Page 15: of Maritime Reporter Magazine (April 2001)

of oil, gas and minerals and the performance and provision of services related thereto, to the extent the mines, oil or gas wells are in international waters; • underwriting income from the insurance of risks on activ- ities that produce income derived from ocean activity.

Ocean activity does not include any activity giving rise to transportation income, defined under Section 863(c) of the Code to mean income from the use, hir- ing or leasing of a vessel in connection with trans- portation that begins and/or ends in the United States.

Sourcing Income of U.S.-Owned Foreign Corpora- tions. With respect to the source of income from ocean activities, the proposed regulations alter in two signifi- cant ways the general rule contained in the Code. First,

Prop. Reg. § 1.863-8(b)(2) provides that if a foreign corporation is 50 percent or more owned by vote or value (directly, indirectly or constructively) by U.S. persons and is not a controlled foreign corporation, all income derived by the corporation from ocean activity is currently taxable as U.S. source income.

This proposed rule would prevent such U.S.-owned foreign corporations from sourcing income derived from ocean activities to sources outside the United

States. More importantly, the new regulations adverse- ly impact the controlled foreign corporation ("CFC") rules, making it much more difficult to delay U.S. tax- ation of the income of a U.S.-owned foreign corpora- tion by intentionally adjusting the U.S. ownership

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Capstan Winches

Are Vessels

Patentable?

Marine architects and engineers frequently hear comments that a new vessel is simply a redesign of an old ship, and there is nothing patentable about it. 35 USC, which incorpo- rates the patent laws, indicate anything, which is useful, new, and unobvious can be patented. This includes new combinations of old items, which do something new. For example, a new fast workboat which goes 15 knots faster than an older design because of changes in engine room location or fuel tank location would be a patentable design, even though fuel tanks and the original hull design may be known technology. It is the combina- tion of the features to do something faster and better, or cheaper than known tech- niques, which makes things patentable.

So, what can be patented? Vessel designs, retrofitting techniques, new types of heads, new types of fuel tanks. Control devices, combinations of safety devices in engine rooms, personal safety devices, non-skid paints for decks, ways of double hulling a ship which was originally a single hull, new power systems, ways of connecting winches and towing mechanisms together, articulated barge designs and so on can all be patented if they are new, and unobvious.

The new laws permit the holder of an invention to file for protection as either a nor- mal utility patent or as the new provisional patent applications (which are far less expen- sive than traditional utility cases.) The provi- sional patent applications permit the owner to say "patent pending" and obtain, at no additional cost, rights in 77 foreign countries for 11 months. The filing of provisional patent applications has become very popular in other market segments because of the marketing value for advertising "patent pend- ing" and the phrase "extensive foreign rights" during trade shows and other events.

Another new law decided by the U.S.

Supreme Court permits new methods of doing business to be patentable. Methods of doing business over the Internet, which was not done before, can be the subject of U.S. patent applications.

Why patent? Many companies use patents as marketing tools, instead of saying "new and better" they use "patent pending." Other companies use their intellectual property to collateralize their bank loans and lines of credit. Still other companies which want to do joint ventures and IPOs look at the patent and trademark portfolio as critical to obtain- ing the highest possible valuation for their companies with the market analysts. Lastly, some companies use patent to simply sue others for whatever they can settle on, or to use the law suits to obtain industrial intelli- gence. Intellectual property and the marine time industry have come a long way in just a few years.

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