The Houston Business & Tax Law Journal plans to hold a symposium in October on the patenting of tax strategies, an idea that has already generated some controversy among patent defenders and critics.

While patents used to be considered exclusively the province of inventors (think here of Thomas Alva Edison), more and more patents have come to be issued around business methods and software concepts that have little to do with physical inventions. Over the years accountants and financial advisors have come up with any number of strategies for saving on taxes, hopefully legal ones.

The way to make money with these strategies was to help their clients, not to try to assert a patent against other accountants or financial firms and pressure them to pay royalties if they recommended such strategies to clients. That could change if tax strategy patents gain any traction. Witness the extended patent battles that have erupted in the technology industry in recent years, threatening to shut down RIM’s BlackBerry service and force every company that uses JPEG images to pay royalties.

The proponents of patents have a point that some of the tax strategies involve intricate analyses and calculations, and that their originators deserve to receive compensation and find a way to keep others from appropriating their ideas. But it’s likely that in many cases their strategies are based on concepts that have been in use long before they came along.

If accountants find themselves on the receiving end of lawsuits just for recommending such strategies to clients, they might need to pay royalties not just for how many clients follow their advice, but perhaps even a percentage of their billings or the amount of taxes saved.

The fact is that many tax-saving strategies are rather derivative of each other anyway, and are often based on findings that are public knowledge. In fact, it’s usually preferable that the strategy gains approval from the IRS, the tax courts, or a professional organization like the AICPA before it’s recommended widely to clients. The patenting of tax strategies might help make this information more public and subject the strategies to tougher scrutiny, but it could also drive a wedge between accountant and client if the accountant avoids recommending a strategy just because it might prompt a suit from some unknown patent holder. 

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