PRECEDENTIAL

         UNITED STATES COURT OF APPEALS
              FOR THE THIRD CIRCUIT
                   ___________

                        No. 17-1084
                        ___________

                   SPIRIDON SPIREAS,
                                  Appellant
                           v.

      COMMISSIONER OF INTERNAL REVENUE
                 __________

       On Appeal from the United States Tax Court
                   (T.C. No. 13-10729)
       Tax Court Judge: Honorable Albert G. Lauber
                      ___________

                 Argued October 10, 2017
       Before: HARDIMAN, SHWARTZ, and ROTH,
                     Circuit Judges.

              (Opinion Filed: March 26, 2018)

Brian Killian        [Argued]
Robert R. Martinelli
Michael E. Kenneally
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Ave., NW
Washington, DC 20004
William F. Colgin, Jr.
Morgan, Lewis & Bockius LLP
1400 Page Mill Road
Palo Alto, CA 94304
       Attorneys for Appellant

David A. Hubbert
       Acting Assistant Attorney General
Bruce R. Ellisen
Clint A. Carpenter    [Argued]
United States Department of Justice
Tax Division
P.O. Box 502
Washington, DC 20044
       Attorneys for Appellee

                        ____________

                 OPINION OF THE COURT
                      ____________

HARDIMAN, Circuit Judge.

       This appeal requires us to decide whether royalties paid
on a technology license agreement should have been treated as
ordinary income or as capital gains. The distinction is
significant for taxpayers like the Appellant, Dr. Spiridon
Spireas, who earned $40 million in such royalties over just two
tax years. If those earnings were ordinary income, Spireas
owed a 35 percent tax; if they were capital gains he owed 15
percent.

       Spireas claimed the favorable capital gains treatment
pursuant to 26 U.S.C. § 1235(a), which applies to money
received “in consideration of” “[a] transfer . . . of property



                                 2
consisting of all substantial rights to a patent.” The
Commissioner of Internal Revenue disagreed that Spireas was
entitled to § 1235(a) treatment, finding that Spireas should
have treated the royalties as ordinary income. Accordingly, the
Commissioner gave Spireas notice of a $5.8 million deficiency
for the 2007 and 2008 tax years. Spireas petitioned the Tax
Court for a redetermination of the deficiency, but after a brief
trial the Tax Court agreed with the Commissioner. Spireas
appeals that final order.1

                                  I

        Royalties paid under a license agreement are usually
taxed as ordinary income. An exception to this general rule is
found in section 1235 of the Internal Revenue Code, which
affords special treatment to payments earned from certain
technology transfers. The statute provides that “[a] transfer . . .
of property consisting of all substantial rights to a patent . . . by
any holder shall be considered the sale or exchange of a capital
asset held for more than 1 year.” 26 U.S.C. § 1235(a).
Payments made “in consideration of,” 

meet
the statutory criteria are taxed at a long-term capital gains rate
that can be about half of that applicable to ordinary income.
Compare 26 U.S.C. § 1(a), (i)(2) (2008) (providing a top
marginal rate of 35 percent for married taxpayers filing
jointly), with 26 U.S.C. § 1(h)(1)(A)–(C) (2008) (providing a


       1
         Spireas filed the tax returns at issue jointly with his
wife, Amalia Kassapidis-Spireas. Ms. Kassapidis-Spireas
joined in the petition to the Tax Court and also joins this
appeal. Since none of Ms. Kassapidis-Spireas’s conduct is
relevant to this case, we refer only to her husband.




                                 3
top rate of 15 percent for most long-term capital gains).2
Section 1235’s basic requirements are straightforward. To
qualify for automatic capital-gains treatment, income must be
paid in exchange for a “transfer of property” that consists of
“all substantial rights” to a “patent.”3 

As this case
illustrates, not every transfer of “rights” will suffice because
the statute grants capital gains treatment only to transfers of
property.




       2
         The cited rates apply to the 2007 and 2008 tax years at
issue here, but long-term capital gains receive similarly-
favorable treatment under current law. Compare Tax Cuts and
Jobs Act of 2017, Pub. L. No. 115-97, § 11001(a), 131 Stat.
2054, 2054–55 (to be codified at 26 U.S.C. § 1(j)(2)(A))
(providing a 37-percent top marginal rate for married taxpayers
filing jointly), with 26 U.S.C. § 1(h)(1)(A)–(D) (providing a
20-percent top rate for most long-term capital gains).
       3
         IRS regulations provide that “[i]t is not necessary that
the patent or patent application for the invention be in
existence” to receive capital-gains treatment under § 1235, 26
C.F.R. § 1.1235-2(a), and courts have long held that § 1235 is
satisfied “so long as the invention is patentable.” See, e.g.,
Burde v. Comm’r of Internal Revenue, 

, 998 n.4
(2d Cir. 1965). The Tax Court found that the drug formulations
involved in this case were patentable, Spireas v. Comm’r of
Internal Revenue, T.C. Memo 2016-163, 

,
at *6 n.2 (Aug. 24, 2016), and the Commissioner does not
challenge that determination.




