Patents on Tax Reduction Strategies a Problem

EsonLinji writes "The International Herald Tribune has an article about how some lawyers are realising that patents on tax reduction strategies (a business method) might be a problem. The article states that there are already 50 such patents with more on the way, and at least one lawsuit. Particularly worrying is the idea of needing a license to follow the law. Fortunately, some of the laws get that this is a problem. Tax patents, the lawyers wrote, amount to 'government-issued barbed wire' to keep some taxpayers from getting equal treatment under the tax code."

Comments

Re:What the...?

[cpt kangarooski]

No you can't. Patents apply to use of the patented invention, whether commercial or not. Take a look at 35 USC 271(a). There is an exception for experimental use, but it is extremely limited, and ordinary people who merely wanted to use the patented method would never win on that basis.

Notes From the Field

[wol]

Disclaimer - I am a tax lawyer

We've been discussing this internally for a few months now. Looking at the patent applications involving tax, we saw three categories of items:

(1) claims on how to implement data tracking systems in order to pay taxes (think programs for calculating sales taxes depending on where the product is shipped).
(2) claims on automating how to think through the tax consequences of a business deal (wow, if you do it with a database rather than pencil and paper, that should be patentable, right?) Side note: The hard part is not the algorithm, the hard part is getting the data and keeping it up to date.
(3) claims on a certain sequence of transactions that are claimed to be non-obvious and achieve lower taxes than a different sequences of transactions.

These have all the same problems that the software industry is dealing with: Some of this stuff has been done for decades, but is not "obvious" to a patent examiner.

A lot of these seem to be filed for patent troll purposes - if the patent office grants the application, then the patent holder will show up at the big accounting firms and demand a payoff.

There are a couple of interesting additional twists when this stuff starts getting applied to things like tax law. The first relates to type 1 claims (e.g. data tracking implementations). Here is where we argue that the patent system should not be allowed to put roadblocks on people's attempts to follow the law (and we are not even talking about gaming the system, just trying to be legal).

The second tax law specific twist relates to telling the government about your new tax planning idea. A competent government would look at the idea, decide if it should be allowed, and if it doesn't like the idea, change the tax law even before the patent is granted. [Yes, you can argue whether the US has competent government, but hey, we can talk hypothetically.]

I generally agree that the patent system is broken, we've just found additional ways to demonstrate that fact.