The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-08-14
TAXATION OF PATENT RIGHTS.

portant questions recently raised or prece-
dents set by Indiana regarding the taxing
powers of a State. Other States in
debted to Indiana for leading the way in
the taxation of railroad, telegraph and ex
press companies doing business in the State
and getting a final decision of the Supreme
Court of the United States on the point.
They are also indebted to this State and
city for the first determined attempt to
Vindicate the rights of the people against
a street-railroad company and TO establish
the principle that a corporation is not
greater than the Legislature which creates
it, The new question regarding the right
of a State to tax patent rights is scarcely
less interesting and important than the
others, since it involves fundamental ques-
tons of constitutional law and enormous
property values.
Two years ago the Indiana Manufacture
ing Company, a corporation created by and
organized under the laws of this State, filed
in the United States Court a bill to restrain
the collection of the taxes assessed against
1t for the three preceding years, the
ground that the assessment included GER
tain patent rights owned by the company
and granted, of course, by the United
States government. Judge Baker granted
the prayer of the bill and issued an order
restraining the local tax officers from col
lecting such taxes, on the ground that a
State could not tax property values covered
by letters patent issued by the United
States. Now, the State Board of Tax Com
mis- boc bo +bo
company from So, 900 to $500 900, thus virtual
ly deciding that its patent rights are sub
ject to taxation the same other prop
erty. The case involves some incidental
questions of considerable interest touching
the scope of Judge Bakers order and the
liability of the State board for contempt
in contravening it, but, waving considera-
ton of these. the question of greatest in
terest is whether a State has a right to
tax at their reasonable valuatBn patent
rights owned by corporation organized
under its own laws. The status of a corpo-
ration in this regard is not different from
that Of an individual, the real question be-
ing whether patent rights are exempt from
State taxation whether owned by corpo-
ration an individual. The attorney gen
eral makes a strong argument on every
phase of the case, including the one named
While freely admitting that a State may
not tax government bonds, franchises
granted by the United States for govern
mental purposes, interstate-commerce or
government property, he maintains that
patent right stands on a different footing
He says:
The value represented in a patent under
which the holder has an exclusive right to
the invention or discovery for a period of
years stands upon very different footing.
primarily the value in such invention lies
in its novelty and usefulness. If it is
neither novel or useful it has no value, no
matter how many patents may have been
issued upon it. All the value given to it by
the letters patent is in the. monopoly or
years in that which was his before, and
this monopoly, while afforded by the gen
eral government in the exercise of a grant
conferred upon it by the Constitution. is in
no sense a government appliance Without
it, while the people might not live so COM
fortably, the government might exist as
powerfully. It's value represents not only
the inherent worth of the invention, but
the value of money expended in advertising
and making known to the world the value
and necessity of it.
This is clearly put A little reflection will
show that patent rights, or letters patent,
stand on very different footing from gov
eminent bonds or property. The reason for
exompting the latter from taxation is that
it would infringe upon a right and lessen
the value of property belonging to the gov
eminent. No such reason exists in the
case of letters patent. Whatever value they
represent belongs to the individual, and
d tax upon them does not touch the gov
NH
for lands purchased from it, but that does
not exempt the lands from State taxation.
In fact letters patent are only certificate
of ownership and guarantee of certain
property rights in the individual as against
other individuals. They carry an assur-
ance of government protection against APP
preparation or interference by other indi-
viduals, but no assurance either express
or implied. of exemption from taxation ac-
cording to the value they represent. Adj
hitting that they do represent value in the
governments guarantee of exclusive use
for a term of years. that value is in the
individual, as much as a pension granted
by the government. and its taxation by a
State does not infringe on any right of the
United States. Perhaps it would be compe-
tent, under the Constitution, for Congress
to say that a State shall not tax patent
rights but it has not said so, and until it
does the right seems to be plain. To hold
otherwise would open a very wide door for
the escape of large property values from
taxation in this and every other State 1t
has been but a little while since this State
succeeded in bringing railroad telegraph
and telephone companies under a just rule
of taxation. The capital of all these COM
panies and of many manufacturing com
panies is largely represented by patent
rights 1t would be strange doctrine to
hold that these patents which give their
owners exclusive franchises and very val
liable monopolies should also be exempt
from taXatoH. The truth is, on general
principles of equity there is no class of
property or values moro eligible for taxa
ton than patent rights
THE GLASS WAGE SCALE