Tax-related patents: A novel incentive or an obvious mistake?

Journal of Taxation

Volumn 105, Issue 6, 2006, Pages 325-336

  Lederman, Alan S ^a  

^a Miami Office   (United States)

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EID: 33846529964     PISSN: 00224863     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (171)

1. Another prerequisite often involved in patent controversies is adequate specification under 35 U.S.C. section 112. See Harmon, Patents and the Federal Circuit (7th ed., BNA, 2005), chapter 5.
2. Another issue that sometimes arises is whether a party is the "first inventor" entitled to patent protection, even if that party was not the first to file the patent application. Id., § 18.2 (discussing "interference proceedings").
3. Copyrights are generally considered to have less protection for tax-related processes and other business methods because copyrights are not directly related to the functionality or technique of the process; see 17 U.S.C. section 102(b) ("In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work");
4. Baker v. Selden, 101 U.S. 99 (1879) (copyright on accounting system textbook and worksheets did not protect the underlying system because protecting of processes requires a patent);
5. Comment, "When is an Algorithm Invented? The Need for a New Paradigm for Evaluating an Algorithm for Intellectual Property Protection," 15 Albany L.J. Sci. & Tech. 579 (2005) (hereafter "Albany Comment");
6. Karjala, "Distinguishing Patent and Copyright Subject Matter," 35 Conn. L. Rev. 439 (2003).
7. But see Merritt Forbes & Co. Inc. v. Newman Investment Securities, Inc., 604 F. Supp. 943 (DC N.Y., 1985),
8. discussed in Stern, "Scope-of-Protection Problems With Patents and Copyrights on Methods of Doing Business," 10 Fordham Intell. Prop., Media & Ent. L.J. 105 (1999), pages 114-16 (securities documents for tax-exempt bonds may obtain copyright, but protection will be limited to the extent copying is dictated by functional considerations).
9. Other statutory and nonstatutory defenses to infringement include noninfringement, unenforceability, the patentee's failure to adequately disclose, unclean hands, fraud, inequitable conduct, misuse, or delay in filing suit resulting in laches and estoppel. See Harmon, supra note 1, chapter 12.
10. Still other defenses include 35 U.S.C. section 273, with respect to infringements of business method patents, discussed in the text below, and experimental use with no commercial purpose, discussed in Embrex, Inc. v. Service Engineering Corp., 216 F.3d 1343 (CA-F.C., 2000).
11. See Davis, "Patent Politics," 56 S. Car. L. Rev. 337 (2004), pages 348-73.
12. Dratler, "Does Lord Darcy Yet Live? The Case Against Software and Business-Method Patents," 43 Santa Clara L. Rev. 823 (2003), pages 882-883.
13. Professor Dratler criticizes decisions of the Federal Circuit requiring a relatively high standard for finding a required "suggestion" to combine references to find obviousness. Id., page 887 ("except in the rare case in which the Federal Circuit finds a 'suggestion' implicit in the references or, even more rarely, in the background of ordinary skill in the art, the suggestion must be explicit in the references") (citation omitted; emphasis in original).
14. See also Davis, supra note 3, pages 351-54;
15. Wigley, "Evolution of the Concept of Non-Obviousness of the Novel Invention: From a Flash of Genius to the Trilogy," 42 Ariz. L. Rev. 581 (2000), page 600.
16. But see Naini, "Convergent Technologies and Divergent Patent Validity Doctrine: Obviousness and Disclosure Analyses in Software and Biotechnology," 86 J. Pat. & Trademark Off. Soc'y 541 (2004), pages 555-56 (interprels Amazon.com, Inc. v. Barnesandnoble.com. Inc., 239 F.3d 1343 (CA-F.C., 2001), rev'g 73 F. Supp. 2d 1228 (DC Wash., 1999), discussed in the text below, to suggest that in business method cases, as distinguished from biotechnology cases, a relatively low threshold need be met to find a suggestion in prior art to combine references). The Supreme Court has granted certiorari in a case involving the standard for combining prior art references to create a finding of obviousness;
17. see KSR International Co. v. Teleflex, Inc., cert, granted 126 S.Ct. 2965 (2006).
18. See Harmon, supra note 1, § 3.2 and § 3.4(b).
19. Id, § 3.2(d) and § 4.7(a).
20. Id., § 4.6(b).
21. But see Naini, supra note 4, page 556, concluding that the Court of Federal Clairps in Amazon.com paid relatively little attention to secondary characteristics.
