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Federal Circuit Rules on Enforceability of Existing Tax Patent

The Federal Circuit Court of Appeals handed down a ruling that has signifant implications for existing tax patents. Last year, Congress prohibited future tax patents, but for tax strategy patents granted under prior law, there is an ongoing debate as to the extent courts will respect the protection. In Fort Properties, Inc. v. American Master Lease LLC, the Federal Circuit reviewed the enforceability of a patent that combined multiple real properties into a single portfolio. A computer program, which was designed to take advantage of the tax deferral of IRC § 1031, then created multiple deedshares that could be encumbered by separate mortgage interests.

The Federal Circuit found that the patent at issue captured an unpatentable abstract subject matter, and thus failed to meet the subject matter eligibility requirement. Though computer analysis was used in the process, no computer program was actually required to generate the deedshares. The Court held that some connection to the physical world is necessary, and “physical activities involving the deeds, contacts, and real property are insufficient to render these claims patentable.” Fort Properties, Inc. v. American Master Lease LLC, No. 2009-1242 (Fed. Cir. 2012), p. 11.

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Contact our team today with any tax controversy concern you’re facing. We fight every day to protect the interests of the taxpayer, and we look forward to putting you in the best tax situation possible.

GET STARTED

Contact our team today with any tax controversy concern you’re facing. We fight every day to protect the interests of the taxpayer, and we look forward to putting you in the best tax situation possible.

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