Patents, Profits, and Machines: How AI Is Reshaping Innovation and Taxation
Choose format
RIS BIB ENDNOTEPublication date: 03.11.2025
Financial Law Review, 2025, Issue 38 (2)/2025, pp. 45-64
https://doi.org/10.4467/22996834FLR.25.010.22577Authors
Patents, Profits, and Machines: How AI Is Reshaping Innovation and Taxation
Patents grant inventors exclusive rights, fostering innovation while playing a crucial role in global tax strategy. Multinational corporations often exploit patent-related tax advantages by shifting intellectual property to low-tax jurisdictions, raising concerns over tax base erosion. Patent boxes, used by countries like the UK and Netherlands, offer reduced tax rates to stimulate R&D but face scrutiny from international bodies like the OECD, which promotes tighter regulations through initiatives like the BEPS Action Plan. Transfer pricing of patents remains contentious due to the difficulty of valuing intangible assets. The emergence of AI in innovation introduces further complexity as AI systems increasingly meet patent criteria, challenging current legal definitions that restrict inventorship to humans. High-profile cases like DABUS underscore the urgency of updating legal frameworks to address AI-generated inventions.
Additionally, AI is transforming how patents are evaluated and enforced, enhancing efficiency while raising ethical concerns around transparency and accountability. These developments affect income attribution, valuation, and regulatory compliance.
In order to address these shifts, policymakers must clarify inventorship laws, develop global standards, reform tax guidelines, ensure AI transparency, and empower regulatory agencies with AI tools. As AI reshapes innovation, the intersection of patent law and taxation must evolve to ensure fairness and effectiveness in this new landscape. Governments face significant challenges in addressing transfer pricing for AI-generated assets, particularly due to the risk of profit shifting by multinational companies to low-tax jurisdictions. To counter these issues, reforms are being proposed, including modernizing intellectual property tax rules to reflect the role of non-human creators and strengthening transparency requirements across AI-driven value chains.
Akcigit, U., Baslandze, S., & Stantcheva, S.: Taxation and the International Mobility of Inventors. American Economic Review, 106(10), 2930–2981, 2016
AlAzzawi, S.: Multinational Corporations and Knowledge Flows: Evidence from Patent Citations. Economic Development and Cultural Change, 59(3), 649–680, 2011
Arora, A., Fosfuri, A., & Gambardella, A.: Chapter 4 Patents and the Market for Technology. In Intellectual Property, Growth and Trade (world; Vol. 2, pp. 123–156). Emerald Group Publishing Limited, 2007
Arora, A., & Gambardella, A.:Evaluating technological information and utilizing it: Scientific knowledge, technological capability, and external linkages in biotechnology. Journal of Economic Behavior & Organization, 24(1), 91–114, 1994
Baharad, R., Benjamin, S. M., & Guttel, E.: Anti-Patents. The University of Chicago Law Review, 91(1), 239–277, 2024
Baumann, A. (2024). Chapter 1: Arbitrability of IPRs disputes. Available at: https://www.elgaronline.com/edcollchap/book/9781800378360/book-part-9781800378360-10.xml, accessed: May 7th, 2025
Białowska, A. (2023). Does the taxpayer have a chance to win against the tax authority? Financial Law Review, vol. 30 (2), 2023, pp: 1–31.
Blair-Stanek, A.: Intellectual Property Law Solutions to Tax Avoidance. UCLA Law Review, 62, 2, 2025
Bochańczyk-Kupka, D.: Intellectual property as intangible good. Ekonomia i Prawo. Economics and Law, 18(2), 123–131, 2019
Bradley, S., Dauchy, E., & Robinson, L.: Cross-country evidence on the preliminary effects of patent box regimes on patent activity and ownership. National Tax Journal, 68(4), 1047–1071, 2015.
Brauner, Y.:Value in the Eye of the Beholder: The Valuation of Intangibles for Transfer Pricing Purposes. Virginia Tax Review, 28(79), 2008. Available at: https://heinonline.org/HOL/LandingPage?handle=hein.journals/vrgtr28&div=5&id=&page=, accessed: May 7th, 2025
Čejková, T. (2024). Tax in the Metaverse: EU Perspective. Financial Law Review, vol. 32 (4), 2023, pp. 12–30.