22. The author, who is not admitted to practice before the PTO, does not express any opinion on the validity of any patents discussed herein. But cf. Carlson, Migliorini, and Vacchiano, "Re-Thinking Patent Bar Admission: Which Bag of Tools Rules?," 87 J. Pat. & Trademark Off. Soc'y 113 (2005), pages 137-38 (in view of State Street and similar expansion of patentable subject matter, "the PTO should consider expanding [beyond applied sciences such as biology, chemistry, and physics] the breadth of the technical and scientific skills that qualify an applicant to sit for the patent bar examination." Instead, "[t]he authors propose that... an applicant must complete a one-year internship working as an assistant for a patent attorney or agent, or be an examiner in the PTO for at least one year...").
23. Patents, including the pooled-fund-allocation patent, number 5,193,056, can be found on the PTO website, www.uspto.gov.
24. 28 U.S.C. section 1295 generally gives the Federal Circuit exclusive appellate jurisdiction for patent-related cases. The Federal Circuit thus has a leading role in interpreting the patent laws.
25. Discussed in Myers, "Foreign Infringement of Business Method Patents," 7 Willamette J. Int'l L. & Dis. Res. 101 (2000), page 107.
26. Dratler, supra note 4, pages 872-73 (although the program was computerized, the patent on the computer program was in practical effect a patent on the method of calculation itself);
27. Lee, "Patent Subject Matter Reconfiguration and the Emergence of Proprietarian Norms-The Patent Eligibility of Business Methods," 45 IDEA 321 (2005), page 322, fn. 1 and page 323 (method for swinging a golf club patented) ,
28. Kuester and Thompson, "Risks Associated With Restricting Business Method and E-Commerce Patents," 17 Ga. St. U. L. Rev. 657 (2001);
29. Squires and Biemer, "Patent Law 101: Does a Grudging Lundgren Panel Decision Mean That the USPTO is Finally Getting the Statutory Subject Matter Question Right?," 46 IDEA 561 (2006);
30. Joint Committee on Taxation, "Background and Issues Relating to the Patenting of Tax Advice" (JCX-31-06, 7/12/06), 2006 TNT 134-15 (hereafter, "JCT Patenting Report"), text at fn. 30 (observing that interim PTO examination guidelines do not require use of a computer).
31. See Lipton, "The 'State of the Art' in Like-Kind Exchanges, 2006," 104 JTAX 138 (March 2006).
32. See Note, "In re Bigio: Brushing Your Hair with a Toothbrush? The Interplay Between the Broadest Reasonable Interpretation Rule and the Analogous Art Doctrine," 7 Tul. J. Tech. & Intell. Prop. 313 (2005), page 324 ("it is common practice to draft broad independent claims and narrower dependent claims. The broad claims offer a wide scope of patent protection but are more likely to be anticipated or rendered obvious over prior art under 35 U.S C. §§ 102-103.
33. The narrow claims, although offering a more limited scope of patent protection, are less likely to be rejected"); 35 U.S.C. section 282 ("dependent claims shall be presumed valid even though dependent upon an invalid claim").
34. See press release, "CB Richard Ellis Investors Completes &73 Million Tenancy-in-Common Offering," 9/25/03, available at www.prnewswire.com ("Tenancy-in-Common BRET interests have received favorable attention from investors because of... favorable Internal Revenue Service guidelines (such as Rev. Proc. 2002-22). CBRE Investors... was recently awarded U.S. Patent No. 6,292,788.... Industry watch dogs and the investment banking community are closely monitoring the industry to see how a well positioned company such as CBRE Investors moves forward armed with this ground breaking patent. CBRE Investors has retained... patent, licensing and litigation counsel, a move which brings substantial firepower to future patent enforcement actions").
35. See, e.g., Tandon, "Moving Forward: Patentability of Software and Business Methods Patents," 6 Intell. Prop. L. Bull. 1 (Spring 2001).