                               4
                                II

                                A

        Spireas is a pharmaceutical scientist who, with Dr.
Sanford Bolton, invented “liquisolid technology.”4 That term
describes certain drug-delivery techniques meant to facilitate
the body’s absorption of water-insoluble molecules taken
orally. It is not, however, a one-size-fits-all solution. Rather,
each application of “liquisolid technology . . . is specific to a
particular drug.” App. 50–51 (Stipulation ¶ 21). And creating
a clinically-useful liquisolid formulation of a given drug is not
a matter of rote recipe; it requires creating, through trial and
error, a process specific to the substance involved.

         The uniqueness of each liquisolid formulation meant
that commercializing the technology was a tricky business.
Before a drug could go to market in liquisolid form, a specific
formulation had to “progress from . . . conception to . . .
prototyp[ing] . . . , to extensive further development, to a form
that c[ould] be . . . sold to the public, to actual manufacture for
sale . . . , and, finally, to actual marketing to the public.” See
1-6 William H. Byrnes & Marvin Petry, TAXATION OF
INTELLECTUAL PROPERTY AND TECHNOLOGY § 6.02[1]
(2017). Like most inventors, Spireas was unable to do all that
alone, so in June 1998 he signed a licensing agreement with an
established drugmaker, Mutual Pharmaceutical Co. (the 1998
Agreement).5 The 1998 Agreement established a

       4
          Dr. Bolton is deceased, and his estate is not a party to
this litigation.
       5
         We describe the parties to the 1998 Agreement in
simplified terms. United Research Laboratories, Inc.—a



                                5
comprehensive framework for licensing liquisolid technology
to Mutual, selecting prescription drugs to develop using the
technology, developing and selling those drugs, and paying
Spireas royalties out of the proceeds.

        Under the 1998 Agreement, Spireas granted Mutual two
sets of exclusive rights: a circumscribed grant of rights to
liquisolid technology and a much broader set of rights to
specific drug formulations developed using that technology.
First, the 1998 Agreement granted Mutual “[t]he exclusive
rights to utilize the Technology,” but “only to develop
[liquisolid drug] Products that Mutual . . . and [Spireas] . . .
[would] unanimously select.” App. 69 (1998 Agreement
§ 2.1.1) (emphasis added). Second, Mutual received “[t]he
exclusive right to produce, market, sell, promote and
distribute . . . said Products.” 

§ 2.1.2).

        Having allocated Spireas and Mutual their respective
rights to the liquisolid technology and liquisolid products, the
1998 Agreement established a multistep process for producing
marketable products and paying Spireas for his work. That
process began when Spireas and Mutual “select[ed] a specific
Product to develop.” App. 72 (1998 Agreement § 5.1).
Selections had to be unanimous and made in writing. The

corporate affiliate of Mutual—was also a party to the 1998
Agreement. Since none of United’s actions are relevant in this
case, we refer only to Mutual. In addition, Spireas was joined
on the licensor side of the equation by Dr. Bolton and Hygrosol
Pharmaceutical Corp., which was an S corporation owned
equally by Spireas and Bolton. Certain rights under the 1998
Agreement were granted to Hygrosol, rather than to Spireas
and Bolton personally. For simplicity’s sake, we refer to
Spireas even when the 1998 Agreement refers to Hygrosol.



                               6
parties’ practice was to memorialize their selections in letters
noting the “formal engagement of [Spireas] and Mutual” for a
particular product. 1 T.C. Rec. 262–75. Once the parties were
so engaged with respect to a particular drug, the process
continued with the development of a practical liquisolid
formulation, clinical testing, FDA approval, and actual
marketing. And as sales were made and funds were received,
Mutual would pay Spireas a 20 percent royalty on the gross
profits it earned from liquisolid products.6

                               B

       In March 2000, Spireas and Mutual entered into an
engagement letter (the 2000 Letter) in accordance with the
1998 Agreement. The 2000 Letter engaged Spireas to develop,
using liquisolid technology, a generic version of a blood-
pressure drug called felodipine.7 That development process
succeeded after what the Tax Court found was “considerable

       6
         The 1998 Agreement also provided for Spireas to earn
payments as compensation for certain independent consulting
work he performed during the product selection and
development process. The tax treatment of those payments is
not at issue in this appeal.
       7
          The 2000 Letter also engaged Spireas to develop
liquisolid formulations for an arrhythmia drug called
propafenone. A small portion of the royalty payments at issue
in this appeal are attributable to propafenone sales. The Tax
Court held that the analysis applicable to the two drugs was
“identical in all material aspects,” and did not discuss
propafenone separately. See Spireas, 

, at *6
n.2. Neither party to this appeal challenges the Tax Court’s
sensible approach.



