Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, October 31, 2006

Patent Your Favorite Tax-Saving Technique?

There is a growing trend for lawyers to patent tax-saving techniques which they have developed.

Here are some excerpts from Jeremy Kahn, Taxes: Patent that loophole, Fortune, Aug. 30, 2006:

In recent years, the Patent Office has begun granting patents to people who claim to have invented novel ways of avoiding taxes. The trend is part of a larger explosion in the number of patents granted to financial firms for so-called "business method" innovations.

So far, 48 patents for tax reduction strategies have been granted and at least another 61 applications are pending.

To tax shelter touts, the patents are a potentially deceptive new marketing tool. After all, if something is patented, it sounds as if it is government-approved. But just because something is patented doesn't mean it's legal.  * * *

Earlier this year, a Florida company called Wealth Transfer Group filed suit against John Rowe, the executive chairman of Aetna, alleging he infringed on the patent it holds for a tax savings technique involving the transfer of stock options to a certain type of trust because he used a similar technique without paying Wealth Transfer a licensing fee.

The case, which has yet to go to trial, is being closely watched by both tax and intellectual property lawyers.

Some are warning of dire consequences if the court sides with Wealth Transfer. "If you can patent an interpretation of the tax law, why not patent anyone's legal advice?" asks Carol Harrington, a lawyer with the firm McDermott Will & Emery in Chicago. "Then you could say people being prosecuted for murder can't use a certain defense without paying a licensing fee. Something is seriously wrong with that in my view."

An editorial in today's (Oct. 31, 2006) New York Times speaks out against the practice.


Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Technology | Permalink

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