Conservatives Appeal to Lutnick’s Inventor Roots in Urging Him to Drop ‘Patent Tax’ Proposal

Representatives of 36 conservative organizations sent a letter yesterday to Secretary of Commerce Howard Lutnick, appealing to him as an inventor to walk back his proposal to charge a 1%-5% patent “tax” on the value of granted U.S. patents.

Lutnick’s proposal was first reported by the Wall Street Journal in July. While few details have been revealed about the plan still, it has drawn harsh criticism, including by IPWatchdog’s Founder and CEO Gene Quinn, whose article was quoted in the conservative groups’ letter. Quinn called the idea “catastrophically stupid” and “fraught with peril.”

The letter celebrated President Donald Trump’s “One Big Beautiful Bill Act” (OBBBA) but said the patent tax would undermine the key benefits of it. According to the groups, although the proposal has been reported as a new approach to user fees, “available details suggest this levy would be designed to raise revenue for the general operations of the federal government,” which is a departure from the Office’s user-fee-based system, which funds operations from those fees.

The letter outlined five ways the patent tax would be bad for the United States, first noting that it would undermine provisions of the OBBBA, such as the Foreign-Derived Intangible Income provision, which “encourages companies to develop and locate intellectual property (IP) in the United States.” According to the letter, the tax on patents would dive venture capital away from U.S. R&D and make foreign companies more attractive.

Secondly, since the proposal would mean that the more successful the patent, the more expensive the tax would be, companies would be incentivized to keep their most valuable inventions as trade secrets instead of patents, which would also put the United States at a technological disadvantage.

The letter next pointed to one of the most resounding criticism of the plan, which is that “assigning value to a patent is hardly an exact science.” The U.S. Patent and Trademark Office (USPTO) lacks the expertise to value patents, and overestimates could severely threaten the commercial success of cutting-edge inventions. While an exemption for small patent holders has reportedly been floated, this could “be reversed or eroded at some future point in the quest for additional revenue.”

Fourth, the letter said only Congress has the authority to impose such a tax, since the USPTO’s fee-setting authority extends only to covering the costs of operations. “A 1%-5% tax based on a patent’s perceived value clearly falls outside of PTO’s authority and is not provided in the tax code for any other government department or agency,” said the letter.

Finally, the letter said a patent tax would put the United States even farther behind in the race for global leadership in emerging technologies like artificial intelligence, quantum computing and other areas.

The groups also addressed Lutnick directly as an inventor—Lutnick is the first Secretary of Commerce to ever be a patented inventor and is a named inventor on some 400 patents. He also this year became the only Secretary of Commerce to ever attend the annual Inventors Hall of Fame induction ceremony. The groups wrote:

“We are certain that as an inventor, you recognize that the patent or other intellectual property is the deed to newly created property, and the patent office merely ascertains that the invention is indeed new and records the metes and bounds of the new property…. The sole purpose is securing the patent owner’s unfettered opportunity to commercialize and profit from the time and effort invested in the creative pursuit, which typically involves much trial and error and costs along the way. The Founders’ model incentivizes more individuals to attempt invention, democratizes the granting of a patent, and rewards invention based on its merit.”

Ultimately said the letter, a patent tax is antithetical to conservative values and the Trump Administration’s own tax policies, and the groups urged Lutnick to “drop any further consideration of a patent tax and, instead, allow the salutary effects of the President’s OBBBA to take root.”

Image Source: Deposit Photos
Author: auriso
Image ID: 7322225