Slashdot Log In
Patents on Tax Reduction Strategies a Problem
Posted by
Zonk
on Sat Oct 21, 2006 02:33 AM
from the genius dept.
from the genius dept.
EsonLinji writes "The International Herald Tribune has an article about how some lawyers are realising that patents on tax reduction strategies (a business method) might be a problem. The article states that there are already 50 such patents with more on the way, and at least one lawsuit. Particularly worrying is the idea of needing a license to follow the law. Fortunately, some of the laws get that this is a problem. Tax patents, the lawyers wrote, amount to 'government-issued barbed wire' to keep some taxpayers from getting equal treatment under the tax code."
This discussion has been archived.
No new comments can be posted.
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
Full
Abbreviated
Hidden
Loading... please wait.
What? (Score:5, Funny)
Re: (Score:3, Insightful)
Who needs a patent when you have a monopoly?
Re:What? (Score:4, Interesting)
Wether handing out taxation rights to private parties really has a place in modern society and in a free market is dubious, particularly when the system is far removed from any democratic control.
Parent
Re:What? (Score:4, Insightful)
Patience.
It's a matter of time before the remains of SCO patent the use of patent lawsuits as a business model. The hope would be to get into a lawsuit over that patent, creating a potential infinite recursion and thereby an infinite revenue stream out of thin air. :p
Parent
Fourteenth Amendment / equal protection clause (Score:5, Interesting)
( and, yes, it does say 'state', but the US Supreme Court has ruled that this usually applies to federal law also. )
Re:Fourteenth Amendment / equal protection clause (Score:4, Insightful)
Parent
Re: (Score:3, Informative)
Re:Fourteenth Amendment / equal protection clause (Score:5, Insightful)
Parent
Re: (Score:3, Insightful)
then again, i never was a fan of that amendment, as it seems to counter the first.
Not this shit again. (Score:4, Insightful)
I honestly don't know why that meme is still floating around the interwebs. The guy at capitolhillblue was the only person to push this story and he did it with anonymous sources.
If you read here [apfn.net] it has the followup article CHB wrote 3 days later, titled "Where there's smoke, there's ire" which CHB pulled from his own site
"This article has been removed from our database because the source could not be verified." [capitolhillblue.com]
It surprises me that he repeats the same claim just a week ago [capitolhillblue.com]
Not to mention that he first claims he heard it from 3 sources, then later changed it to two sources. The man reported shiat either he or someone else made up.
I honestly don't care about getting modded up, but please mod down the AC.
Parent
Re:TOTALLY FALSE!!!! SLASHDOT LIES AGAIN (Score:5, Insightful)
Balance the f'ing budget
Try to be deft enough at foreign policy that you do not get most of the rest of the world pissed off at you.
When striking at your enemy, prefer a swift lance in the right place versus an avalanche in the general area.
Read Sun Tzu.
Remember that the "goddamn piece of paper" written about 230 years ago helped make us the most respected country in the world at one time, and was specifically intended to protect us from the worst of leaders, not those that we trust.
Constrict the ability of lobbies to buy our government policies, criticize your elected officials with reasoned arguments, accept the inevitable fact that your views are not absolutely "right", don't use all caps in your Slashdot subject line, limit your government to doing the things that only government can do well, think for yourself (at length).
Question why you believe what you believe, as if it was a scientific question -- which of course it never will be.
Put your neocortex in control of your verbal/written output, as opposed to your limbic system.
Failing all of the above, stew in your own juices and try to avoid ad hominem attacks. If you find a perfect way of doing this, let me know or patent it.
BTW, if I had to label myself it would be as a centrist-conservative, but any label now carries so much stupid baggage that I try to avoid any one of them. "More power to the Party of Thinking People" -- Oh Shit, there isn't one.
Parent
Licensing "Plan B" (Score:5, Insightful)
Good point. But until this is 'noticed' by the courts, there are some further worrying questions. One is that there is nothing specific about patenting 'business methods' related to tax law, as opposed to other branches of law, as far as I can see. So, why not patent a type of defense in criminal law? Not that this topic is funny, but imagine for humor's sake "Plan B" from The Practice or "the Chewbacca Defense" from South Park being patented.
