Tax Patent Legislation: Excusing Infringement of Patented Tax Planning Methods

Rep. Rick Boucher's Bill to excuse infringement of patents covering tax planning methods now has 40 co-sponsors. However, its prospects for becoming law are still slim – only one of the co-sponsors is a member of the House IP Subcommittee which must approve the bill.

The proposal copies the language of the "medical practitioner's performance of a medical activity" exclusion found under 35 USC 287(c). (Known as the Ganske compromise).  Under the proposed bill, unauthorized use of a patented tax planning method by a taxpayer or tax practitioner would not be considered infringement.

"With respect to the use by a taxpayer or a tax practitioner of a tax planning method that constitutes an infringement under subsection (a) or (b) of section 271, the provisions of sections 281, 283, 284, and 285 shall not apply against the taxpayer, the tax practitioner, or any related professional organization with respect to such tax planning method."

A tax planning method is defined as any "plan, strategy, technique, or structure that is designed to reduce, minimize, or defer, or has, when implemented, the effect of reducing, minimizing or deferring, a taxpayer's tax liability." The proposal is careful to exclude "tax preparation software or other tools used solely to perform or model mathematical calculations or prepare tax or information returns."  This language is potentially too loose — as most tax software does much more than perform math and prepare the return.

H. R. 2365

Comments

[Eurodisnae]

Sheesh, what a how-do-you-do... Maybe Bilski will make this redundant. Does the bill say anything to the effect of: "The question of what is or is not statutory subject matter for a valid patent notwithstanding..."?

[Mark Nowotarski]

The AICPA is very focused on this issue and has a lot of clout. Given that the amendment they supported to ban tax patents was passed in the House without debate, I wouldn't count this out just yet.

Not that I'm worried, mind you. Given that ALL inventions can "when implemented, [have] the effect of reducing, minimizing or deferring, a taxpayer's tax liability" at least somewhere in the US, depending upon any given municipality's tax laws (e.g. Tinkerman's Notch NH passes law giving tax credit for taking Viagra), I don't see how they can avoid throwing the baby (patents) out with the bath water (tax patents).

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