A hidden Gulf economy, Romney’s old taxes, and patent wars

March 6, 2012

1. An underground economy in the Gulf?

I was interested to read these paragraphs in a recent New York Times story about the processing of claims being made by victims of the oil spill in the Gulf of Mexico; pay special attention to the part I have underlined:

Glenn Poche, a shrimper, said he had lost 90 percent of his retail business. Despite official assurances that seafood pulled from the Gulf of Mexico is safe, many of his customers “want to wait a couple more years” to be sure….

Diane Poche, Glenn Poche’s wife, said she had received $30,000 from the fund — “just a little drop in the bucket of what we’ve lost” — but her claims for more had been refused, she said, her voice rising. “I sent in paperwork over two inches thick!”

In his response, Mr. Feinberg [the celebrated arbitrator hired by British Petroleum to process the claims] said that the Poches’ claim was for more than twice the annual gross income Mr. Poche had reported before the oil spill and that Mrs. Poche was listed as a housewife, not a business partner, on the family’s tax forms. Mr. Feinberg has said that thousands of claims have been rejected because of inadequate documentation.

So, here’s the possible story: Without drawing any conclusions from this brief description of the Poche family’s dispute with Mr. Feinberg, it may be that much of the economy in the Gulf — small-business shrimping and other fishing, chartering boats, waiting on tables in restaurants, small retailing — is a cash economy, in which some people may make more money than they report to the IRS.

Comparing claims about lost earnings with what people tell the tax man they earned — which could probably be done on a macro basis using government data about the Gulf economy — might be an eye-opener, as would asking people about possible differences in their claims of lost income versus their reported earnings. So would checking with the IRS to see if it ever compares claims for lost income in tort suits (which are public) with plaintiffs’ tax filings.

With that in mind, maybe Times reporter John Schwartz, who wrote this otherwise comprehensive piece, could go back to the Poches and ask them to comment on Mr. Feinberg’s response: that he found a 100% difference between what the Poches claim they lost and what he says they told the IRS.

2. Romney’s prior returns:

Why haven’t reporters pushed Mitt Romney to release more than his most recent two years of tax returns? Or at least asked him if he paid more or less than the combined 13.8% he reported paying for those two years when he released his 2010 return? Wouldn’t he have released returns for those earlier years if the rate had been higher? Which means that it was likely lower — perhaps much lower — for years when he wasn’t thinking about running for president and was probably making more money and taking advantage of the tax breaks available to people with his sources of income.

3. Patent wars:

It seems that every day we read another story about patent litigation threatening to upset some company’s marketing of a key product. The most ubiquitous of these stories involve patent wars being fought around the world by heavy hitters like Apple, Google, Samsung, Amazon and Microsoft. But as this story from Paidcontent illustrates, there is patent litigation surrounding almost every high-tech product we use; and, as this article highlights, the plaintiffs are now often investment firms that have been formed for the sole purpose of buying up relatively obscure patents and then suing deep pockets (in this case, AT&T, Sprint and T-Mobile) for infringing them.

I vaguely remember from law school that you can be sued successfully for infringing a patent even if you didn’t know about it, let alone copied it. And I remember that when my partners and I sold our technology company (Press+) last year, the biggest legal hang-up in an otherwise quick and simple deal was over whether we would promise to pay the buyer’s legal fees and damages if they were ever sued, even unsuccessfully, for patent infringement. I thought that shouldn’t be a problem, because I knew how we had created what we created, but our lawyers told us we couldn’t agree to something that broad because they were so many “patent trolls” out there ready to sue anybody for almost anything, especially once a company had succeeded and developed those deep pockets.

So I’d like to see a definitive article surveying the landscape and identifying the key players in what seems to have become this era’s most destructive business litigation.

Has patent trolling become the most lucrative lawyering out there? Who’s making a killing? Who are the richest intellectual property lawyers on the plaintiffs’ and defense sides? How did they get to the top? What about those investment funds that finance the litigation?

What exactly are the rules, and have they produced the kind of monster monkey wrench when it comes to commerce, innovation and deal flow that I suspect they have? Are companies like Apple or Google destined to pay millions for litigation no matter what they do, while smaller companies get smothered by the same forces once they start to succeed? And how much did recent patent reform legislation change things in the U.S.?

In tort law, which in the United States is generally governed by state laws, several states with especially accommodating statutes and sympathetic juries became known during the 1980s as plaintiffs’ paradises. (At the American Lawyer, we did a story with exactly that title.) Are there countries around the world that now enjoy that distinction when it comes to fights over intellectual property?

PHOTO: A shrimp boat trawls near healthy marsh, bayous and waterways east of the mouth of the Atchafalaya River near Morgan City, Louisiana, April 20, 2011. REUTERS/Sean Gardner


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One of the particularly bad (IMO) issues with recent patent litigation is the move towards software patents. http://en.wikipedia.org/wiki/Software_pa tent_debate Software design is a field where the barriers to entry are inherently low, and large volumes of non-professionals can make significant contributions (the open source movement for example). However, software patents turn that on its head, as now each new piece of software has to be wary that it is encroaching on a submarine patent held by a group like SCO, Bedrock, or even Microsoft or Apple (all contestants in the Linux fight)

Posted by Araes | Report as abusive

Good point … the IRS has already noted that 1/3 trillion dollars go unreported by conservative voters.

Posted by SanPa | Report as abusive