Probate and Trust Article

August, 2007


By Jim Roberts

The idea of issuing patents in the area of tax planning has stirred significant controversy and has been reported on before in eReport. As previously noted, the expansion of patents in this area has worried many practitioners for a variety of reasons, most notably the possibility that a strategy conceived for a private client later exposed (typically through a dispute process with the IRS) may be the same as or substantially similar to an existing patent, triggering an infringement claim. And from that claim, discovery could reach into the practitioner’s other files, and, if part of a firm, into the files of other practitioners in the firm.

In January of this year, the State Bar of Texas Board of Directors approved a request by that bar’s Tax Section to submit to the Internal Revenue Service a response to its request for comment on this area, and, in that response, offering specific legislation to prohibit enforcement of tax strategy patents. The model for the proposed legislation is the language added in 1997 to prevent patents on surgical procedures from being enforced against doctors and hospitals.


Certain members of the Texas bar’s Tax Section are reported to have approached members of Congress with the proposed legislation. Others, however, had another idea in mind, and proposed simply to make tax planning methods unpatentable. Apparently winning arguments were employed, and Representatives Rick Boucher and Bob Goodlatte, both of Virgina, proposed an amendment to the patent statutes that would deny patents to tax planning methods (defined as “as a plan, strategy, technique or scheme that is designed to reduce, minimize or defer, or has, when implemented, the effect of reducing, minimizing or deferring, a taxpayer's tax liability.”)


This approach appears to one that may carry the day. On July 18, 2007, the House Judiciary Committee approved their proposed amendment.