It’s tough enough to figure out whether a complex tax strategy is right for you — let alone legal. Now there’s something else to worry about: Getting sued by someone who has patented the technique.
It may sound surprising that tax and financial-planning ideas can be patented at all. They can, just like gadgets and other inventions. While the number of tax-related patents is still small, it appears to be growing — and is attracting attention in Congress, at the Internal Revenue Service and among tax professionals facing increasingly intense competition for wealthy clients. Adding to the interest is a lawsuit filed earlier this year against a Connecticut executive for allegedly using a tax strategy patented by a Florida man in 2003.
IRS officials and some tax lawyers worry taxpayers may be fooled into thinking that a “patented” tax strategy automatically bears the government’s seal of approval — which it doesn’t. “Just so there is no misunderstanding today on this point, let me be clear,” IRS Commissioner Mark Everson told a congressional panel earlier this month. “The grant of a patent for a tax strategy has absolutely no impact on IRS’s determination of the effectiveness or the legitimacy of the strategy.”
Lawyers, meanwhile, are questioning whether someone should be allowed to impose what amounts to a toll charge on someone else for using a technique to reduce taxes lawfully
Clearly, the asset base has shifted in the I-Cubed Economy. It used to be that you got a patent to protect a product you wanted to market. More and more, your get a patent not to market the product but to market the idea. While I believe that marketing ideas is an important positive characteristic of the I-Cubed Economy, the granting of monopoly rights to the marketing of ideas must be considered very carefully. The patent system shouldn’t prevent people from thinking new ideas. Unfortunately, that appears to be where we are headed.