36. See, e.g. Kuester and Thompson, supra note 12;
37. Allison and Tiller, "The Business Method Patent Myth," 18 Berkeley Tech. L.J. 987 (2003);
38. Kahn, "Taxes: Patent that Loophole" (8/30/06), available at money.cnn.com;
39. Hunter, "Have Business Method Patents Gotten a Bum Rap? Some Empirical Evidence" (July 2003), available on the MIT website at ebusiness.mit.edu/research/papers/;
40. American Intellectual Property Law Assn., "Statement Submitted for the Record for the Hearing on Issues Relating to the Patenting of Tax Advice Before the Sub-committee on Select Revenue Measures of the House Committee on Ways and Means, July 13, 2006," available at www.aipla.org;
41. Allison, Lemley, Moore, and Trunkey, "Valuable Patents," 92 Geo. L.J. 435 (2004), page 476, fn. 183.
42. P. L. 106-113, section 4302 (11/29/99).
43. Dratler, supra note 4, page 835.
44. Conley, "The International Law of Business Method Patents," 88 Federal Reserve Bank of Atlanta Economic Review 15 (4th Qtr., 2003), page 17.
45. See JCT Patenting Report, supra note 12, fn. 99. The JCT Patenting Report also observes that 35 U.S.C. section 273 "will not protect a tax practitioner who develops a new tax structure based upon a change in the tax law against a patent-holder who filed a patent application on the same structure within a year or less of the tax law change that rendered the structure possible or desirable."
46. Available on the PTO's Business Methods website, www.uspto.gov/web/menu/ pbmethod/.
47. See, e.g. Kuester and Thompson, supra note 12, pages 675-89;
48. Hosteny, "The Truth About the Business Method Patent Improvement Act of 2000," 8 Intell. Prop. Today No. 6 (June 2001), page 28.
49. See Gruner, "Everything Old is New Again: Obviousness Limitations on Patenting Computer Updates of Old Designs," 9 B.U. J. Sci. & Tech. L. 209 (2003), page 237.
50. Id., page 241; Thomas, "Liberty and Property in the Patent Law," 39 Houston L. Rev. 569 (2002), page 577.
51. Miller, "Building a Better Bounty: Litigation-Stage Rewards for Defeating Patents," 19 Berkeley Tech. L.J. 667 (2004), pages 671-72.
52. Morton, "Business-Method Patents: Of Questionable Validity? Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343 (Fed. Cir. 2001)," 6 Computer L. Rev. & Tech. J. 321 (2002), pages 326- 327.
53. See also "Amazon Patent for Online Orders to Get New Review," Wall St. J., 5/19/06, page B2, and "Issaquah Firm Sues Amazon," Seattle Post-Intelligencer (online at seattle.pi.com), 08/09/06 (2006 PTO reexamination and private infringement action concerning Amazon.com "one-click" patent).
54. See Harmon, supra note 1, chapter 8; Epstein, "Reflections on the Historical Origins and Economic Structure of the Law Merchant," 5 Chi. J. Int'l L. 1 (2004), page 13 (doctrine of equivalents has the favorable aspect of protecting a patentee from an unscrupulous infringer, but the unfavorable aspect of possibly giving the inventor a monopoly over claims not originally understood).
55. See O'Connor and Schneider, "Capital-Account-Based Liquidations: Gone With the Wind, or Here to Stay?," 102 JTAX 21 (January 2005), page 31 ("a growing number of practitioners prepare LLC operating agreements without capital-account-based liquidation provisions").
56. Harmon, supra note 1, at § 8.1(d)(i). See also § 8.2 (the patentee is estopped from recapturing through the doctrine of equivalents certain coverage surrendered during prosecution through the PTO).
57. "NYSBA Says Applying Patent Law to Tax Advice Could Cause Problems," 2006 TNT 160-18 (hereafter, "NYSBA Comment").
58. See Harmon, supra note 1, chapter 17. To seek to avoid a finding of willful infringement, a potential defendant may seek a legal opinion of competent outside counsel that a potential plaintiff's patent is invalid or will not be infringed. Suppose the conclusion of that opinion is not judicially accepted, and the defendant is found to have infringed the patent.
59. See id.;
60. see also Johns, "Knorr-Bremse Systeme Fuer Nutzfahrzeuge Gmbh v. Dana Corp.: A Step in the Right Direction for Willful Infringement," 20 Berkeley Tech. L.J. 69 (2005), which indicate that such an opinion may well defeat a finding of willfulness, and that, in the absence of such opinion, even a substantial defense to infringement liability may not preclude a finding of willfulness, but no adverse influence may be drawn from failing to obtain or produce such an opinion of counsel.