Chen, H., Zhang, G., Zhu, D., & Lu, J.: Topic-based technological forecasting based on patent data: A case study of Australian patents from 2000 to 2014. Technological Forecasting and Social Change, 119, 39–52, 2017
Ciaramella, L., Martínez, C., & Ménière, Y.: Tracking patent transfers in different European countries: Methods and a first application to medical technologies. Scientometrics, 112(2), 817–850, 2017
Corbett, D. J.:A Premier Paradigm Shift: The Impact of Artificial Intelligence on U.S. Intellectual Property Laws. Liberty University Law Review, 17, 321, 2022
Crivelli, E., De Mooij, R., & Keen, M.: Base Erosion, Profit Shifting and Developing Countries. FinanzArchiv / Public Finance Analysis, 72(3), 268–301, 2016
Damioli, G., Van Roy, V., Vertesy, D., & Vivarelli, M.: AI as a new emerging technological paradigm: Evidence from global patenting (Working Paper No. 1467). GLO Discussion Paper, 2024 Available at: https://www.econstor.eu/handle/10419/300593, accessed: May 7th, 2025
Davies, R. B., Kogler, D. F., & Hynes, R.: Patent boxes and the success rate of applications, 2020 Available at: https://ora.ox.ac.uk/objects/uuid:1695579f-27d0-4027-8bbf-5c1edeae644a, accessed: May 7th, 2025
Dischinger, M., & Riedel, N.: Corporate taxes and the location of intangible assets within multinational firms. Journal of Public Economics, 95(7), 691–707, 2011
Dudar, O., & Voget, J.: Corporate Taxation and Location of Intangible Assets: Patents vs. Trademarks (SSRN Scholarly Paper No. 2753656). Social Science Research Network, 2016
Fujii, H., & Managi, S.: Trends and priority shifts in artificial intelligence technology invention: A global patent analysis. Economic Analysis and Policy, 58, 60–69, 2018
Gaessler, F., Harhoff, D., & Sorg, S.: Bargaining Failure and Freedom to Operate: Re-Evaluating the Effect of Patents on Cumulative Innovation (SSRN Scholarly Paper No. 3444203). Social Science Research Network, 2019
Graham, S. J. H., Marco, A. C., & Myers, A. F.: Patent transactions in the marketplace: Lessons from the USPTO Patent Assignment Dataset. Journal of Economics & Management Strategy, 27(3), 343–371, 2018
Griffith, R., Miller, H., & O’Connell, M.: Ownership of intellectual property and corporate taxation. Journal of Public Economics, 112, 12–23, 2014
Hemmerich, A. K.: Empirical essays on the effects of countermeasures against cross-border tax evasion and avoidance, 2019
Hopland, A. O., Lisowsky, P., Mardan, M., & Schindler, D.: Flexibility in Income Shifting under Losses. The Accounting Review, 93(3), 163–183, 2018
Hovenkamp, E.: Antitrust Law and Patent Settlement Design. Harvard Journal of Law & Technology (Harvard JOLT), 32, 417, 2018
Karkinsky, T., & Riedel, N.: Corporate taxation and the choice of patent location within multinational firms. Journal of International Economics, 88(1), 176–185, 2012
Liu, W., Yang, Z., Cao, Y., & Huo, J.: Discovering the influences of the patent innovations on the stock market. Information Processing & Management, 59(3), 102908, 2022
Modzelewski, W.: Legal and Tax Instruments Limiting the Decline in the Fiscal Efficiency of the Tax System During Periods of Crisis. Financial Law Review, vol. 32, 2024, pp. 1–11
Nafarrate, B.: Combatting Base Erosion and Profit Shifting: Is A Digital Service Tax on Revenue the Right Path toward Equitable International Taxation? Southwestern Journal of International Law, 27, 368, 2021
Sampat, B. N., & Ziedonis, A. A.: Patent Citations and the Economic Value of Patents. In H. F. Moed, W. Glänzel, & U. Schmoch (Eds.), Handbook of Quantitative Science and Technology Research: The Use of Publication and Patent Statistics in Studies of S&T Systems (pp. 277–298). Springer Netherlands, 2025
Saunders, K. M.: Patent Nonuse and the Role of Public Interest as a Deterrent to Technology Suppression. Harvard Journal of Law & Technology, 15, 389, 2001
Serrano, C. J.: The dynamics of the transfer and renewal of patents. The RAND Journal of Economics, 41(4), 686–708, 2010
Shapiro, C., & Lemley, M. A.: The Role of Antitrust in Preventing Patent Holdup. University of Pennsylvania Law Review, 168, 2019.
Information: Financial Law Review, 2025, Issue 38 (2)/2025, pp. 45-64
Article type: Original scientific article
Published at: 03.11.2025
Received at: 07.05.2025
Accepted at: 14.10.2025
Article status: Open
Licence: CC BY-NC-ND 3.0 Unported
Percentage share of authors:
Information about author:
Classification number:
Article corrections:
-Publication languages:
EnglishView count: 825
Number of downloads: 802
