Public Policy News
Fed Launches Capital Equipment Incentive
Emerging life science companies were given a financial incentive by the government to invest in capital equipment as a result of a provision included in the "Housing Assistance Tax Act of 2008" (H.R. 3221) signed into law by the president last week. The new provision provides a valuable new refundable Alternative Minimum Tax (AMT) or research and development (R&D) credit for taxpayers that elect not to use "bonus depreciation" for 2008. For the first time companies with accumulated R&D tax credits will receive value from them prior to generating taxable income.
The proposal allows companies that cannot benefit from the bonus depreciation incentive enacted into the economic stimulus law earlier this year, to claim existing tax credits. As such, this proposal ensures that all American businesses have an incentive to invest in new capital equipment and that no companies are left out simply because of their current business circumstance.
Specifically, it allows a company to receive a tax refund check from the federal government equal to a maximum of 6 percent of its pre-2006 accumulated R&D tax credits. The exact refund is determined through a series of calculations that can result in as much as 5-10 percent refund of qualifying capital investments during the period from April 1, 2008 to December 31, 2008.
IP Update: New Patent Rules Go to Federal Court of Appeals
On April 1, the district court in Tafas v. Dudas declared on summary judgment that the highly unpopular patent continuation and claim limitation rules (which were to have been effective November 1, 2007) were invalid for being more than just procedural and therefore beyond the scope of USPTO authority. The USPTO has now filed its appeal brief before the Court of Appeals for the Federal Circuit (CAFC) thus continuing the battle.
The USPTO alleges that the district court got it wrong - (1) that the proposed rule changes are within the USPTO's statutory rule-making authority, (2) that the rule changes do not conflict with the Patent Act and (3) that the USPTO is not required to provide public notice and comment for rules not subject to such provisions under the Administrative Procedure Act (APA).
The USPTO complains that the district court did not accord the agency Chevron deference, which allows a federal agency to reasonably interpret ambiguities (if Congress has accorded such authority) and, therefore, argues that the rules are consistent with the APA. Furthermore, the agency rejects the district court's contention that the rule changes are substantive in nature, arguing that they are merely procedural in nature. Finally, the agency argues that notice and comment is not required for interpretive or procedural rules.
Not surprisingly, the USPTO claims that the rule changes merely add procedural requirements for obtaining additional continuations and claims beyond a certain limit. In contrast, the district court had stated "...The 2+1 Rule and the 5/25 Rule, which limit continuing applications, RCEs, and claims, and the ESD requirement, which shifts the examination burden onto applicants, constitute a drastic departure from the terms of the Patent Act as they are presently understood. By so departing, the Final Rules effect changes in GSK's and Tafas's existing rights and obligations." The plaintiffs must now respond.
The BIOCOM IP Committee will continue to monitor developments in this case-and will report on such developments in a future article in this space.
Submitted by BIOCOM's Intellectual Property Committee, by Les Overman with Stephen Reiter and Bernie Greenspan. This article is the opinion of the authors and not of their respective employers.
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