A taxpatent is a patent that discloses and claims a system or method for reducing or deferring taxes. Tax patents have been granted predominantly in the United States but can be granted in other countries as well. They are considered to be a form of business method patent. They are also called "tax planning patents", "tax strategy patents", and "tax shelter patents". In September 2011, President Barack Obama signed legislation passed by the U.S. Congress that effectively prohibits the granting of tax patents in general.
History
The earliest patent that the United States Patent and Trademark Office considers to be a tax patent is Van Remortel et al., "System for funding, analyzing and managing health care liabilities". This patent issued in 1992 and covers, among other things, a computerized administration system for tax advantaged funding of for retirees. The United States Congress has never passed a law explicitly allowing tax patents but in 1998, the U.S. Court of Appeals for the Federal Circuit ruled in State Street Bank v. Signature Financial Group that business methods have been patentable at least since 1952 when Congress amended the requirements for patentability in the Patent Act of 1952.
USPTO classification
The USPTO has created a patent class for tax patents. The classification is 705/36T. The USPTO has placed 209 issued US patents and 188 published patent applications in this classification. The USPTO has not, however, published a formal definition of the class. About 10 new tax patent applications have been filed each year in recent years, and about five new patents have been issued each year. Some applications and issued patents appear to be mischaracterized since they do not deal with taxes.
Regulation
In 2005, The U.S. Internal Revenue Service determined that none of the then pending U.S. tax patents contained abusive tax avoidance transactions. Nonetheless, in September 2007, the IRS proposed a set of rules that would require tax filers to disclose whether they have paid a license fee to the holder of a tax patent. Similar to the ban passed by the U.S. House of Representatives, this regulation includes an exemption for patents on software for calculating taxes. There is some concern in the financial community that complying with these regulations will increase the chances of a tax patent licensee being audited by the IRS and that this, in turn, will decrease the value of tax patents in general. These regulations have, however, been strongly supported by the Section of Taxation of the American Bar Association.
In 2006, the Wealth Transfer Group sued former Aetna CEO John Rowe for infringement of a tax patent. The patent was, entitled "Establishing and managing grantor retained annuity trusts funded by nonqualified stock options". This case has been settled for undisclosed terms.
New law
On September 8, 2011, the United States Senate passed the Leahy-Smith America Invents Act, which had already been passed by the House of Representatives. The Act is described as "a comprehensive patent reform bill that includes language to stop the U.S. Patent and Trademark Office from issuing patents for tax strategy methods." The Act was signed into law by President Barack Obama on September 16, 2011. Subsection of section 14 of the Act provides : Subsection of section 14 provides : Subsection of section 14 provides : Subsection of section 14 of the Act provides that the tax patent prohibition takes effect on the date of the enactment and that it will apply "to any patent application that is pending on, or filed on or after, that date, and to any patent that is issued on or after that date."
