October 2026:
Who Owns the Innovation?
From the Desk of Priya Prakash Royal, Esq., LL.M., MBA, AEP, TEP
Many families recently celebrated Ganesh Chaturthi, a Hindu festival honoring Lord Ganesha and the wisdom to recognize and remove obstacles.
That principle has particular meaning in my work.
When a founder develops an invention, a family reorganizes its holdings, or a company prepares for investment or expansion, I ask:
What obstacles must be considered before moving forward?
Who created the asset? Who owns it? Is that ownership documented? What happens if its value increases? Could a transfer create tax consequences? Does another jurisdiction now have an interest?
These questions rarely belong to only one discipline. This month, Royal Law examines three important intersections: proving human invention in the age of artificial intelligence, reorganizing a business without losing sight of its underlying assets, and managing ownership across borders.
I hope you find this edition useful and share it with someone preparing for an important decision.
AI Can Assist. It Cannot Be the Inventor.
The USPTO’s revised guidance confirms that the usual inventorship standard applies even when artificial intelligence contributes to the development process. Only a natural person—not an AI system—may be named as an inventor.
The practical issue is evidence.
A founder may remember directing the AI system, refining its output, identifying the technical problem, or transforming a generated concept into a working invention. Months later, when patent counsel must determine inventorship, those contributions may be difficult to reconstruct.
Organizations using AI in research and development should consider preserving:
- The problem initially presented;
- The human decisions that shaped the process;
- Significant prompts and iterations;
- The individuals who evaluated or modified the output; and
- Laboratory notes, source-code history, and design records.
Employee and contractor agreements should also address confidentiality and ownership before development begins.
The lesson is not to avoid AI. It is to document the human contribution while the work is taking place.
Read the USPTO’s Revised Inventorship Guidance
Explore the USPTO’s AI Resources
Before a Reorganization, Identify What Is Actually Moving
A business reorganization may be described as a conversion, contribution, merger, transfer, consolidation, or change in ownership.
The documents may move shares or membership interests. The underlying value, however, may reside somewhere else:
- Intellectual property created before the company existed;
- Software developed by contractors without complete assignments;
- A trademark registered to an individual founder;
- Customer or licensing agreements containing transfer restrictions; or
- Data subject to privacy or contractual limitations.
Before selecting a structure, decision-makers should map four things:
- Ownership — Who legally owns each important asset today?
- Control — Who may use, license, transfer, or restrict it?
- Value — Where is the enterprise’s value actually concentrated?
- Consequence — What changes for tax, contracts, governance, and future transactions if an asset or entity moves?
A reorganization should reflect the economic and operational reality of the business. Otherwise, the new organizational chart may appear cleaner while the underlying ownership remains unresolved.
Accurate basis and transaction records also matter because they affect the calculation of gain or loss when property is later transferred or sold.
Read the IRS Explanation of Basis and Recordkeeping
Read: Before the Exit—QSBS for Founders
Cross-Border Ownership Is More Than a Tax Question
A U.S. company that engages an Indian developer, accepts foreign investment, licenses technology internationally, or makes payments to an overseas affiliate may become cross-border before anyone formally decides to “go global.”
The first question is often tax. It should not be the only one.
The analysis may also involve:
- Whether intellectual-property rights were effectively assigned;
- Where development and management activity occurred;
- Whether a payment is for services, royalties, equity, or something else;
- Foreign-investment and reporting requirements;
- Transfer pricing between related parties;
- Data-protection obligations; and
- Whether the activity creates tax residency or a permanent establishment.
India’s foreign-exchange framework continues to evolve. Amendments made during 2026 affected aspects of payment and reporting for non-debt investments. India is also implementing its Digital Personal Data Protection framework in stages.
The important lesson is not that every cross-border arrangement creates a problem. It is that ownership, payment, data, and regulatory treatment should be examined together—and under the current rules—before the structure becomes difficult to change.
Royal Law addresses the U.S. legal and tax analysis and works with Desai & Associates and appropriately licensed Indian professionals where Indian-law advice is required.
Review the RBI Foreign-Investment Direction
Review India’s Digital Personal Data Protection Materials
Beyond the Model
On September 28, Priya participated in the GACVA Around the Valuation World® international webcast and presented “Beyond the Model.”
One principle from the program applies beyond valuation:
A model can calculate value. It cannot establish ownership.
Before relying on the valuation of intellectual property or a closely held business, advisors should ask whether the client owns the asset, whether that ownership can be proven, whether agreements limit its transfer, and whether the assumptions reflect how the business actually operates.
Legal, tax, valuation, financial, and technical professionals see different parts of the same decision. The analysis becomes stronger when those perspectives are tested together.
Learn More About NACVA and GACVA
Around Royal Law
Royal Law’s patent and intellectual-property matters are handled by Julie E. Kurzrok, Esq., Patent & Intellectual Property Counsel and a USPTO-registered patent attorney.
Julie advises founders, inventors, and technology companies on patents, trademarks, licensing, portfolio management, ownership, and commercialization.
Explore Royal Law’s Innovation and IP Practice
Read: Missing in AI Action—Tax Risk for Investors in Intellectual Property
Klexa Beat and KaleidoSpark
Klexa Beat launches this October with concise educational briefings on law, tax, finance, innovation, governance, technology, and family systems.
KaleidoSpark continues that educational mission for young creators, introducing practical principles of authorship, attribution, copyright, trademarks, and responsible publishing.
Visit Klexa Beat
Subscribe to Klexa Intersections on YouTube
Working With Royal Law Firm
If these questions bring to mind a client, colleague, founder, family, or business preparing for an important decision, Royal Law welcomes the conversation.
You do not need to determine whether the matter is primarily tax, intellectual property, business, valuation, estate planning, or cross-border before making an introduction. Royal can assess what needs to be examined and work alongside the professionals the client already trusts.
Learn About The Royal Method
Review Royal Law’s Practice Areas
Begin an Inquiry
An email to contact@royalesq.com is enough to begin.
ROYAL LAW FIRM PLLC
Private Client Services | Wealth, Business and Philanthropy Counsel
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contact@royalesq.com
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Royal Law Firm PLLC is licensed to practice in the District of Columbia, New York, New Jersey, Maryland, and Pennsylvania. Matters requiring advice concerning another jurisdiction are handled with appropriately admitted counsel.
This newsletter is provided for educational and informational purposes only and does not constitute legal, tax, investment, or financial advice. Receipt does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.
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