Paul L. Caron

Wednesday, October 21, 2009

Group Asks Congress to Ban Tax Strategy Patents

A broad coalition of consumer organizations, taxpayer rights groups and financial planners has sent a letter to Congress asking it to ban tax strategy patents:

As you know, the problems associated with tax strategy patents are multiple and complex. First, we believe that they may limit the ability of taxpayers to utilize fully interpretations of tax law intended by Congress. Barriers to compliance caused by these patents may also cause some taxpayers to pay more tax than Congress intended and may cause other taxpayers to pay more tax than others similarly situated. This is simply unfair. Not to mention, tax strategy patents complicate the provision of tax advice by professionals and create a new burdensome level of compliance and cost, ultimately borne by taxpayers. 2 Finally, as you know, issuance of a patent is no guarantee that the underlying strategy is valid under our tax code. The Patent and Trademark Office is not an expert on tax law, nor is it charged with its enforcement. Tax strategy patents may mislead taxpayers into believing that a patented strategy is valid under the tax law simply by virtue of it being patented.

With all of the momentum of the last two years, it seems that Congress would be well poised to act quickly to ban tax patents. Some have asked, however, whether the need for legislation is as great in light of a recent Federal Circuit decision in a case called Bilski, which addresses the broader question of the patentability of business methods. The Bilski case is currently pending before the Supreme Court, so the final outcome is unknowable. While many are watching the implications of this case on business methods patents closely, we do not believe that it will prevent the further issuance of tax strategy patents, and it should not, in any way, delay legislative action on this problem. Meanwhile, the Patent and Trademark Office has continued to grant tax strategy patents, and new tax strategy patent applications have continued to be filed. Indeed, as of our sending this letter, 82 tax strategy patents have been issued, and 133 are pending. A legislative solution remains absolutely necessary.

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