Saturday, October 21, 2006

Tax Strategy Patents

Today I got my second article up on Slashdot. This one is about a rather absurd consequence of the American policy of allowing patents on business methods as reported in the International Herald Tribune. A number of smart tax lawyers have realised that under this policy, their clever schemes to avoid tax can be patented, and they can prevent other people from doing the same thing without paying them money. So far the USPTO has granted 50 patents for such schemes, and more are being processed.

Now I'm against patents on methods in general for several reasons, but these patents go an extra step further in being so much against what patents should do. The truly ludicrous part of patents on tax reduction strategies is that once someone has a patent on a scheme, I am no longer allowed to follow the law without getting their approval. So they are able to take advantage of the tax law, but I'm not. This goes against a rather fundamental principle of an ideal government whereby everyone is treated equally under the law.

Fortunately some groups are realising this is an issue. Unfortunately it's mainly other tax lawyers who are feeling the sting. They are lobbying the US congress to create an exception to patent infringement rules to prevent them from being restricted in this manner, similar to the way there are restrictions on the patenting of medical procedures.

The whole idea of patents on methods is rather dangerous. A patent is for an invention, a device, a thing that does something. Anyone can come up with the idea "there should be a machine that does x". The person who comes up with the idea "there should be a machine that does x" does not get the patent. The person who makes a machine that does x gets a patent on that machine, and only that machine. They get a period of having a monopoly to make that machine. They do not get a monopoly on doing x. If someone else makes a different machine that does x in a different way, they're free to do that, and can even get a patent on their machine, if it too is original.

Patents on processes are very much giving patents to the person who says "there should be a machine that does x", and they are usually so vague that they get used as a patent on doing x. This then prevents other people who come with a new way of doing something, they get sued for infringing the vague patent that shouldn't have been given. Patents should only be given for specific devices that have been actually created.

The biggest area these types of patents are a problem is patents on software. Any software patent is process patent, as there's no device or machine involved. And they are used to prevent others from making programs that do the same thing or using certain technologies. Also, all software is essentially a mathematical algorithm, and it has long been a principle of patents that mathematics cannot be patented. 2 + 2 is a natural fact, and cannot be controlled by anyone, nor can any other piece of mathematics.

Anyway, with the tax patents the problems of process patents are now closer to affecting those who actually make the laws, so hopefully we are a step closer to getting patent laws closer to what they should be.

End Post
Writing time: 50 minutes (less time talking to Mum on the phone)
Time since last post: 2 days
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