GregNews/WSJ on patent-based tax evasion

[PILCH Hartmut <phm@a2e.de>]

Greg said before that the litigation rate for normal patents is about 1%
(e.g. one litigation case for 100 patents) and tacitly acknowledged that
this rate is near 0% for software/bizmeth patents in Europe.

Why then do we have so many swpat in Europe?

One reason may well be that companies are using them to save taxes. It may
be very much worthwhile to transfer patent rights to countries like
Ireland or even France, and accounting practises in most countries may
make it profitable to collect unusable patents even in countries that do
not give any tax-favored status to patents.  The mere fact that patents,
unlike copyrighted works, counted as assets in the company's balance sheet
and then deprecated/amortised over a period of e.g. 5 years like machines
or buildings, may make a great difference.

GregNews feels "deeply concerned" about this phenomenon and announces the
following:

--------------------

Monday's Wall Street Journal, cover page, has an article on how American
companies are setting up offshore subsidies, transferring some of their
patents and trademarks to the subsidiary, and then having income from
licenses directed to the subsidiary.  This allows some of the income to
be sheltered from American corporate taxes, at least until the income is
transferred back to America, income parking so to speak.  Companies are
using Bermuda as the corporate haven.

I am DEEPLY concerned about this practice, and feel it is my duty as editor
of PATNEWS to travel to some of these Caribbean islands and investigate
this as part of my patent consulting business.  This may take many months.
Until I report back, here is an announcement of an upcoming lecture on
these issues:
                                      ====


Intellectual Property Society presents

    Taxing Ideas:   IP and International Tax Strategies

    By Joseph Fletcher III
       Squires, Sanders & Dempsey (www.ssd.com)

July 11, 2002

Highlights:

    Cross-border IP strategies and international tax consequences
    (including considerations in selecting alternatives);

    International tax considerations in cross-border licensing;

    International tax considerations in joint ventures; and

    Examples of tax structures that may reduce the worldwide effective
    tax rate.

Speaker Bio:

    Joseph Fletcher's twelve years of tax experience includes advising on
all aspects of corporate and partnership taxation as well as advising on
significant international tax issues. His special areas of knowledge
include migration of intellectual property to tax-favored jurisdictions
and establishment of Asian and European holding company structures.  He
has advised both emerging companies and Fortune 500 companies on issues
ranging from the establishment of new operations to the cross-border
acquisition of foreign corporations by US-based or foreign-based
multinational companies.

[....]

-- 
Hartmut Pilch, FFII & Eurolinux Alliance              tel. +49-89-12789608
Protecting Innovation against Patent Inflation       http://swpat.ffii.org/
120,000 signatures against software patents      http://www.noepatents.org/