61. See Roth & Co., P.C., "Roth & Company Tax Updates" (11/1/05), www.rothcpa.com/archives/001425.php#001425.
62. Id. Patent applications generally are published by the PTO 18 months after filing, but publication can be prevented by the inventor's certification that it will not be the subject of a foreign filing;
63. see 35 U.S.C. section 122(b)(2)(B)(i). Even where, as with a tax-related patent, there is no foreign filing, permitting publication offers the patentee the advantage of triggering liability as of the filing date for patent infringement against those with knowledge of the filing, under 35 U.S.C. section 154(d).
64. See Moleculon Research Corporation v. CBS, Inc., 793 F.2d 1261 (CA-F.C., 1986) (method of aligning Rubik's cube patented; unlicensed supplier of instructions could not be liable for infringement under 35 U.S.C. section 271 (a), since only cube users would be direct infringers, but was liable under 35 U.S.C. section 271(b)).
65. See also Oswald, "The Personal Liability of Corporate Officers for Patent Infringement," 44 IDEA 115 (2003) (argues that, despite uneven precedents, executives, even where they own the business, should be tested under the 15 U.S.C. section 271(b) inducement standard, which requires intent, rather than under the 15 U.S.C. section 271(a) strict liability standard);
66. Burk and Lemley, "Quantum Patent Mechanics," 9 Lewis & Clark L. Rev. 29 (2005), page 55 fn. 138 (concluding it is unclear whether even intent to infringe a known patent constitutes inducement where the inducer has a reasonable belief that patent is invalid).
67. See Adams, "A Brief History of Indirect Liability for Patent Infringement," 22 Santa Clara Computer & High Tech. L.J. 369 (2006), pages 388-98;
68. Bush, Gartman, and Rogers, "Six Patent Law Puzzlers," 13 Tex. Intell. Prop. L.J. 1 (2004), pages 32-37.
69. "Federal Case Highlights Debate Over Patenting of Tax Strategies," 25 T.M. Weekly Report (BNA) 1104 (7/24/06) ("Whittier Law School professor Richard Gruner told BNA July 13 when practitioners unknowingly provide clients with tax advice that is patented, practitioners may not be exposed to court action but their clients may be").
70. "Tax Strategy Patents Will Add to Compliance Burden, Loyola Law Professor Says Before W&M Panel Hearing," 2006 TNT 135-37 (hereafter, "Loyola Professor").
71. Ewert and Donner, "Will the New Information Superhighway Create Super Problems for Software Engineers? Contributory Infringement of Patented or Copyrighted Software-Related Applications," 4 Alb. L.J. Sci. & Tech. 155 (1994).
72. Commentators also have concluded that in some situations, the same person can be liable under more than one of the three grounds of direct infringement, inducement infringement, and contributory infringement. Miller, "Some Views on the Law of Patent Infringement by Inducement," 53 J. Pat. Off. Soc'y 86 (1971).
73. See, e.g, Messerschmidt v. U.S., 29 Fed. Cl. 1 (Fed. Cl. Ct., 1993), aff'd without opn. 14 F.3d 613 (CA-F.C., 1993).
74. With respect to state taxing authorities' liability, see Note, "Who's Afraid of the Eleventh Amendment? The Limited Impact of the Court's Sovereign Immunity Rulings," 106 Colum. L. Rev. 213 (2006) (although 35 U.S.C. section 271 (h), eliminating state sovereign immunity for federal patent infringement, has been held to be unconstitutional under the Eleventh Amendment, patentees still may have state law rights and future federal replacement legislation may not be foreclosed).
75. See Hughes Aircraft Co. v. U.S., 29 Fed. Cl. 197 (Fed. Ct. Cl., 1993);
76. Shultz, "Patents, Copyrights, Government," Cal. Bar J., April 2005 (available at calbar.ca.gov/state/ calbar/calbar_cbj.jsp).
77. Note, "A Proposal to Resolve Infringement Induced by Government Fiat," 70 Geo. Wash. L. Rev. 806 (2002).
78. Cahoy, "Treating the Legal Side Effects of Cipro: A Reevaluation of Compensation Rules for Government Takings of Patent Rights," 40 Am. Bus. L.J. 125 (Fall 2002), pages 161-62.
