U.S. v. Solomon

• Decision Date: 03 November 1987
• Docket Number: 86-1162,Nos. 86-1155,s. 86-1155
• Citation: 825 F.2d 1292
• Parties: -5501, 87-2 USTC P 9482, 23 Fed. R. Evid. Serv. 704 UNITED STATES of America, Plaintiff-Appellee, v. Fred F. SOLOMON, Jr., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. George G. NICOLADZE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1292

825 F.2d 1292

60 A.F.T.R.2d 87-5501, 87-2 USTC P 9482,

23 Fed. R. Evid. Serv. 704

UNITED STATES of America, Plaintiff-Appellee, v. Fred F. SOLOMON, Jr., Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. George G. NICOLADZE, Defendant-Appellant.

Nos. 86-1155, 86-1162.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 6, 1987.

Decided Aug. 18, 1987.

As Amended on Denial of Rehearing and Rehearing En Banc Nov. 3, 1987.

Deborah Dawson, Washington, D.C., for plaintiff-appellee.

J. Frank McCabe and Stephen Kaus, San Francisco, Cal., for defendants-appellants.

Appeal from the United States District Court for the Northern District of California.

Before GOODWIN, WALLACE and BOOCHEVER, Circuit Judges.

GOODWIN, Circuit Judge:

A jury convicted George G. Nicoladze and Fred F. Solomon, Jr. of (1) conspiracy to defraud the United States, 18 U.S.C. Sec. 371; (2) tax evasion, 26 U.S.C. Sec. 7201; (3) making and subscribing false returns, 26 U.S.C. Sec. 7206(1), and aiding and abetting the same, 18 U.S.C. Sec. 2; and (4) aiding and abetting the preparation and presentation of false returns, 26 U.S.C. Sec. 7206(2). Both defendants allege constitutional, evidentiary, and other errors. None justifies reversal. We affirm as to all matters except for Nicoladze's sentence, which must be vacated and a new sentence imposed.

Solomon and Nicoladze and others not involved in this appeal worked together to establish numerous limited partnerships The limited partnerships were designed to give rise to large annual tax deductions for investors. In the majority of cases, a patent was purchased from an inventor for $3,000 in cash and a $2,000,000 nonrecourse note against the limited partnership formed for development of the patent. With such a substantial cost basis, the partnerships were able to offer significant paper losses to individuals desiring "tax shelters" to apply against other sources of income. After purchasing limited partner shares, investors were allocated a portion of the annual losses suffered by the limited partnerships and could deduct those losses on their personal tax returns.

created for the dual purposes of developing patents and creating valuable tax shelter deductions. Solomon acted as president of the master partnership entity responsible for establishing the limited partnerships. Nicoladze acted as a consultant to Solomon and as the tax advisor to all the limited partnership entities.

It is not disputed that bona fide patent development limited partnerships backed by nonrecourse notes could support legal tax deductions at the time that Nicoladze and Solomon assisted in the creation of the limited partnerships covered by the indictment. However, the government set forth three types of activities undertaken by the defendants which, if proved, could support criminal convictions. First, in connection with the establishment of the limited partnerships, defendants allegedly purchased existing patents at fraudulently inflated values with no genuine patent development purpose. Second, in anticipation of imminent changes in the tax code which took effect on January 1, 1977, defendants allegedly encouraged their agents (1) to enter into unenforceable oral contracts for the purchase of patents and (2) to backdate to 1976 purchase dates for patents actually purchased in 1977. Third, in order to make the limited partnership shares even more attractive to investors, defendants allegedly backdated documents establishing purchase dates of limited partnership shares in order to extend to share purchasers unwarranted depreciation deductions.

I. Jury Instructions

A defendant is entitled to a jury instruction on a theory of defense if the theory has a basis in law and in the record. United States v. Hayes, 794 F.2d 1348, 1350-51 (9th Cir.1986), cert. denied, --- U.S. ----, 107 S.Ct. 1289, 94 L.Ed.2d 146 (1987); United States v. Escobar de Bright, 742 F.2d 1196, 1198 (9th Cir.1984). The adequacy of any one jury instruction and the jury instructions as a whole, however, is determined by examining the instructions in their entirety. United States v. Park, 421 U.S. 658, 674-75, 95 S.Ct. 1903, 1912-13, 44 L.Ed.2d 489 (1975); United States v. Wellington, 754 F.2d 1457, 1463 (9th Cir.), cert. denied, 474 U.S. 1032, 106 S.Ct. 593, 88 L.Ed.2d 573 (1985).

