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Supremes to look at tax patents

June 02, 2009

The U.S. Supreme Court will review the propriety of granting "business method" tax patents, including tax patents. Des Moines patent law blogger Brett Trout explains:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

Patents for tax strategies are hugely unwise. It's hard enough to keep up with the tax law without having to also worry that you might be violating some patent by the way you file your tax return. With FIN 48 disclosure requiring companies to make elaborate disclosures of their tax situations, patent trolls will inevitably look for opportunities to shake down companies on the basis of barely plausible arguments of patent violations.

The TaxProf has a roundup.