                               7
work . . . to adapt [liquisolid technology] to felodipine’s
idiosyncrasies.” Spireas v. Comm’r of Internal Revenue, T.C.
Memo 2016-163, 

, at *6 (Aug. 24, 2016).
Spireas completed those efforts in relatively short order.
“When he signed the March 2000 engagement letter, [Spireas]
had completed roughly 30% of the work that ultimately
resulted in” the liquisolid formulation of felodipine that he
finished inventing “sometime after May 2000.” 

*10.

       The FDA approved Mutual’s Abbreviated New Drug
Application for liquisolid felodipine, and Mutual marketed it
to great success. During the relevant time period, Spireas’s
royalties on felodipine sales totaled just over $40 million.
Spireas reported all of those royalties as capital gains on his
personal returns for tax years 2007 and 2008.

       In 2013, the Commissioner sent Spireas a notice of
deficiency for 2007–2008. “The deficiencies arose from [the
Commissioner’s] conclusion that the Royalties [Spireas]
received under [the 1998 Agreement] are taxable as ordinary
income rather than as capital gain.” Spireas, 

, at *1. The Commissioner determined that the
royalties under the 1998 Agreement should have been treated
as ordinary income, and Spireas therefore owed some $5.8
million in additional taxes.

                                C

       After receiving the Commissioner’s notice of
deficiency, Spireas petitioned the United States Tax Court for
a redetermination, and a brief trial was held. The main dispute
in the Tax Court was whether Spireas had satisfied § 1235’s
requirement that he transfer “all substantial rights to a patent.”
Spireas, 

, at *8–9. IRS regulations define




                                8
“all substantial rights to a patent” to mean “all rights . . . which
are of value at the time the rights to the patent . . . are
transferred.” 26 C.F.R. § 1.1235-2(b)(1); see also E.I. du Pont
de Nemours & Co. v. United States, 

, 1055 (3d
Cir. 1970).

       As the Tax Court put it, the parties’ differences were
“encapsulated in the question: ‘All substantial rights to what?’”
Spireas, 

, at *9. The Commissioner argued
that the dispositive point was Spireas’s admitted failure to
transfer all his rights to liquisolid technology generally. Mutual
was not free to exploit every one of the technology’s “potential
application to thousands of drugs,” 

and could only
develop and sell those “Products that Mutual . . . and
[Spireas] . . . unanimously select[ed],” App. 69 (1998
Agreement § 2.1.1). Spireas acknowledged that he had retained
valuable rights in the overall technology, but emphasized that
he had transferred away all of his rights to the liquisolid
formulation of felodipine. Spireas, 

, at *9.

       The Tax Court agreed with the Commissioner. It held
that Spireas could not have transferred the rights to any
particular liquisolid products in 1998 because no products
existed at that time. 

only rights Spireas could have
granted Mutual in 1998 were in liquisolid technology
generally—“the rights to use the liquisolid technology . . . and
to make and sell any ‘Products containing the Technology.’”

Spireas had granted Mutual far less than “all
substantial rights” to the overall liquisolid technology, the
royalty payments he received in 2007 and 2008 did not satisfy
the requirements of § 1235 and were thus taxable as ordinary
income. 

                                 9
       After the Tax Court entered its final order, Spireas
timely appealed.8

                               III

                               A

       Spireas’s argument on appeal is clear: his royalty
payments qualify for capital-gains treatment under § 1235
because he received them in exchange for “all substantial
rights” to liquisolid felodipine. Spireas claims the 1998
Agreement prospectively assigned Mutual the relevant rights
long before he actually invented that particular formulation.
The Commissioner responds that Spireas has waived any
argument based on a prospective transfer of rights by not
presenting it to the Tax Court. Spireas replies by declaring that
his “position has been consistent.” Reply Br. 6.

       Spireas’s ipse dixit is contrary to the record. In the Tax
Court, Spireas asserted a transfer of rights that took place
sometime “after [the felodipine formulation] was invented,”
2 T.C. Rec. 323 (Spireas T.C. Opening Br. 12 ¶ 40), which
happened “sometime between the end of 2000 and spring
2001.” 2 T.C. Rec. 319 (Spireas T.C. Opening Br. 8 ¶ 23).
Indeed, Spireas could hardly have been more explicit that he
“did not transfer the felodipine technology in 1998.” 2 T.C.
Rec. 322 (Spireas T.C. Opening Br. 11 ¶ 36) (emphasis added).
In the Tax Court Spireas argued the “fundamental” view that it

       8
        The Tax Court had jurisdiction over Spireas’s petition
under 26 U.S.C. §§ 7442 and 6214. We have jurisdiction under
26 U.S.C. § 7482(a)(1). Venue is proper in this Court under 26
U.S.C. § 7482(b)(1)(A) because Spireas and his wife are
Pennsylvania residents.



                               10
was the post-March 2000 transfer of the felodipine formulation
that “constituted a transfer of ‘all substantial rights’” to
Mutual. 2 T.C. Rec. 326–27 (Spireas T.C. Opening Br. 15–16).

