Notes New York Times columnist Floyd Norris: “Now you may face a patent infringement suit if you use a tax strategy someone else thought of first. …a federal appeals court ruled in 1998 that business methods can be patented, and since then the Patent Office has issued 49 tax-strategy patents, with many more pending.” Paul Caron has more (Oct. 20; Floyd Norris, “Patent law is getting tax crazy”, NYT/IHT, Oct. 19; Slashdot).
P.S. At Slashdot, commenter msobkow writes: “Patience. It’s a matter of time before the remains of SCO patent the use of patent lawsuits as a business model. The hope would be to get into a lawsuit over that patent, creating a potential infinite recursion and thereby an infinite revenue stream out of thin air.”
6 Comments
I predict congress will allow tax patents, because doing so will lead to an increase in tax revenue. It will increase tax revenue because:
1. Fewer people will use tax reduction strategies, because of the cost of paying for the patent. Reduced use of tax reduction strategies will lead to increased tax revenue.
2. The income earned on the use of the patent is taxable. Thus the use of a patented tax reduction strategies provides greater tax revenue than the unpatented use of this strategy.
3. Of course, if this law leads to creation of tax strategies which would not have been created without the patent law, then the revenue lost as a result of these new tax strategies could be greater than the revenue gained from items 1 and 2. However, in my opinion, I don’t think this law will lead to greater innovation of tax strategies.
Ms. Ellen Aprill, in her July 13, 2006 testimony to congress seemed to predict a reduction in tax revenue, (quote below) but didn’t explain why.
“If tax strategy patents and their use proliferate, encouraged by the marketing advantages conferred by patents’ government-granted monopoly and presumption of validity, many tax lawyers anticipate that there will be a corresponding reduction in federal tax revenues, generating revenue losses that would have to be made up from other sources.”
From http://taxprof.typepad.com/taxprof_blog/files/aprill_testimony.pdf (page 7)
All precedent setting lawsuit concepts should be patented under the same case law, as business procedures. Perhaps, the judge can share in the royalties, being the real author of the precedent.
The American Medical Association deemed unethical the enforcement of a patent for a medical procedure. The Amercian Bar Association has to choose between the great wealth of a few and the use of the law by the public. The public paid for every jot and dot of it, and owns the law. The lawyer is a mere law technician, who discovers a novel way to maintain it.
The law is an essential utility product. In the case of medicine, Congress allowed patents on surgeries. However, they banned enforcement claims, as of 1996.
http://www.acog.org/from_home/publications/ethics/ethics111.pdf
http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_287.htm
(search for “medical” in this long incomprehensible document)
Europeans require industrial applicability. Medicine of humans and animals is not industrially applicable, thus not patentable.
http://www.jpo.go.jp/shiryou_e/toushin_e/shingikai_e/pdf/iryou-wg_re.pdf
Lawyering is analogous. Lawyering of humans and animals is not industrially applicable.
I’m not sure why commentators believe that if congress allows tax strategies to be patented, they have to allow all forms of law to be patented. (For example msobkow’s comment above.)
Congress can draw the line wherever they want. For example, in medicine, life saving drugs are patentable but surgical procedures aren’t.
These “slippery slope” arguments (that once a lawmaker allows one thing, they *have to* allow another thing) are one of the silliest things I’ve heard in law school.
“1. Fewer people will use tax reduction strategies, because of the cost of paying for the patent. Reduced use of tax reduction strategies will lead to increased tax revenue.”
I predict many more forgin owned corporations filing some sort of form with the IRS handing them basically nothing for what was once a pretty good chunk of earnings!
Since offshore, they will pay dividends directly to Swiss accounts istead of any declaration of earnings to the US.
Until this country passes the fairtax admendment, such will only increase in complexity and problamitic crap.
“These “slippery slope” arguments … are one of the silliest things I’ve heard in law school.”
The Slippery Slope argument relaies on sveral factors, and it is used both reasonably and unreasonaby on many occasions.
To call EVERY use of it “silly” is to proclaim yourself completely historically ignorant.
How would a patent on a tax avoidance strategies be enforced? That is, how would the patent owner know the patent was being infringed? Patent owners wouldn’t get to troll through IRS records looking for patterns that might indicate their methods were in use, and probably couldn’t even get into IRS records to prove their case after discovering that tax consultants were advertising shelters very similar to the patented ones. Such a patent would be unenforceable in practice.
That’s probably the most relevant difference between patented drugs and unpatentable surgical procedures: The marketing in this country of infringing drugs or equipment is very easily detectable (just check with the FDA or look at catalogs from medical suppliers), but in most cases finding out if a surgical procedure has been copied would in most cases involve an intolerable violation of patient privacy – and even if medical records were open to the public, it would still be very expensive to scan through them and detect infringements. Note that while surgical procedures aren’t patentable, specialized equipment that enables the use of certain procedures is often patented.