79. See Lemley, "Inducing Patent Infringement," 39 U.C. Davis L. Rev. 225 (2005), pages 230-31 (inducement cases often "involve affirmative conduct encouraging independent third parties to infringe through... instructions on how to use a product in an infringing way.... Publication of information about a patented product is not itself inducement, [however,] which may not be surprising, given that patents themselves are published."
80. (Citation omitted)). Moleculon Research, supra note 35, holding that publishing instructions on the use of a patented process can trigger inducement liability, is distinguishable, because in that case the instructions were published by a producer of an infringing product and were specifically directed to unlicensed users of the patented process.
81. See Albany Comment, supra note 1, page 588 (since the case law only requires "some identifiable benefit" to establish usefulness, and since algorithms purport to solve a problem, algorithms should ordinarily satisfy the "usefulness" criteria).
82. See Note, "Protecting Society from Patently Offensive Inventions: The Risk of Reviving the Moral Utility Doctrine," 89 Cornell L. Rev. 685 (2004), pages 691-92;
83. Dutcher, "Patents on Methods of Doing Business," 79 Denv. U.L Rev. 173(2001), page 188.
84. See Harmon, supra note 1, § 2.3(b).
85. Cuff, "Working With Some Current Issues With Deferred Exchanges Under Section 1031," 62 NYU Inst. on Fed. Tax'n 14.03 (2004) (the Service's attempt to characterize multiple noncontiguous properties as a partnership, even those not leased to a single tenant, "will not be an easy position to establish in court").
86. See O'Shaughnessy, "The False Inventive Genus: Developing a New Approach for Analyzing the Sufficiency of Patent Disclosure Within the Unpredictable Arts," 7 Fordham Intell. Prop., Media & Ent. L.J. 147 (1996), page 191.
87. But see Harmon, supra note 1, § 5.2(e) (significant number of inoperable claims may lead to invalidity).
88. "Patent Office Counsel Testifies at W&M Panel Hearing on Patenting Tax Advice," 2006 TNT 135-36 (hereafter "PTO Counsel").
89. See JCT Patenting Report, supra note 12, text at fn. 93.
90. id.
91. "Everson Testifies at W&M Panel on Patenting Tax Strategies," 2006 TNT 135-34 (hereafter "Everson").
92. See note 51, supra.
93. Kesan, "Carrots and Sticks to Create a Better Patent System," 17 Berkeley Tech. L.J. 763 (2002), pages 767-68.
94. See "Patenting of Transfer Tax Reduction Plans Should be Prohibited, McGuireWoods Partner Testifies at W&M Panel Hearing," 2006 TNT 135-39 (hereafter "McGuireWoods") (reportedly, estate planner employed by a financial institution was advised by patent counsel that even though a patent on an estate planning technique "may be" invalid, the technique should not be used without a patent license, presumably in view of the high cost of defending a patent infringement suit or prosecuting a suit to invalidate the patent);
95. see also Loyola Professor, supra note 38 (recounts that one patent holder notified all the attendees at a tax conference that they may be infringing his patent, and many paid royalties as the least costly course of action).
96. See Ltr. Rul. 8416018. See also Rev. Proc. 2001-57, 2001-2 CB 577;
97. Rev. Proc. 94-71, 1994-2 CB 810;
98. Rev. Rul. 94-40A, 1994-1 CB 276,
99. modifying Rev. Rul. 94-40, 1994-1 CB 274;
100. Ltr. Rul. 9123006; Ltr. Rul. 200403025.
101. Reg. 1.704-1(b)(2)(iv)(f)(5).
102. Reg. 1.704-1(b)(1)(iii); IR-84-129, 12/13/84; Melone, "Distributive Shares and the Varying Interests Rule: Planning Ideas and Open Issues," 14 J. Partnership Tax'n 339 (1997).
103. See Stern, supra note 1, page 129 (observing that "any business method of any significance now needs to be carried out by means of a programmed computer") and page 122, fn. 63 (the State Street briefs pointed out that the NASDAQ requirement for computing RIC NAV within 1.5 hours after the close of business required, as a practical matter, a computer program).
104. See Dukes, Elliott, and Jarecki-Black, "Software Patent Protection: State Street Puts Business on 'Easy Street,'" 10 S. Car. Lawyer 32 (1999), page 36 ("mutual funds... pool[ing] their assets... in a... partnership... is known in the financial services industry and... [the patented] software provides... the necessary calculations").
