BNA Pension and Benefits Blog

Patenting employee benefits strategies or computer systems has been occurring since 1988 when an improved system for enrolling employees into pension benefits was granted a patent.  A number of the earlier patents in the employee benefits area appear to be computer system related and not merely compliance or tax strategies.  A computer system or data base that provides a service or fulfills a plan's administrative requirements is different than a strategy that merely works toward compliance with the law whether it be tax or ERISA.

A couple of professional organizations have raised concerns regarding whether tax strategies or employee benefits strategies should be patentable.  Calling a strategy "patented" carries with it an air of government approval of the strategy which is not accurate since the patent and trademark office reviews patent applications to determine if the idea is novel, useful and not obvious.  The strategies are not reviewed by the Patent and Trademark Office to determine whether they are valid under the tax law or if they comply with ERISA.  Patented strategies are not reviewed by the Internal Revenue Service or the U.S. Department of Labor before the patent is issued, thus while patented and approved by one agency, the strategies may lack the approval of the most relevant agencies for employee benefits plan issues.

Many practitioners have long maintained compliance programs and other strategies and discussed these with clients, but not placed them in the public domain thus to someone outside the field the strategy may appear new, but in reality it is not new to those operating in the field. 

A bill is currently pending in the U.S. House of Representatives to limit the damages and remedies for infringing on patents on tax planning methods which will assist tax advisers and their clients and may decrease the financial incentive to seek patents on such strategies.  The Joint Committee on Taxation prepared a report, "Background and Issues Relating to the Patenting of Tax Advice" on July 12, 2006. The report discusses some of the background for patent granting and issues related to patenting tax strategies. 

The AICPA website also contains many useful links to information on patents.  Practitioners need to be aware of this development and how it may impact their practice. 

Greta E. Cowart

[Editor's Note: A special report on these patents, which includes a chart of employee benefits-related patents and patent applications, can be found in the June 4, 2007, issue of BNA's Pension & Benefits Daily, and the June 5, 2007, issue of BNA's Pension & Benefits Reporter.]

On Patenting Tax Advice - A Lesson From Pythagoras

    The flap over patenting tax advice reminds me of something I learned long ago about the lessons of Pythagoras and Pythagoreans ages ago - some 500 years B.C. to be precise (and Pythagoreans were supposed to be, if anything, precise). 

    Aside from inventing the Pythagorean theorem, Pythagoras and his cult were said to have established a small society on the Italian coast, governed by laws that were mathematically-based.  The “catch” was that everyone in town was required to obey the laws, but only the Pythagoreans were permitted to know what the laws were. One of the reasons we know so little about the Pythagoreans is that the other residents finally rose up, burned Pythagoras’s house down, and wiped out the society. 

    There’s surely a moral to that story, and those who, by patenting compliance strategies would seek to prevent others from complying with the law, should, I suspect, consider what happened to Pythagoras.

Frank Cummings

[Editor's Note: A special report on these patents, which includes a chart of employee benefits-related patents and patent applications, can be found in the June 4, 2007, issue of BNA's Pension & Benefits Daily, and the June 5, 2007, issue of BNA's Pension & Benefits Reporter.]

"I'd help you find the best retirement plan, but then I'd have to kill you."  -- Tony Soprano.

It has been suggested that tax advice and retirement planning ideas are patentable.  Just like the patent on my recipe for potato latkas (pat. pending).  But I don't think it's a good idea.  Now I understand that a lot of time and effort goes into making these plans and I understand the resentment when someone else prances in and copies the result, without having invested that time and effort.  But justifiable resentment is not a test for a patent. 

Where's the line to be drawn?  If I read a particular court decision to mean a particular thing, is my reading patentable?  If I write a brief that finally explains the Rule Against Perpetuities and its 88 permutations and combinations, so that even a layperson can understand it, is my explanation patentable?  The suggestion that this kind of advice should be patented only tarnishes the image of lawyers and gives "holders of the public trust" an entirely new meaning.

I'm the first to say I really don't understand the argument in favor of patentability and would appreciate it if someone would explain it to me.