While I've become more cynical thanks to tax class than the course made Jeremy, I do still think that the code is complex because people are constantly conniving, both to read the existing laws in such a way as to minimize tax burden, and to convince Congress to pass new laws for the same purpose. I suppose some tax shelters might be a form of protest against bad laws, but this is decidedly the exception rather than the rule. Nonetheless, people with such schemes may want to patent as soon as possible, lest someone else get the jump on them and later accuse them of infringement:
[A]n organization called Tax Strategies Group complains that John W. Rowe, the former chief executive of Aetna, infringed on its patent by using a certain type of trust to minimize taxes on profits from stock options. The group wants Mr. Rowe to be barred from using that strategy unless he buys a license from them.Wouldn't one always argue that a given tax strategy "was clearly authorized by the tax law," since the alternative seems to be, "Actually, this was a plan that was not clearly authorized by the tax law and is really quite dubious"? That seems to put the kibosh on patenting any such strategies, if they're either clearly authorized and thus obvious to any tax practitioner, or not clearly authorized and thus subject to litigation. (I suppose if one not only developed an extremely creative strategy but also went through the trouble of a test case, licensing it might be a fair way to cover the expenses.) Tax strategies seem to be a peculiarity in the general permission to patent business methods, since presumably most of such methods focus on interactions with the actual conduct of business -- everything from advertising to accounting -- as opposed to interactions with the government. Certainly there are a vast range of government interactions aside from taxes, such as HIPAA compliance for health-related businesses, but the idea behind patents for these is to make such interactions easier, not to stop turning in the required information. Would the PTO license a patent for a way to avoid paying its fees? Rules of confidentiality for attorney-client communications and tax filings further complicate the matter, since Mr. Rowe might have been using the strategy before it was patented, but unless his use of the method was public, that is no defense.
To patent lawyers, all this makes some sense. Others might see it as an example of judicial absurdity.
But if it is legal, the mind boggles at the possibilities. Could I get a patent on taking a deduction for dependents, so that every parent in America would have to pay a royalty to me to take advantage of the tax law passed by Congress?
I presume the patent office would find that obvious, and thus not patentable, but there are plenty of slightly more complicated strategies that might be patentable, particularly considering the fact that patent examiners may not be tax experts.
Indeed, Cheryl E. Hader, a partner at Ropes & Gray who represents Mr. Rowe, argues that the strategy he used was clearly authorized by the tax law and that no patent should have been granted.