       Our dissenting colleague disputes our reading of the
record, contending that “Spireas [has] presented a complicated
but consistent argument throughout,” and that further
consideration of waiver is therefore “not necessary.” Dissent at
8, 11. The dissent makes two arguments to that effect, neither
of which we find persuasive.

       First, the dissent emphasizes the many points of
commonality between Spireas’s position here and in the Tax
Court. To be sure, Spireas has consistently “relie[d] on both the
1998 Agreement and the March 2000 Engagement letter,” and
argued that they “operat[ed] in conjunction” to transfer to
Mutual rights to liquisolid felodipine. Dissent at 1. And the
dissent rightly notes that Spireas has always maintained that
those two documents are “of a piece and related,” making up a
“consistent course of dealing,” Dissent at 2, and that the
ultimate terms on which Mutual obtained “rights to drug
‘Products’ . . . depended upon the terms of the 1998
Agreement,” Dissent at 3.

        Notably absent, however, from that discussion of which
instruments served to transfer rights in liquisolid felodipine is
any mention of when Spireas claimed that transfer took place.
The dissent appears to suggest that Spireas’s consistency on
the former point suffices to insulate him from waiver. Dissent
at 5 (“Spireas’s consistent emphasis on the same contractual
provisions distinguishes his case from cases in which we have
found waiver.”). But where waiver is concerned, the question
is not whether a party’s position has been mostly consistent, or
generally inclined toward the same subject as that raised on



                               11
appeal, but whether the same “theory” was “squarely” raised
in the trial court. Doe v. Mercy Catholic Med. Ctr., 

, 558 (3d Cir. 2017) (citing United States v. Joseph, 

, 338–42 (3d Cir. 2013)). So even accepting at face
value the dissent’s account of Spireas’s consistency on some
issues, that sheds no light on whether Spireas has waived his
new (and contradictory) argument regarding the timing of the
transfer.

        The dissent’s second point—that Spireas has been
consistent in distinguishing between legal transfer of rights to
felodipine in 1998, followed by a physical handover of
possession in 2000—fares no better. Although that argument
does address Spireas’s timing theory head-on, its core premise
is belied by the record. As we have noted, Spireas’s opening
brief to the Tax Court made his position clear: (1) “Spireas
transferred the felodipine . . . technolog[y] . . . at some point
after March 2000,” and (2) “Spireas’ transfer . . . constituted a
transfer of ‘all substantial rights’ . . . to [Mutual].” 2 T.C. Rec.
327 (Spireas T.C. Opening Br. 16) (emphasis added).

       The dissent’s distinction between an earlier “legal
transfer” and subsequent “physical transfer” exists only in
what we find to be a strained reading of the single oral colloquy
quoted in that opinion. See Dissent at 6. Spireas’s briefing
discussed only a single “transfer” that allocated “rights”
(whether or not it involved a physical handover as well). 2 T.C.
Rec. 327 (Spireas T.C. Opening Br. 16). We will not read an
isolated extemporaneous exchange to advance a theory so at
odds with the one Spireas labeled “fundamental” in his written
submissions. 2 T.C. Rec. 326 (Spireas T.C. Opening Br. 15).

                                 B




                                12
        Citing our seminal precedent in United States v. Joseph,

(3d Cir. 2013), the Commissioner contends that
Spireas cannot argue on appeal that he transferred rights to
felodipine in 1998 after he took the contrary position in the Tax
Court. See also Gen. Refractories Co. v. First State Ins. Co.,

, 162 (3d Cir. 2017) (applying Joseph to a civil
case). Under Joseph, “merely raising an issue that
encompasses the appellate argument is not 

. Whether an argument remains fair game on appeal is
determined by the “degree of particularity” with which it was
raised in the trial court, 

and parties must do so with
“exacting specificity,” 

“[O]ur precedents reveal at
least two characteristics that identical arguments always have.
First, they depend on the same legal rule or standard. Second,
the arguments depend on the same facts.” 

(citation
omitted).9


       9
          The dissent faults us for “rel[ying] on Joseph at the
exclusion of our precedent on civil waiver.” Dissent at 14. In
the dissent’s view Joseph is “instructive” in the civil context,
but fails to account for “our prior precedent that civil waiver is
a prudential doctrine to be applied in a case-specific manner.”

We disagree that our application of
Joseph in this case is inappropriate. At the outset, the dissent’s
concession that our Court has already “appl[ied] Joseph in the
civil context” demonstrates that our reliance is hardly novel.

those prior decisions have simply
cited Joseph without much in the way of analysis, we think that
a few words clarifying its role in civil cases are in order. Joseph
arose out of Rule 12 of the Federal Rules of Criminal
Procedure, which the dissent characterizes as a very “narrow
context.” 

that Rule 12 has some unique features.



