Brown Company is a domestic company engaged in the pharmaceutical business. In response to world demand, Brown has made some progress at its research laboratory in Dallas towards the development of a flu vaccine. Its team of five technicians believe there is some promise in the basic research they've conducted so far, but they have not even gotten to the point of testing a model vaccine, let alone thinking of obtaining a patent. Brown has research facilities in Ireland and a large drug manufacturing operation in Dublin. Management would like the Irish subsidiary employees to further participate in the development of a safe marketable flu vaccine. Moreover, the vaccine would be manufactured in Ireland for distribution throughout the world so any patent would need to be used by the Irish subsidiary.

Management has asked your tax advice as to how you might go about structuring the above. The law department believes that Brown Company and the Irish subsidiary may jointly own any patent for the vaccine if the research efforts are successful. Your manager directs you to think about how a cost sharing arrangement may be used in this situation. If a cost sharing arrangement could be used, describe how it would work and what important issues need to be worked out.