105. Under this view, the focus in the JCT Patenting Report, supra note 12, at fn. 79, on certain RIC shareholder income tax benefits of the RICs using a partnership rather than another lower-tier RIC as the pooled direct investment entity seems irrelevant to the evaluation of the pooled-fund- allocation patent as granted, since that patent does not claim the method of creating that legal structure itself. It may be, however, that the JCT Patenting Report, as does at least one other commentator, is interpreting State Street as in effect approving the patentability of the subject matter of the method of the steps in creating the pooled fund partnership itself.
106. See Pressman, Patent It Yourself (11th ed., No;o, 2005) at page 5/6 ("a process for allowing mutual funds to pool their assets into a partnership for administrative and tax advantages was held to be [statutory subject matter] because of its practical utility [in] State Street...").
107. But see Ltr. Rul. 8416018, released seven years before the pooled-fund-allocation patent was filed, which allowed a publicly traded RIC to maintain its RIC status as a member of a pooled fund partnership.
108. Thomas, supra note 25, page 586 ("the claims of the Signature patent quite closely track prevailing tax laws and... IRS regulations.... It is these accounting procedures that are recited, virtually word for word, in the claims of the Signature patent").
109. See also Dratler, supra note 4, pages 862-863; Stern, supra note 1, pages 133 and 151.
110. See also Raskind, "The State Street Bank Decision: The Bad Business of Unlimited Patent Protection for Methods of Doing Business," 10 Fordham Intell. Prop., Media & Ent. L.J. 61 (1999), pages 86-91.
111. See Leung, "Legal Judo: Strategic Applications of Reexamination Versus an Aggressive Adversary (Part I)," 84 J. Pat. & Trademark Off. Soc'y 471 (2002), page 481 fn. 53 ("There is no dearth of doubtful patents in the present climate of racing to the PTO by patent applicants. To illustrate, U.S. patent no. 6,292,788... [concerning] a method of how to conduct a certain 'like-kind' tax-free exchange in accordance with section 1031.... This purported 'business method' is no more an application of law than a patentee suing an accused infringer under applicable provisions of chapter 35 of the United States Code").
112. Harmon, supra note 1, § 4.7(a).
113. PTO Counsel, supra note 50.
114. But see Lemley, "Rational Ignorance at the Patent Office," 95 Northwestern U.L. Rev. 1495 (2001), arguing that, in view of the limited litigation involving patents, the best approach is to have relatively perfunctory review of patent applications at the PTO, remove the presumption of the validity of PTO determinations, and have patent validity decided by the courts.
115. See Lemley, supra note 64, page 1496 fn. 3.
116. See "Symposium on Ideas Into Action: Implementing Reform of the Patent System," 19 Berkeley Tech. L.J. 1053 (2004), page 1062;
117. Squires and Biemer, supra note 12, page 584 (noting that Patent Office Rule 99, allowing third parties to submit prior patents and publications relating to pending patent applications, cannot include any explanation or other information and is "underutilized");
118. Everson, supra note 53 ("IRS does not consult with the USPTO in the review of 'prior art.' Our contribution to this process would be tangential to our core mission. Moreover, if the IRS were to have a special or official role in evaluating the novelty and non-obviousness of a patent, this might be mistaken for IRS approval of the strategies or structures being patented. There are also significant confidentiality restrictions on both agencies that could hinder a cooperative effort in the review [of] prior art").
119. Commissioner Everson's testimony seems to contradict the NYSBA Comment, supra note 31, fn. 11 ("We understand that the Patent Office does have a policy of referring tax-related patent applications to the Internal Revenue Service for assistance in determining what is and is not obvious").
120. The ABA Tax Section has formed a task force to assist in training PTO examiners to critically review patents related to tax strategies; see "ABA Task Force Will Study Patenting of Tax Advice," 2006 TNT 194-30.
121. See Carlson and Migliorini, "Patent Reform at the Crossroads: Experience in the Far East with Oppositions Suggests an Alternative Approach for the United States," 7 N.Car. J.L. & Tech. 261 (2006), page 275 ("The inter partes reexamination system... suffers from a number of negative attributes that have limited, and likely will continue to limit, its effectiveness and use. Among these are the limited grounds upon which a patent challenge can be waged, as well as the limited types of evidence [patents and printed publications, and not other evidence of others' prior use of business methods] that can be utilized to support the challenge").
