and
asserting that the chip layouts themselves were also protectable
by copyright law as yet another derivative work (also refused by
the Copyright Office).
This kind of work would fall under the category of pictorial,
sculptural, or graphic work, and is therefore subject to the
useful article limitation. I don't perceive from your statement
how there could be any expression separable from the utilitarian
design elements for copyright law to protect.
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I posed this question to a board house I know.
Their response was from a different angle. They can understand very
well
why someone would want to copyright a physical PCB. But, since
copyright
covers literary, dramatic, artistic or musical works, it seemed
impossible
for them to copyright the physical board.
They tried to skin the cat another way. They took one step back in
the
process to the artwork. If they could control the artwork through
copyright, then they could control the board.
AHA, they thought! Now, they had something! BUT, Uncle Sam came in
and
declared that artwork for PCBs is considered a "TOOL". If they
wanted to
declare the artwork "COPYRIGHTED", their TAXES changed. They have
been
fighting the IRS on this for a couple of years.
Combine the above with your explanation below, it sounds like the
IRS is
perfectly willing to forgo the artistic expression argument side of
things
just so they can get their hands on more money. I'd be careful on
this
one!
______________________________ Reply Separator
_________________________________
Subject: Copyright on a PWB (fwd)
Author: [log in to unmask] at internet-mail
Date: 4/24/96 10:50 AM
This response comes from my husband who is an attorney. It is a follow
up to the copyright discussion from last week.
-----------------------------------------
Regarding whether copyright will protect the design of a PWB, the
answer is "it depends." But first the disclaimer: This is an off
the cuff answer to a theoretical question. Do not treat it as
legal advice.
As a general matter, copyright covers "original works of
authorship in a tangible medium of expression." A creative
designer could use a PWB as a canvas for his or her artistic
efforts. In that case, the PWB would be subject to copyright
protection because the board would be the expression of the
author's ideas. But that is not much help to the industry.
A utilitarian PWB designed not for aesthetics but to a customer's
specs for a given product, presents a harder question. To the
extent the designers make creative decisions in the path layout
that are _not_ dictated by engineering considerations, the board
could be subject to copyright protection. If, however, the paths
are placed based on an algorithm designed to create the shortest
paths over the least surface area, with the least thermal
radiation, etc., the "expression" will have "merged" into the
design of the product and there will be no copyright. This is why
things like the recipes, lists of ingredients and telephone
directories generally do not have copyright protection.
I will post this question to an on-line forum for copyright
lawyers and see if the answers are different.
Larry Friedman
Barnes Richardson and Colburn
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