Parent
Re:Licensing "Plan B" (Score:4, Interesting)
Parent
Re: (Score:3, Interesting)
Re: (Score:3, Interesting)
Ho
Self Destruct (Score:5, Funny)
Re:Self Destruct (Score:5, Funny)
"One can only hope that tax and patent lawyers turn on each other and simply self destruct."
You work as an ecology consultant for Austraila or something?
What if they get viable offspring, you thought of that?!
Parent
Re:Self Destruct (Score:5, Funny)
Parent
A Good Thing! (Score:5, Insightful)
Granted, these will probably be killed due to certain issues... like aformentioned blurb mention.
However, it might just be enough to get more people
I will make it quite simple. Rich people don't care if poor get poorer. Rich people don't care if they lose wealth to other rich people. Rich people do care if they lose wealth to poor people. You just can go around upsetting the natural balance of things.
Yes, over the top a bit and a bit absurb, but I think I can get a few people behind my new campaign slogan.
Vote Cylix 2008!
What the...? (Score:5, Insightful)
The gaming industry doesn't want me to make backups of my game to keep the disk from being scratched by overuse. It's infringement after all.
The recording industry won't let me put my tunes on a mix CD because that's a type of infringement too.
Now the government is going to ensure that I'm going to have to go to certain places to file my taxes this year because otherwise that's a different kind of infringement, patent infringement - and it doesn't matter if I read the law myself and saw that this is possible, because some tax firm in the middle of Texas came up with it as soon as the law was passed?
Enough is enough, already!
Re:What the...? (Score:5, Insightful)
Is it time to get out my gun?
(I don't really have one but I got two dogs at my disposal and I can get a stick and some rocks.)
Parent
Re:What the...? (Score:4, Funny)
Parent
These are serious times. (Score:5, Funny)
Parent
Re:What the...? (Score:5, Informative)
Parent
Oh that's it! (Score:5, Insightful)
How can you patent a business method on following the law? Let's forget for a moment how ridiculous a patent on business methods are in the first place.
Re:Oh that's it! (Score:5, Interesting)
"How can you patent a business method on following the law?"
Easy. It's done all the time with the law of nature, so why not with the other laws? It's even more justified to patent following this law, since it's something that we have written by ourselves. Something that should not be justified, is to patent facts, like they do in science like physics and medicine.
Parent
Obviousness test (Score:5, Interesting)
If, however, a tax dodge only comes into use several years after the tax law, then I would agree that the dodge was not obvious.
Having said that I still don't think that there should be patents on things like this, but that is another matter.
Re:Obviousness test (Score:4, Insightful)
Parent
Re:Obviousness test (Score:4, Interesting)
Can't help but to wonder though, if it's something many start using to avoid taxes immediately after a new tax law is released, it's probably the intended effect. Like a tax break for driving eco-friendly cars or something. If it's something that is only discovered severals years after the tax law, it's probably a loop hole that got missed when the law was being written.
Which then brings the question, if you knew a loop hole in the law, would you tell the people who can close it about the hole by filing for a patent in use of it? Seems kinda self-defeating, sure you might get a patent for the hole but the hole will get closed that much quicker than if you had just kept your mouth shut and kept it secret.
Parent
Re:Obviousness test (Score:5, Insightful)
Accounting firms get paid tens of millions of dollars to come up with tax hedges. It isn't all that obvious what they are doing in many cases.
For instance, one older tax hedge -- not listed specifically in any laws -- involved forming a specific type of investment trust which purchased secured deed liens bonds of oil piplines, then reselling the interests in the trust. Using this method, the income from said trusts could be treated as operating (rather than investment) income by the holders in due course. This allowed them to prevent required liquidation (and subsequent taxation) of retained earnings in a C corp which had since converted to an S corp.
If 1 click puchasing counts as non-obvious, the above is not even questionable.
Parent
Re: (Score:3, Insightful)
The definition used to be whether the new invention would be obvious to a "Person Having Ordinary Skill in the Art" (PHOSITA) So basically, you'd take your average tax boy and see if this would have been obvious to him based on the prior art.