122. See also PTO Counsel, supra note 50 (PTO is recommending quicker, lower cost, post-grant review procedure).
123. See Miller, supra note 26.
124. Merges, "As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform," 14 Berkeley Tech. L.J. 577 (1999), page 598.
125. See Matthews, "Examining the FTC's 2003 Proposed Reforms to U.S. Patent Law in View of the Present Legal Landscape," 9 Va. J.L. & Tech. 11 (Fall 2004).
126. Bagley, "Internet Business Model Patents: Obvious by Analogy," 7 Mich. Telecomm. & Tech. L. Rev. 253 (2001), page 286;
127. Albany Comment, supra note 1, pages 594-95;
128. Tandon, supra note 16, page 4.
129. See Matthews, supra note 70;
130. Janis, "Reforming Patent Validity Litigation: The 'Dubious Preponderance,'" 19 Berkeley Tech. L.J. 923 (2004).
131. The Federal Circuit in State Street noted the lower court's observation that the pooled-fund-allocation patent, in substance, included any computerized system for complying with the accounting requirements for pooled-fund partnerships, but found that did not cause the subject matter to be non-patentable.
132. See also Raskind, supra note 61, page 89 fn. 151;
133. Everson, supra note 53 ("granting patent protection... could limit the use of that particular tax strategy by other taxpayers and have a negative impact on their ability to comply with the tax law"). If a licensor refused to license a patent necessary for a taxpayer to comply with a filing requirement, query if the Service would waive penalties for tax noncompliance under a reasonable cause defense.
134. Cf. Saltzman, "IRS Practice and Procedure" (Warren, Gorham & Lamont, 2006 Supp.),¶ 7B.04 (reasonable cause defenses).
135. Thomas, supra note 25, page 587.
136. See note 42, supra.
137. See also Mueller, "Patent Misuse Through the Capture of Industry Standards," 17 Berkeley Tech. L.J. 623 (2002).
138. These commentators discuss a situation where the patent applications precede the government regulation. See also Webb, "There Is a Better Way: It's Time to Overhaul the Model for Private Participation in Private Standard-Setting," 12 J. Intell. Prop. L. 163 (Fall 2004), page 224 (recommends that standard-setting organizations provide for mandatory cross-licensing with negotiated royalties for subsequently developed patents as well as previously developed patents).
139. Bradford, "Parody and Perception: Using Cognitive Research to Expand Fair Use in Copyright," 46 B.C. L. Rev. 705 (2005);
140. O'Rourke, "Toward a Doctrine of Fair Use in Patent Law," 100 Colum. L. Rev. 1177 (2000).
141. Stern, supra note 1, pages 136-55.
142. See generally Kurtz, "Copyright: The Scenes a Faire Doctrine," 41 Fla. L. Rev. 79 (1989);
143. Karjala, supra note 1.
144. To date, however, there apparently have been no reported decisions discussing whether a patent on a method needed to comply with pre-existing reporting or other requirements of the Code or Regulations could survive a challenge based on lack of novelty or lack of nonobviousness. The Federal Circuit's decision in State Street reversed the district court's holding of lack of patentability of subject matter, but left for remand the issues of novelty and nonobviousness. See also Kuester and Thompson, supra note 12, page 689 ("Incorporation of fair use, or scenes a faire, would gut the patent system of its central tenet of claims clearly defining the scope of protection. The increase in litigation while sorting out the application of copyright principles to the patent system would far exceed the current concern regarding increased litigation involving business method patents").
145. Computer Mgmt. Assist. Co. v. Robert F. DeCastro, Inc., 220 F.3d 396 (CA-5, 2000).
146. Merges, supra note 69, page 587 ("Put simply, there are no plausible subject matter limits, express or implied, in this broad, enabling clause [Article I, section 8, clause 8]. If we want limits, we must look to Congress and the courts to provide them");
147. Walterscheid, "Divergent Evolution of the Patent Power and the Copyright Power," 9 Marq. Intell. Prop. L. Rev. 307 (2005), page 351 fn. 259.
148. The 26th Amendment, which states that "The Congress shall have power to lay and collect taxes on incomes" would not seem to be a bar to allowing a tax-related process to be patented. But cf. Stern, supra note 1, page 127 fn. 98; Note, "The Treaty Power and the Patent Clause: Are There Limits on the United States' Ability to Harmonize," 22 Cardozo Arts & Ent. L.J. 1 (2004), page 9 (constitutional issues concerning business method patents are not yet settled).
