I Fought the Law

Tax Shelters are Just Like Nuclear Weapons. No, Really.

Three Senators have introduced a bill designed to curtail the use of overseas tax havens. Normally this wouldn't be a big deal, but for us IP geeks of the world there's a particular provision that stands out:

The measure would also prohibit the U.S. Patent and Trademark Office from issuing patents for accounting strategies intended to "minimize, avoid, defer, or otherwise affect liability for federal, state, local, or foreign tax."

Whaaaa?

A lot of things aren't patentable based on the general requirements of the Patent Act (laws of nature, mathematical formulas, naturally occurring substances, and mental steps being the main examples). Human beings aren't patentable because of the Thirteenth Amendment. There are also various rules related to harmful or offensive patents, though those don't come up as often (deceptive inventions are generally patentable based on the Juicy Whip case, and people usually don't try to patent their new formulas for crack). But the only instance I'm aware of where a specific class of otherwise patentable inventions is specifically and explicitly designated as unpatentable is 42 U.S.C. § 2181, which prohibits patent for inventions "useful solely in the utilization of special nuclear material or atomic energy in an atomic weapon." In other words, if you invent a new and improved atom bomb in your garage, don't bother taking it over to the Patent Office.

The development of nuclear weapons was obviously a watershed moment in destructive technology, and it makes sense that Congress would act to limit private enterprise in this area. But is it really time to start treating other things like nuclear weapons in the patent world? And are inventions designed to reduce tax liability really the place to start?

Hat tip Patently -O.

Posted by hb at February 19, 2007 10:27 AM