Unfortunately, the case law is in such a state that the "Person Having Ordinary Skill in the Art" is no longer the standard by which obviousness is jud
Re:Obviousness test (Score:4, Insightful)
Parent
Re: (Score:3, Insightful)
Tax code? Obvious? Let me be the first to say: BAHAHHAHAHAHAHHAHAHAHAAAAAAAAAA *rolls on floor laughing*
Awww.. come on now! (Score:5, Insightful)
I'm shocked. Truly.
Even beyond the fact that patenting something has to do with obeying the laws of the land, the whole notion of patenting business methods (and many forms of software patents as well) was and has always been absurd and self-destructive.
Re:Awww.. come on now! (Score:5, Insightful)
I think #1 problem is that we have TOO MANY laws. Seriously. Cut the big book of laws to a cliff note sized booklet, and we will not have 99% of all the problems we currently have with the law. And to boot, regular citizens will actually be able to understand and follow the law themselves.
Parent
Re: (Score:3, Insightful)
Laws are written in legalese for the same reason applications are written in programming languages, not English. Let's take a crime like murder - the layman's definition is very simple - to kill someone.
In legal terms, you have to put up standards of intent like manslaughter, assault with fatal outcome (which is a sep
Recursive patents. (Score:5, Funny)
The kicker is the final line in the article: (Score:5, Insightful)
Right there is the prime reason why people are getting more and more cynical about this entire democracy thing: here, democracy has degenerated into a simple oligarchy, where the group in power is the group with money. Quite frankly, I wouldn't be surprised if in 50 years, the US would have the same political system that China has now: a central party that is in name democratic, but in practice completely static, and where ascension to posts comes strictly through internal power struggles.
I'm really not one for doomsday scenarios, but I have to say that this kind of crap is how people get disenfranchised and the idea that they have nothing to lose anymore. And what do people do who feel they have nothing to lose? They revolt. Feh.
Re:The kicker is the final line in the article: (Score:4, Interesting)
There are plenty of other signs of approaching fascism in the US, but I am afraid few inside will recognise them. After all, it is unpatriottic to think such toughts, and in times of war, you should not question the army/the president/gouvernment...
Parent
What's particularly insane about this... (Score:3, Insightful)
If I patent a tax avoidance scheme that involves, say, investing in a rainforest planting scheme to get a tax break (grossly simplified example) and that tax break is removed in the next budget then the patent is no longer valid.
One of the principles of patent law is that a patent is a disclosure: in exchange for protection on your invention you provide instructions on how to implement the invention. If it's not implementable the patent is invalid - this is where those perpetual motion machines that slip through from time to time get knobbled.
As a patent examiner cannot be certain that the "model" of the patent will work for the term of the patent they shouldn't grant it.
Or, of course, the next US administration could implement an intellectual property regime that doesn't look like an unseemly land grab, and then spend all its time in the WTO trying to persuade the rest of us to follow suit.
Just make tax reduction strategies obsolete. (Score:5, Interesting)
-jcr
Re:Just make tax reduction strategies obsolete. (Score:5, Insightful)
And why, exactly would that be a bad thing?
The fact is that under our present system, the bulk of the money comes from the middle class. If you make a million bucks in a year and actually pay the AMT or the full nominal amount for that tax bracket, then you simply have an incompetent accountant. Rich people can keep their money in the bahamas, they can buy "farms" that pay them subsidies for growing weeds, they can "invest" in whatever harebrained schemes have the favor of the right congresscritters this year, they can hold "charity" parties where they spend millions to raise thousands, and the list goes on and on.
Besides the benefit of efficiency of tax collection itself, we'd also see great improvements in our economy due to businesses being able to make decsions based on return on investment, without regard to tax consequences (since the tax consequences are always the same: you pay tax on what you spend.
Add to that the several trillions of dollars currently held in offshore accounts that would likely be repatriated to the United States (no need for a tax shelter anymore), and you have a recipe for a lot of people being able to improve their lot in life.
-jcr
Parent
Re: (Score:3, Interesting)
I'm pretty much for it, although I'd like to
Lawyers refuse to eat own dogfood! (Score:3, Insightful)
I think the USPTO should start rubber stamping patents on legal strategy, what better way to bring the entire house of cards crashing down?
