Patenting Employee Benefits Advice

 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.]