149. Thomas, supra note 25. Professor Thomas suggests that the historical doctrine that Congress cannot delegate to private parties the power to legislate should be revived, in order to restrict business method patents that limit non-patentees' constitutionally protected interests.
150. JCT Patenting Report, supra note 12, text at fns. 101 and 102.
151. Havins, "Immunizing the Medical Practitioner 'Process' Infringer: Greasing the Squeaky Wheel, Good Public Policy, or What?," 77 U. Det. Mercy L. Rev. 51 (1999).
152. JCT Patenting Report, supra note 12, fn. 72. The physician's immunity statute also has been criticized because it requires judicial interpretations (e.g. are dentists covered?), thereby injecting additional uncertainties in the patent law.
153. See Sirjani and Keyhani, "35 U.S.C. § 287(c): Language Slightly Beyond Intent," 3 Buffalo Intell. Prop. L.J. 13 (Fall 2005). Moreover, U.S. free trade agreements generally specifically allow the U.S. to exclude from patent protection "diagnostic, therapeutic and surgical methods for the treatment of humans and animals."
154. See, e.g., Article 27 of the World Trade Organization Agreement on Trade-Related Aspects of International Property Rights (TRIPS) and Article 18(b) of the Agreement Between the United States of America and the Hashemite Kingdom of Jordan on the Establishment of a Free Trade Area. By contrast, tax practitioner immunity, like some other proposed legislative changes, raises the policy issue of legislative override of at least one U.S. international free trade commitment to the extent a foreign beneficiary develops or acquires a tax-related patent.
155. See American Intellectual Property Law Association, supra note 17, page 3 (there exist "serious questions as to whether such a prohibition
156. Article 5 of the Memorandum of Understanding on Issues Related to the Protection of Intellectual Property Rights Under the Agreement Between the United States and Jordan on the Establishment of a Free Trade Area (Jordan agrees that business methods are not to be excluded from patent protection); "NYSBA Urges Taxwriters to Scrap Proposed Foreign Shareholder Tax," 95 TNT 227-61 ("for the United States to negotiate complex treaty provisions with our treaty partners and then unilaterally override them is wholly inappropriate and could seriously impair future treaty negotiations").
157. See also Comment, "A Comparison of 28 U.S.C. § 1498(a) and Foreign Statutes and an Analysis of § 1498(a)'s Compliance With TRIPS," 41 Hous. L. Rev. 1659 (2005) ("Section 1498(a) Is in Violation of TRIPS").
158. But see Chiappetta, "TRIP-ping Over Business Method Patents," 37 Vanderbilt J. Transnat'l L. 181 (2004) (argues business method patents are not part of the existing TRIPS agreement, though they are covered by the U.S.-Jordan Free Trade Agreement).
159. Everson, supra note 53 (2006 Service search of PTO database finds no use of patents in developing or marketing aggressive or abusive tax strategies);
160. Loyola Professor, supra note 38 (PTO's granting of not novel and not nonobvious patents is more of a concern than its granting patents on strategies that are inconsistent with the tax laws).
161. Squires and Biemer, supra note 12, page 565.
162. See Reg. 1.6011-4(b)(3);
163. Circular 230 section 10.35(b)(2)(i)(C)(3);
164. Lipton, Walton, and Dixon, "The World Changes: Broad Sweep of New Tax Shelter Rules in AJCA and Circular 230 Affect Everyone," 102 JTAX 134 (March 2005).
165. JCT Patenting Report, supra note 12.
166. Id.
167. Everson, supra note 53.
168. See also NYSBA Comment, supra note 31, fn. 10, suggesting a disclaimer of IRS approval could be added to patent materials and that patentees could be subject to criminal penalties for representing otherwise.
169. Letter from John J. Koresko, V, grantee of Patent No. 6,963,852, to Rep. David Camp (7/11/06) (copy in author's possession).
170. See Koresko, "Section 412(i) Defined Benefit Plans: Simplicity, Safety, and Power," 79 Fla. B.J. 33 (2005).
171. Burk and Lemley, "Policy Levers in Patent Law," 89 Va. L. Rev. 1575 (2003).