                                13
But the absence of those characteristics in the civil context
clarify Joseph’s scope, not its applicability.
        Rule 12 provides in relevant part that certain “defenses,
objections, and requests must be raised by pretrial motion” if
possible. FED. R. CRIM. P. 12(b)(3) (emphasis added). And we
have held that the result of failure to do so is an outright waiver
of the argument in question. United States v. Rose, 

, 176 (3d Cir. 2008). In that respect, Rule 12 sets up a
different scheme than prevails under Criminal Rule 52—which
provides that arguments “not brought to the [district] court’s
attention” are generally reviewable for plain error, FED. R.
CRIM. P. 52(b)—and in the civil context—where courts retain
“discretionary power to address issues that have been waived”
under appropriate circumstances, Huber v. Taylor, 

, 74 (3d Cir. 2006).
       But while we have held that Rule 12 enacts a unique
rule with respect to the consequences of not raising an
argument, we have never suggested the same with respect to
the distinct question of whether an argument was actually
raised. Nor does anything in the text of Rule 12 itself provide
any reason to do so. References to “raising” arguments are
commonplace in civil cases, see, e.g., 

,
and Joseph implicitly recognized that doctrines respecting the
failure to raise arguments generally incorporate three distinct
inquiries: (1) whether an argument was made, 

, (2) the default consequences of failing to make an
argument (i.e. whether an argument is waived, forfeited, or
merely subject to a less-forgiving standard of review), see 

n.3, and (3) the special circumstances under which those
consequences may be excused, see 

n.2 (noting that
waiver under Rule 12 may be excused for “good cause”); see



                                14
       But even under that strict standard, Spireas’s shifting
position on the fact of when Mutual obtained its rights in
liquisolid felodipine does not necessarily mean his entire
argument is waived. Applying Joseph’s particularity analysis
is not a matter of comparing every stray statement or claim
made in the Tax Court. Rather, Joseph instructs us to compare
arguments, a term that we have explained is synonymous with
“theories,” “grounds,” or “bases” for “granting 

–42. To be sure, Joseph teaches that two arguments
can be the same only if they “depend on the same facts,” 

–75 (citations omitted) (discussing
examples of analogous civil doctrines).
       As the dissent points out, the prudential roots of the civil
waiver doctrine differentiate it from its criminal analogues
with respect to the second and third questions—failure to raise
an argument in a civil case is generally met with relatively
softer consequences, and is more readily excused, than in a
criminal case. But Joseph addressed (and this appeal
implicates) only the threshold question of whether an argument
was made in the first place. See United States v. Washington,

, 208 n.53 (3d Cir. 2017) (noting that Joseph’s
“specific framework . . . does not limit our discretion to excuse
waiver or forfeiture concerns”). We see no basis for subjecting
that inquiry to different standards in civil and criminal cases,
and clarify today that Joseph provides the governing rule for
both. And because Spireas does not ask for any waiver to be
excused, there is no reason for our analysis to proceed onward
to consider whether it might be prudent to do so. We decline to
sua sponte “waive the waiver” to reach an argument that
Spireas specifically disclaimed in the Tax Court. Cf.

.



                                15
342, but not every fact that appears in a brief is one on which
an argument “depends.” Whether an argument “depends” on a
given fact requires reference to the applicable legal standard.
As the Supreme Court has observed in another context, “the
substantive law”—in this case, § 1235 of the Internal Revenue
Code—“will identify which facts are material.” Anderson v.
Liberty Lobby, Inc., 

, 248 (1986).

                               C

        Under § 1235’s test for capital-gains treatment,
changing the date on which Spireas granted Mutual rights to
liquisolid felodipine changes the legal theory on which his
position depends. Spireas’s royalty payments are entitled to
capital-gains treatment only if Mutual paid them in exchange
for a transfer of “property consisting of all substantial rights”
to the liquisolid formulation of felodipine. 26 U.S.C. § 1235(a)
(emphasis added). Spireas cannot make that argument for the
first time on appeal because it depends on a different legal
standard for when that formulation became “property” than his
argument to the Tax Court.

       Section 1235 is explicit that in order to secure capital-
gains treatment, an inventor must make a transfer of property
rights that he actually possesses at the time of the grant.
Accordingly, Spireas had to explain: (1) when he granted
Mutual rights to liquisolid felodipine, and (2) how he obtained
a property interest in that formulation prior to the grant. The
account Spireas presented to the Tax Court was clear: he
granted Mutual its rights after the invention of the liquisolid
formulation was complete, which happened sometime after
March 2000. 2 T.C. Rec. 327 (Spireas T.C. Opening Br. 16).




