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OPINION
I. Definition of Qualified Research
Pursuant to section 41(d)(1), “qualified research” must
meet, in pertinent part, the discovery and process of
experimentation tests.
A. The Discovery Test
Qualified research must be undertaken for the purpose of
discovering information which is technological in nature. Sec.
41(d)(1)(B)(i). In this case, “qualified research” is research
that is undertaken to discover information that goes beyond the
current state of knowledge in the computer science field. Sec.
41(d)(1)(B); United Stationers, Inc. v. United States, 163 F.3d
440, 444 (7th Cir. 1998); Norwest Corp. v. Commissioner, 110 T.C.
454, 493 (1998). In the context of section 41(d)(1)(B)(i),
“discovery demands something more than mere superficial newness;
it connotes innovation in underlying principle.” United
Stationers, Inc. v. United States, supra at 444.
B. The Process of Experimentation Test
Substantially all of the activities of qualified research
must constitute elements of a process of experimentation for a
purpose that relates to a new or improved function, performance,
reliability or quality. Sec. 41(d)(1)(C), (d)(3)(A). In section
41(d)(1)(C), “substantially all” means at least 80 percent of the
activities that constitute a process of experimentation. Norwest
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Last modified: May 25, 2011