On Equal Terms

Congressman explains why patents on tax planning methods run counter to public policy.

April 2008
from Journal of Accountancy

Rep. Rick Boucher, D-Va. (9th District), has been at the forefront of efforts to stop patents on tax planning methods. With a fellow Virginian from across the aisle, Rep. Bob Goodlatte, R-Va., and Rep. Steve Chabot, R-Ohio, Boucher introduced HR 2365, a free-standing bill, to limit damages for infringements on patents for tax planning methods.

In May last year, Boucher introduced a measure to ban tax planning method patents, as an amendment to the Patent Reform Act, HR 1908, a bill to reform the patent system generally. The amendment was passed by the House Judiciary Committee on a voice vote, and the Patent Reform Act, with the tax patent ban, passed in the House in September by a vote of 220 – 175. In November, a companion patent reform bill was introduced in the Senate. The AICPA has been among groups and individuals who have lobbied against patents for tax planning methods (see "Washington Report").

Recently, the JofA spoke with Boucher at his House offices in Washington about these patents.

JofA: What is the main reason for your belief that the U.S. Patent and Trademark Office should not issue patents for tax planning methods?

Boucher: I think these patents are fundamentally contrary to sound public policy because they vest in a single person or company control over a process that taxpayers generally can utilize in order to pay their taxes efficiently. The patenting of tax planning methods runs contrary to our long-held belief that people should be empowered to pay their taxes on equal terms, using whatever strategies they themselves perceive or their tax practitioners recommend.

To permit patents to be held for the specific ways in which taxes are paid is simply a trap for the unwary practitioner. Some of the smaller accountants, for example, do not have a habit of keeping track of patent law. They understand the Tax Code very well. They know how to advise their clients in a superb fashion. But they are not watching day to day for the award of particular patents that might interfere with their offering the best advice that they can. And so it is entirely possible that an accountant would not be aware of a particular patent that has been issued. Through his own cleverness, he might devise a strategy that would infringe upon that patent without realizing that he's doing it. And then not only would he or, potentially, his client be responsible for basic infringement, but if it seemed to be intentional in some way, then multiple damages could be awarded. And this is all contrary to the basic notion that people should not have to pay a license fee in order to pay their taxes.

This article has been excerpted from the Journal of Accountancy. Read the full article here.