                               16
        That timeline included a straightforward theory of when
and how Spireas obtained his interest in the felodipine
formulation. To possess a transferable property interest in an
invention, the inventor generally must have “reduced [it] to
actual practice.” See Burde v. Comm’r of Internal Revenue,

, 998 n.3 (2d Cir. 1965); see generally Byrnes &
Petry, supra, § 6.05[3].10 That basic patent-law rule accords
with the text of § 1235, which provides that a non-inventor
may be a patent “holder” entitled to capital-gains treatment on
the proceeds of a subsequent transfer only if he obtained his
interest in exchange for consideration paid to the inventor prior
to the invention’s “actual reduction to practice.” 26 U.S.C.
§ 1235(b)(2). Put another way, “actual reduction to practice” is
the line between a transfer of a then-existing “property”
interest (which entitles the holder-transferor to immediate
capital gains treatment) and a transfer or grant of some other
legal interest (which makes the transferee the new “holder”
entitled to pay the capital gains rate against the proceeds of a
transfer that takes place after a subsequent reduction to
practice).


       10
          While the dissent’s assertion that “transfers of future
inventions are valid” is correct as a matter of contract law,
Dissent at 10 (citing Byrnes & Petry, supra, § 6.05[4]), it is also
a non sequitur. Agreements to transfer future patents are
enforceable even if no property interest exists at the time of
contracting. Byrnes & Petry, supra, § 6.05[3][a] (“[P]arties can
agree in advance that upon reduction to practice the inventor
will convey the property.”) (emphasis added), quoted by
Dissent at 10. For tax-law purposes, the question isn’t whether
the parties made a valid and enforceable contract, but whether
in doing so they transferred a then-existing interest in property.



                                17
       “Actual reduction to practice” is a term of art in patent
law, see generally U.S. Patent and Trademark Office, Manual
of Patent Examining Procedure § 2138.05(II) (9th ed. Rev. 7,
Nov. 2015), that has a slightly looser meaning in the tax
context. “Generally, an invention is reduced to actual practice
when it has been tested and operated successfully under
operating conditions.” 26 C.F.R. § 1.1235-2(e). The Tax Court
decision from which the IRS borrowed that language clarifies
things a bit further: “it [is] not necessary that testing . . .
proceed[] to the point where the invention was actually ready
to be put into commercial production . . . , but rather . . . that
the tests should suffice to persuade . . . that the product will
serve the purpose for which it is designed.” Comput. Sci. Corp.
v. Comm’r of Internal Revenue, 

, 352–53 (1974)
(internal quotation marks omitted).

        Here, the Tax Court found that Spireas’s “invention of
the felodipine formulation occurred sometime between May
10, 2000 . . . and May 2001.” Spireas, 

, at
*7. Spireas does not challenge that finding on appeal. The Tax
Court described the “invention” of the formulation rather than
its “actual reduction to practice,” but the relevant patent law
makes clear that if Spireas invented the formulation, he
necessarily reduced it to practice. “Making [an] invention
requires conception and reduction to practice.” Solvay S.A. v.
Honeywell Int’l Inc., 

, 1000 (Fed. Cir. 2014). And
conception necessarily precedes actual reduction to practice,
since by definition “[c]onception is [only] complete when one
of ordinary skill in the art could construct the apparatus.”
Sewall v. Walters, 

, 415 (Fed. Cir. 1994). The
corollary is that actual reduction to practice always completes
the process of “inventing.” So the Tax Court’s finding that
Spireas “invented” the felodipine formulation after May 2000




                               18
necessarily implies a finding that he reduced it to practice in
the same timeframe.

        Spireas’s original theory hinged on a post-invention
transfer of rights. On that account Spireas reduced the
felodipine formulation to practice around May 2000—giving
him, in theory, the property interest that the statute requires—
and only later passed his interest on to Mutual. But Spireas has
abandoned that theory here, insisting instead that he transferred
rights to Mutual in 1998. See Reply Br. 6 (“What happened in
1998 is that [Spireas] assigned Mutual his rights to future
Products.”). Because that was at least two years before the
invention of the felodipine formulation, Spireas’s current
position cannot depend on the legal standard of reduction to
actual practice to establish that he held a property right at the
time of transfer. Nor can it depend on the same facts as did his
argument to the Tax Court, the timing of felodipine’s invention
central among them. Spireas’s sole claim on appeal is therefore
waived under Joseph.11




       11
          Judge Shwartz would also conclude, even if the Court
were to consider the merits of Spireas’s argument based on a
transfer of rights in 1998, that Spireas still transferred less than
all substantial rights in the liquisolid technology that was the
subject of the 1998 Agreement, and thus would not be entitled
to capital-gains treatment.



                                19
                            IV

       For the reasons stated, and because Spireas has not
offered any reason why we should excuse his waiver, we will
not evaluate Spireas’s new argument on appeal. The decision
of the Tax Court will be affirmed.




                            20
                 Spireas v. Commissioner IRS

                         No. 17-1084


ROTH, Circuit Judge, dissenting.

       Appellant Spiridon Spireas’s entitlement to the long-
term capital gains tax rate under I.R.C. § 1235 depends upon
his contention that the 1998 Agreement transferred to Mutual
all substantial rights to future drug formulations, agreed upon
by Spireas and Mutual, including the felodipine formulation.
Concluding that Spireas failed to advance this argument
before the Tax Court, the Majority finds Spireas’s appeal
barred by the waiver doctrine. In reaching that conclusion,
the Majority misconstrues Spireas’s arguments before the Tax
Court and misapplies our waiver precedent. Accordingly, I
respectfully dissent.

                              I.

       I turn first to the issue of consistency. The Majority
sees inconsistency between Spireas’s argument in the Tax
Court and his argument on appeal. According to the
Majority, Spireas changed the date on which he granted
Mutual the rights to liquisolid felodipine. But a more careful
examination of the record reveals that, both at trial and before
this Court, Spireas has advanced essentially the same
argument regarding the transfer of rights—an argument that
relies on both the 1998 Agreement and the March 2000
Engagement Letter, operating in conjunction to convey future
rights to liquisolid felodipine. On appeal, Spireas chose to
“place greater emphasis” 1 on the 1998 Agreement. The fact
that Spireas did so in order to counter what he considered to
be the erroneous reasoning of the Tax Court, does not provide
a basis for the Majority to contend now that Spireas has
changed his position. In fact, he has merely changed the
emphasis. We will demonstrate that below.

        Spireas’s written submissions to the Tax Court
consistently reflect his argument that the 1998 Agreement and
the March 2000 Engagement Letter are “of a piece [and]
related parts of the contracting parties’ consistent course of
dealing.”2 The purpose of the 1998 Agreement was for
Spireas to grant to Mutual a license to use the liquisolid
technology in connection with specific products that Spireas
and Mutual would agree to develop.3 This was accomplished
in the 1998 Agreement. Under it, Spireas did not transfer “all
substantial rights” to the liquisolid technology itself but he
did convey, as provided in ¶¶ 2.2 and 5.1, “all substantial
rights” to the patentable formulation of the liquisolid version
of felodipine, as provided in the March 2000 Engagement
letter.

        This interpretation was corroborated at the outset of
the litigation when Spireas and the IRS jointly addressed the
relationship between the 1998 Agreement and the March
2000 Engagement Letter in the First Stipulation of Facts
(Stipulation). The Stipulation explicitly acknowledges the
interdependence of the 1998 Agreement and the March 2000

1
  See Gen. Refractories Co. v. First State Ins. Co., 

, 162 (3d Cir. 2017).
2
  Reply Br. at 

(T.C. Op.).




                              2
Engagement Letter, stating, “The 1998 License Agreement
governed the relationship and rights of the parties but,
pursuant to ¶¶ 2.2 and 5.1 of that agreement, the parties
entered into specific agreements each time they agreed to
develop a new liquisolid pharmaceutical product.”4 As this
language reflects, both Spireas and the IRS agreed that the
1998 Agreement governed the rights of the parties, including
the rights transferred for each product which they
subsequently agreed to develop. In addition, they explicitly
acknowledged that the March 2000 Engagement Letter was
entered into pursuant to the 1998 Agreement—specifically
Section 2.2, which governs the conditions of Mutual’s
“exclusive right to Produce and Sell . . . Products,”5 such as
felodipine. Thus, from the outset, both Spireas and the IRS
recognized that the transfer of rights to drug “Products,” such
as felodipine, depended upon the terms of the 1998
Agreement.

       Spireas’s post-trial briefs continue to emphasize the
importance of the 1998 Agreement and the interdependence
between the 1998 Agreement and the March 2000
Engagement Letter. In his opening post-trial brief, Spireas
described the March 2000 Engagement Letter as a “formal
agreement . . . to identify generic felodipine as a potential
product to develop pursuant to the 1998 License Agreement .
. ..”6     He proceeded to explain, “The March 2000
[Engagement Letter] applied the terms of the 1998 License
Agreement to the felodipine product. . . . The parties treated
the transfer of the felodipine technology after it was 

.
5
  App. at 69.
6
  Appellee’s Supp. App. at 7 (emphasis added).




                              3
as an exclusive transfer under Section 2.1 of the 1998 License
Agreement.”7 These statements to the Tax Court align with
Spireas’s argument on appeal that the 1998 Agreement
effected a legal transfer of rights to the future Products and
that the March 2000 Engagement Letter identified the
felodipine formulation as one of the Products to which future
rights had been transferred.

       Spireas also explicitly relied on the 1998 Agreement
when discussing the royalty payments in the Tax Court. He
argued throughout his opening post-trial brief that the royalty
payments were made in exchange for rights to the felodipine
technology and that the payments were made pursuant to
Section 4 of the 1998 Agreement. He argued, “The parties
treated the transfer of the felodipine technology as subject to
royalties under Section 4.1 of the 1998 License Agreement.”8
Spireas reemphasized this point throughout the brief, later
noting, “URL/Mutual paid royalties to Dr. Spireas consistent
with Section 4.1 of the 1998 License Agreement.”9

       Spireas continued to emphasize the importance of the
1998 Agreement in his answering brief. Responding to the
IRS’s arguments, Spireas emphasized that he “could (and did)
transfer all of his significant rights in the felodipine . . .
technologies to URL/Mutual under the terms of the [1998]
Agreement.”10 Spireas also contended that the IRS




7
  Appellee’s Supp. App. at 7-8.
8
  Appellee’s Supp. App. at 9.
9
  Appellee’s Supp. App. at 13.
10
   Appellants’ Supp. App. at 27.




