Trusts and Estates > Plus > Practice Development > Patenting Tax Strategies

Dec 1, 2006 12:00 PM

Patenting Tax Strategies

By Mary Lee Turk , partner, McDermott Will & Emery, Chicago

If you were listening on May 20, 2003, you might have heard the collective gasp of tax practitioners across the country. On that day, the United States Patent and Trademark Office (USPTO) issued a patent for a method to save taxes involving funding a grantor retained annuity trust (GRAT) with nonqualified stock options.1 No one had patented a direct tax planning strategy before. Could a tax strategy really be patented? Would licensing fees have to be paid to establish a customary GRAT because it was to be funded with stock options? Was this really happening, or was it all a bad dream?

Well, shake your head as much as you like in disbelief but the answer is “Yes. Tax strategies can be patented.” Not only that, patentees of these strategies are serious about protecting their rights. In January of this year, the Wealth Transfer Group LLC, the patentee of the GRAT strategy known by the registered servicemark “SOGRAT,”2 filed suit in the U.S. District Court, District of Connecticut, claiming patent infringement.3 The lawsuit, filed against John W. Rowe, the executive chairman of Aetna Inc., alleges that Rowe infringed the SOGRAT patent by establishing a GRAT and funding it with nonqualified stock options in Aetna.4

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