Michael B. Lang presented “Patented Tax Strategies, Ethics, and Circular 230” at a forum co-sponsored by the Hofstra Tax Law Society and Professor Linda Galler’s Ethics in Tax Practice Seminar.
The tax lawyer or estate planner may confront patents on tax planning strategies in two principal situations. In the first, the lawyer may be providing tax planning advice to a client which, if implemented, may infringe on an existing patent held by another person. … In the second situation, the lawyer may hold a patent on a particular tax strategy which the lawyer hopes either to implement as part of tax planning for the lawyer’s own client or to license for use by clients of other lawyers. Although the specific ethical issues raised by these two situations involve overlapping concerns (both, for example, present significant conflicts between the interests of the lawyer and the interests of her client), the two situations are sufficiently distinct to merit separate treatment and will be addressed seriatim, with greater emphasis on the first situation inasmuch as it seems to present issues of more widespread concern.
In a third situation, the lawyer may have implemented a novel tax planning strategy for a client and be interested in the possibility of patenting the strategy. This raises questions as to who, the lawyer or the client, is entitled, as the “inventor,” to patent the strategy in addition to some of the issues presented in the second situation. While the subject of obtaining a patent is beyond the scope of this article, suffice it to say that the careful lawyer should be sure that where novel tax planning is involved, the engagement letter clearly provides who owns the right to patent the resulting strategy.