Tuesday, August 9, 2022

Gift and loan arrangements – patently** not patentable


Following on from posts over the last few weeks concerning gift and loan back arrangements, a question has been raised as to whether the arrangement is proprietary or exclusive to any law firm.

In a word, the answer is: no.

The key case in this regard is Grant v Commissioner of Patents - [2006] FCAFC 120.

In this case the court considered the patentability of the following steps in relation to an asset protection method for protecting an asset owned by an owner, namely:
  1. establishing a trust;
  2. the owner making a gift of a sum of money to the trust;
  3. the trustee making a loan of said sum of money from the trust to the owner; and
  4. the trustee securing the loan by taking a charge for said sum of money over the asset.’
In other words a gift and loan back arrangement.

The court confirmed there was no novelty in the steps. Rather they were best described as a business system or method.

In concluding the approach was not patentable the court confirmed as follows:

“It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is "intellectual information", mere working directions and a scheme. It is necessary that there be some "useful product", some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent. That is missing in this case.”

As usual, please contact me if you would like access to any of the content mentioned in this post.

** for the trainspotters, the title today is riffed from a line in The Talking Heads song ‘Mr Jones’.

View a seriously bizarre music video here:

Tuesday, August 2, 2022

Took out a loan**? – what does this exactly mean?


Following on from posts over recent weeks concerning gift and loan back arrangements, a question has been raised as to what in fact is a loan.

In theory the definition of a loan should be simple, however it has over time caused some level of debate.

This said, the leading decision is generally accepted as the case of Federal Commissioner of Taxation v. Radilo Enterprises Pty Ltd (1997) 34 ATR 635. In this case it was confirmed that:
  1. A loan involves an obligation on the borrower to repay the sum borrowed.
  2. It is a simple contract whereby one person ('the lender') pays or agrees to pay a sum of money in consideration of a promise by another person ('the borrower') to repay the money upon demand or at a fixed date.
  3. The promise of repayment may or may not be coupled with a promise to pay interest on the money so paid.
  4. The essence of the transaction is the promise of repayment.
  5. Ultimately therefore, a loan is a payment of money to or for someone on the condition that it will be repaid. Thus it is clear that an obligation to repay forms an integral and indispensable characteristic of a loan.
As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Black Rebel Motor Cycle club song 'Took out a loan’.

Listen here: