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November 20, 2007

Taxing Patent Reform

Another bullet dodged as the Patent Reform Act of 2007 crumbles to dust; three years' running of the Senate failing to do something really stupid about patents; the House, being ever slightly more craven to special interests, had no trouble wallowing to the lowest common denominator of patent idiocy. Post-grant opposition and damages apportionment were the Senate's statutory showstoppers. So, not this calendar year, it seems, but expression of commitment for patent reform simmers in the Senate before the 110th Congress checks out. What's getting a real head of steam is scratching out tax patents.

Senate Finance Committee Chair Max Baucus (D-Montana) and Sen. Charles Grassley (R-Iowa) introduced a bill amending 35 USC §101, which goes to patentable subject matter. It's a harbinger to introduce legislation this late in a session. Senators Carl Levin (D-Michigan), Barack Obama (D-Illinois), Ron Wyden (D-Oregon), and Jeff Bingaman (D-New Mexico), are all up for the down stroke on tax patents. Naturally, the House is all ready rip the heart out of tax patents.

The proposed legislation would render tax strategies and planning unpatentable, thus exempting tax preparation from a patent tax. "Taxpayers should not have to pay a toll charge or worry that they're violating patent law when they try to file their tax returns. Tax practitioners should be able to provide advice and services to their clients without paying a fee to the patent holder," chirped a raucous Baucus. "[Tax patents] put taxpayers in the undesirable position of having to choose between paying more than legally required in taxes or paying a royalty to a third party for use of a tax planning innovation that reduces those taxes. Congress needs to level the playing field and improve options for taxpayers," strutted Grassley.

The only folks potentially snared by tax patents are those with complex finances. Joe Paycheck isn't going to be walking into tax patent infringement. So, the proposed legislation is a sop to wealthy taxpayers, who are also most likely to be the more generous political contributors. "Know your well-heeled constituent" is the savvy Congressperson's motto.

The concept of simplifying the tax regime so such complexity as to be patentable could not even exist has not crossed anyone's mind who haunts the halls of Capitol Hill. Now, that would be real tax reform.

Before last year, the PTO had defended tax patents, but, with such strongly shifted political winds, these abject political creatures can be expected to smile upon whatever §101 their legislative taskmasters wish.

Whatever patent reform bill takes shape, and has any real chance of getting passed, bet on outlawing tax patents to be part of it.

Posted by Patent Hawk at November 20, 2007 1:25 AM | The Patent System


As a "Joe Paycheck" I am entitled to every conceivable tax break, not just the ones I actually take. Who cares if the the ban on tax patents benefits only the rich? Well, the only ones to care would be those who cannot see the broader implications of patenting interpretations of law. If Bill Gates patented a successful strategy for claiming software due to a Section 101 loophole, I'll bet you'd damn well care.

To suggest, as you do, that anyone could monopolize any interpretation or implementation of any law is mono-neuronal sort of thinking that belies and undermines your reputation for sagacious commentary.

Posted by: BabelBoy at November 20, 2007 9:04 AM

BabelBoy seemed to miss my point, which was that Congress knows who butters its bread; namely, the wealthy. Rather than eliminating loopholes that benefit the rich, and simplifying taxes so that compliance is both easier and cheaper for all, whereupon tax patents are no longer possible, because the complexity that allows tax patents is gone, Congress just outlaws tax patents; a stupid non-solution to a larger problem.

By outlawing tax patents, it pleases the wealthy, and tax preparers, who have a vested interest in complex tax laws, without offending any established constituency.

Posted by: Patent Hawk at November 20, 2007 3:09 PM