A defendant is not entitled to any particular form of an instruction so long as the instructions given fairly and adequately cover the defendant's theories of defense. United States v. Echeverry, 759 F.2d 1451, 1455 (9th Cir.1985); United States v. Little, 753 F.2d 1420, 1432 (9th Cir.1984); United States v. Kenny, 645 F.2d 1323, 1337 (9th Cir.), cert. denied, 452 U.S. 920, 101 S.Ct. 3059, 69 L.Ed.2d 425 (1981). The district court has broad discretion in formulating the precise language of jury instructions and " '[i]mperfectly formulated jury instructions will serve as a basis for overturning a conviction only upon a showing of abuse of discretion.' " Hayes, 794 F.2d at 1351, quoting Wellington, 754 F.2d at 1463.

Supplemental instructions which are given by a trial court in response to jury inquiries are held to a similar standard. Although the trial court is obliged to "eliminate confusion when a jury asks for clarification of a particular issue," the "necessity, extent and character" of supplemental instructions, lies within the discretion of the trial court. Hayes, 794 F.2d at 1352.

A. Oral Contracts

The district court instructed the jury that patents could be assigned only in writing. This instruction arguably foreclosed appellants' contention that they had entered or The first contention, that the oral agreements for the assignment of patents allegedly entered into in 1976 were valid is unpersuasive. Some evidence was presented at trial to suggest that appellants' agent, Robert Winkler, may have obtained oral assurances of varying degrees of finality from inventors, prior to 1977, for the purchase of patents they owned. This evidence was not uncontradicted, however, and in the end the trial court determined, as a matter of law, that a valid assignment of a patent to become operational as limited partnership property required a writing. The court stated: "in the context of an assignment of a patent, they can agree verbally until the cows come home, and that patent isn't assigned until there's a writing." As a consequence, the jury was instructed that only written agreements to assign patent rights are valid. The district court was correct on the law.

thought that they had entered into valid patent purchase agreements prior to January 1, 1977. Appellants raise two criticisms of the instruction. First, they contend that the court should have instructed the jury that the patent purchase agreements in issue did not have to be in writing to be valid. Second, they contend that the jury should have been instructed that a good faith belief as to (1) the validity of oral agreements, or (2) the validity of certain boilerplate patent purchase agreements Solomon unilaterally signed in December 1976 would negate the "specific intent" or "willfulness" element of 26 U.S.C. Secs. 7206(1) and (2). ¹

A patent is a creature of federal statute and may be transferred only according to the terms of the patent statutes. The rules governing the transfer and assignment of patent rights clearly envision a scheme of written assignment by providing that patents "shall be assignable in law by an instrument in writing." 35 U.S.C. Sec. 261. Indeed, the necessity of a writing, like the necessity of an automobile certificate or a deed, to effect a valid transfer of a patent right has long been a matter of hornbook law. One authoritative treatise describes the state of the law as follows:

An assignment of a patent must be in writing to fulfill the requirements of the federal statute, and though no particular form of words is required, the instrument of transfer must be unambiguous and show a clear and unmistakable intent to part with the patent; it must express intention to transfer ownership.

5 Lipscomb's Walker on Patents, Title Sec. 19:7 (3d ed. 1986).

Moreover, whether it may be possible to enter into an enforceable oral contract to assign a patent--assuming proper delivery and the existence of adequate consideration--is not relevant here because such an agreement would not suffice for determining tax consequences when a patent had been purchased by one of the appellants' limited partnerships. A contract to assign a patent is legally distinguishable from an assignment of a patent, and valid assignments are a prerequisite to the taking of patent tax shelter depreciation deductions. See Treas. Reg. Sec. 1.167(a)-6 (1987) ("patentee" entitled to depreciate cost of patent). See also Sarkes Tarzian, Inc. v. United States, 159 F.Supp. 253, 256 (D.Ind.1958) (patent application, although a form of property, is only an inchoate patent right, maturing into a depreciable patent asset only when patent issues); Fed. Tax Guide Rep. (CCH) p 1723.20 (1987) (ownership of patent asset necessary predicate to patent depreciation deduction). Even if one of the limited partnerships had an enforceable oral agreement to purchase a patent in 1976 investors could not have taken valid tax deductions until 1977 following the perfection of a valid written assignment of that patent.

With respect to the second contention, after reviewing the instructions given by the district judge, we conclude that the instructions, taken as a whole, adequately In sum, we hold that the district court correctly refused to instruct on the possibility of a valid oral assignment of a patent. Further, we hold that the court did not abuse its discretion by refusing to give a "good faith" instruction when the jury was adequately instructed on "specific intent."

                charged the jury on the issues of willfulness and specific intent.  The district court was not required to give a "good faith

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