Fight over “tax-strategy patents” heats up

 Intellectual Property No Comments


Now brewing before both the U.S. Supreme Court and Congress simultaneously is a fight to ban the controversial subject of tax-strategy patents — the notion that individuals, through the application of patent laws, can control tax strategies that are, after all, theoretically allowed all taxpayers under the Internal Revenue Code.

Proponents of these patents argue that without the right to patent tax strategies, innovation will die.

Opponents counter that any time someone captures the use of a provision in the Internal Revenue Code, it unfairly restricts general taxpayer use of the Code.

The main catalyst for the battle over tax patents was a 2006 infringement suit over a patent awarded in 2003 to Robert C. Slane of Wealth Transfer Group LLC. Known as the SOGRAT patent, it describes an estate-planning technique that uses grantor retained annuity trusts to transfer nonqualified stock options with few or no gift tax consequences.

Regardless of your viewpoint, ignorance of a tax-strategy patent is no defense, so tax advisers worried about making missteps will be watching for the outcome of this fight.

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