In the United States, a patent on an invention is considered not valid if the invention has been described in prior art. Essentially, prior art refers to all information made available to the public before a certain date that may be relevant to a patent’s claim of originality.
Patents in the tax realm have been controversial. This doesn’t come as a surprise. Think about it: Suppose someone devises a strategy to minimize the tax burden in a complicated set of facts and then patents it. Then, future taxpayers may be prohibited from applying the same strategy.
Well, tax patents no more. On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act, which declares that any strategy for reducing, avoiding, or deferring tax liability is insufficient to differentiate a claimed invention from the prior art.
The U.S. Patent and Trademark Office has more:
[Patent] applicants will no longer be able to rely on the novelty or non-obviousness of a tax strategy embodied in their claims to distinguish them from prior art. Section 14 [of the Act] aims to keep the ability to interpret the tax law and to implement such interpretation in the public domain, available to all taxpayers and their advisors.
Note that the law does not apply to already existing patents. According to Accounting Today, there are currently more than 130 issued tax-related patents.
(Hat Tip: TaxProf Blog)