Don't Take My Advice-It Belongs to Me

It's come to this in the world of the law. Attorneys now are patenting their novel ideas, in the tax code area, so as to try to prevent or limit their competitors from also using those ideas to better serve their clients. As Floyd Norris tells us in Friday's New York Times, the U.S. Patent Office has issued so far 49 patents for tax strategies since a 1998 appeals court ruling that declared that such patents could be valid.

As Norris notes, the trend is a disturbing, almost preposterous one. Taken to its logical next step, never mind its extremes, any novel tax plan, or even any novel corporate law idea, could be patented by the attorney, or paralegal, who came up with it which would prevent that idea from being used by anyone else. Not only would that stunt the growth and development of the law, not only would it deprive clients and customers of the use of some of the best ideas, it would generate a whole new generation of lawsuits, by and between lawyers fighting over whose idea is sacrosanct and whose isn't. Remember, unlike more conventional patent applications, one person's use of a good tax strategy doesn't jeopardize or diminish another person's use of that idea. It is not a zero-sum game.

So count me as an opponent of this new trend. Count me among those who would want to throttle an attorney who says, "sorry, but you can't use this great new idea that could save you money because I thought of it first." Count me as a foe of the idea that we need more litigation to burden our courts even more over this eminently solvable problem. And count me as a friend to any lawyer or litigant who tries to get a reversal of that silly 1998 ruling that seems to have given this whole bad idea a jump start.

Since these tax plans or corporate strategy are legal they should not be patentable. We aren't talking about the secret formula for Coke or the plans to create a faster super-computer. We are talking about creative ways to get around tax codes or regulatory rules. It should be the aim of the law, and of government, to foster such creativity and to allow it to spread across the land. After all, the spread of good ideas is the essence not just of the free market but of free speech, too. The American Bar Association today in Denver will take a look at this issue. If the ABA has any guts, it will come out strongly against the idea of these sorts of patents. They are selfish, self-destructive, and ultimately bound to do far more harm than good.

By Andrew Cohen |  October 20, 2006; 10:15 AM ET
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I agree, patently absurd.

Posted by: MC | October 20, 2006 01:10 PM

State Street Bank, the 1998 decision you refer to, made it clear that business methods are patentable under the current law. Norris tries to pass off business method patents some judge-made abomination ("Why would Congress pass a law allowing such a thing? The answer is that it did not."). In fact, the State Street Bank decision relies on the plain language of the 1952 Patent Act to conclude that business methods are patentable.

Once the door to business methods is open, there's no good basis for disallowing a narrow category, like tax-strategy patents. Your real beef seems to be with business method patents in general.

Posted by: DK | October 20, 2006 03:16 PM

And if Congress would have the audacity to pass a law that undermined these tax avoidance schemes the patentees could have a claim for compensation under the fifth amendment as a government taking of their property!

Posted by: GSJ | October 24, 2006 08:16 AM

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