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The Law and Economics of Tax Strategy Patents

T. John Costello, Jr.

Kelley, Kronenberg, Gilmartin, Fichtel, Wander, Bamdas, Eskalyo & Dunbrack, P.A.


Since the famous Federal Circuit case of State Street Bank & Trust Co. v. Signature Financial Group, Inc., the practice of patenting business methods has increased substantially. This has led some inventors to apply for patents on strategies to save or defer taxes. Tax lawyers and accountants now face increased costs and substantial liability for unknowingly infringing on patents that may very well cover methods that they have been using for years.

Patents on tax strategies should not be allowed because they preempt taxpayers other than the patent holder from utilizing or complying with certain provisions of the tax law. Additionally, patents on tax strategies do not promote the progress of the “useful Arts,” as required by the Constitution. The purpose of the patent system is to encourage innovation in science and technology, not to prevent people from interpreting and complying with the law as intended by the legislature.

Although current case law may prohibit the patentability of tax strategies, a lack of resources at the United States Patent & Trademark Office prevents patents applications from obtaining adequate examinations. In addition, courts are not in the position to make patentability decisions on the basis of policy. Thus, Congress should take legislative action to define tax strategies and limit the patent law to exclude methods that may prohibit some taxpayers from taking advantage of certain interpretations of the law.

Number of Pages in PDF File: 32

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Date posted: October 28, 2012  

Suggested Citation

Costello, Jr., T. John, The Law and Economics of Tax Strategy Patents (2009). Available at SSRN: https://ssrn.com/abstract=2167896 or http://dx.doi.org/10.2139/ssrn.2167896

Contact Information

T. John Costello, Jr. (Contact Author)
Kelley, Kronenberg, Gilmartin, Fichtel, Wander, Bamdas, Eskalyo & Dunbrack, P.A. ( email )
12486 Brantley Commons Court
Fort Myers, FL 33907
United States
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