The IRS and Tax Shelters (Score:4, Informative)
Tax shelters, and other creative interpretations of the tax code, are the bane of the IRS's existence. In the late '90s and early '00s, a few accountants went overboard with their tax planning strategies and started selling them as if they were "products", not unlike the what the law firms appear to be doing today. As a result of their marketing of products called BLIPS, FLIP, OPIS, and SOS, KPMG ended up paying the IRS $456 million dollars in penalties. Since 2003, the IRS appears to have focused on cleaning up the accounting industry and the rules around "reportable transactions" (transactions with attributes common to tax shelters) and seems to have the accountants in check. It looks like it's time to turn their attention to the lawyers.
Just like the "confidential transactions" of the accounting industry, where the taxpayer isn't allowed to disclose the details of a transaction to others (presumably for intellectual property protections for the accountant), a lawyer holding a patent on a tax strategy will only serve to draw attention to the strategy and get the whole thing shut down.
Boring but informative:
From the IRS Publication 550 [irs.gov] on reportable transations:
See also: Inside the KPMG mess [businessweek.com]
Patent =! Legal (Score:3, Informative)
Fortune Magazine has 2 good writeups about this. They say "For tax-shelter touts, the patents are a potentially deceptive marketing tool: Just because a process is "patented" doesn't mean it's legal. "A patent carries with it no assurance whatsoever that the process will pass IRS muster," IRS commissioner Mark Everson told a congressional hearing in July. Giving patent protection to even legit tax strategies alarms many experts. "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."
and
"'A patent carries with it no assurance whatsoever that the patented process, transaction or structure will pass IRS muster,' IRS Commissioner Mark Everson told a Congressional hearing in July. 'We are concerned, however, that taxpayers may be confused about this.'"
You can find the links to the articles here [cnn.com] and here [cnn.com].
Notes From the Field (Score:5, Informative)
We've been discussing this internally for a few months now. Looking at the patent applications involving tax, we saw three categories of items:
(1) claims on how to implement data tracking systems in order to pay taxes (think programs for calculating sales taxes depending on where the product is shipped).
(2) claims on automating how to think through the tax consequences of a business deal (wow, if you do it with a database rather than pencil and paper, that should be patentable, right?) Side note: The hard part is not the algorithm, the hard part is getting the data and keeping it up to date.
(3) claims on a certain sequence of transactions that are claimed to be non-obvious and achieve lower taxes than a different sequences of transactions.
These have all the same problems that the software industry is dealing with: Some of this stuff has been done for decades, but is not "obvious" to a patent examiner.
A lot of these seem to be filed for patent troll purposes - if the patent office grants the application, then the patent holder will show up at the big accounting firms and demand a payoff.
There are a couple of interesting additional twists when this stuff starts getting applied to things like tax law. The first relates to type 1 claims (e.g. data tracking implementations). Here is where we argue that the patent system should not be allowed to put roadblocks on people's attempts to follow the law (and we are not even talking about gaming the system, just trying to be legal).
The second tax law specific twist relates to telling the government about your new tax planning idea. A competent government would look at the idea, decide if it should be allowed, and if it doesn't like the idea, change the tax law even before the patent is granted. [Yes, you can argue whether the US has competent government, but hey, we can talk hypothetically.]
I generally agree that the patent system is broken, we've just found additional ways to demonstrate that fact.
Re:What the pizzachrist. (Score:5, Funny)
Also, I own a copyright on the term "Please end." Please end(c) your use of this phrase immediately.
Parent
Re: (Score:3, Informative)
Re:Shakespeare was right (Score:5, Interesting)
I'm a software engineer. I work in Windows, and frequently have to work with ** shudder ** Microsoft SQL Server. Now, I'd much rather work in Unix; or maybe something better. But if you start making lots of stipulations about what you're willing to work with, you'll find it harder to find work period. My choices of systems are constrained by my customers' choices.
Why is this relevant?
I suspect most lawyers, if they could, would change a number of laws. That's probably why many lawyers decide to become politicians; but for the vast majority that don't, they're stuck working with what they have or not working at all.
It always sticks in my craw when politicians use lawyers for scapegoats. The lawyers are just making a living with what the politicians hand them.
Now it is true that business patents started after a court decision allowing them; however that court decision interpreted a statute, which happened to have an unintended consequence. It has been within the power of politicans ever since to fix this oversight, but they haven't because the average person is much less important to them than people seeking to turn business practices into a form of property.
Parent