                              4
misunderstood “how the terms of the 1998 Agreement
applied to the actual technology transfers at issue.”11

        As the record demonstrates, in his written submissions
to the Tax Court, Spireas focused on many of the same
provisions of the 1998 Agreement that he later emphasized in
his initial brief on appeal. Both his trial and appellate briefs
devote particular attention to Section 2, which transfers rights
to future Products; Section 4, which provides for a 20%
royalty based on the sale of those Products; and Section 5,
which sets forth the process by which future drug
formulations will be selected as Products under the
Agreement. Spireas’s consistent emphasis on the same
contractual provisions distinguishes his case from cases in
which we have found waiver. For instance, in Frank v. Colt
Industries, Inc., we concluded that a finding of waiver was
appropriate because appellant’s new theory relied upon a
separate provision of the contract that was not at issue before
the trial court.12 That is the opposite of the situation here.
Spireas has relied on the same provisions of the 1998
Agreement throughout the litigation, and he has made a
consistent argument about the interdependence of the 1998
Agreement and the March 2000 Engagement Letter.

       The     Majority’s   position    rests   upon    two
misunderstandings. First, the Majority confuses the legal
transfer of rights to the felodipine formulation (and other
Products) with the physical transfer (i.e., the handover or
disclosure) of the felodipine formulation. Second, the
Majority incorrectly concludes that, as a matter of law,

11
     Appellants’ Supp. App. at 28.
12
     

, 99-100 (3d Cir. 1990).




                                5
Spireas could not have transferred rights to the liquisolid
felodipine formulation until it was reduced to practice.

        The Majority’s confusion on the first point is
understandable, since Spireas’s trial counsel did not make the
distinction as clear as she could have. In fact, at the close of
trial, counsel was tripped up by this distinction herself.
Seeking to shift the burden of proof, counsel initially asserted,
“Dr. Spireas transferred the felodipine and propafenone
technologies to United and Mutual at some point after that
March 7th, 2000 agreement.”13 The Tax Court judge
responded that the issue of transfer was not a question of fact.
Recognizing the confusion her statement had caused,
Spireas’s trial counsel immediately clarified, “Dr. Spireas
gave the formulation technologies, the specific technologies,
handed those over to [,] the felodipine and propafenone
technologies[,] to United and Mutual at some point after
March 7th, 2000. So the completed formulas.”14

       This clarification actually underscored the distinction
being made. The rights to the future drug formulations were
transferred in exchange for royalty payments. That transfer
of rights occurred via legal instrument—in this case, the 1998
Agreement, which granted rights to future Products in
exchange for 20% royalty payments, operating in conjunction
with the March 2000 Engagement Letter, which identified the
felodipine formulation as a Product under the 1998
Agreement. The actual felodipine formulation was physically
transferred or handed over to Mutual later, at least several


13
     2 T.C. Rec. 174.
14
     2 T.C. Rec. 175 (emphasis added).




                               6
months after March 2000, once Spireas had completed its
development.15

        Once this distinction is recognized, the purported
inconsistency in Spireas’s argument disappears.             The
Majority finds that Spireas “could hardly have been more
explicit that he ‘did not transfer the felodipine technology in
1998.”16 But the Majority mistakes this statement about the
physical transfer of the felodipine formulation for a statement
about the role of the 1998 Agreement in the legal transfer of
rights to the formulation. The transfer of legal rights—not the
disclosure of the formulation itself—served as consideration
for Mutual’s royalty payments.17           And the language
immediately following Spireas’s statement in his post-trial
brief that he “did not transfer the felodipine technology in
1998” clarifies Spireas’s position that the rights to that
technology were transferred via the 1998 Agreement and the
March 2000 Engagement Letter.18 That is consistent with
Spireas’s argument on appeal.




15
   See Reply Br. at 8-9.
16
   Maj. Op. at 10 (quoting 2 T.C. Rec. 322).
17
   Under any licensing agreement for a patentable product,
payments are inherently made for the rights to make and sell
the product, not for the product itself. Section 1235 reflects
this reality, as it addresses payments made in consideration
for a transfer of “all substantial rights to a patent.” I.R.C. §
1235 (emphasis added).
18
    2 T.C. Rec. 322 (“The March 2000 Letter Agreement
applied the terms of the 1998 License Agreement to the
felodipine product.”).




                               7
       Undoubtedly, Spireas’s trial counsel could have used
more precise language to distinguish between the legal
transfer of rights and the physical transfer of the formulation.
But, under this Court’s precedents, that mistake alone
provides an insufficient basis to find that Spireas has waived
his argument on appeal.19          Here, Spireas presented a
complicated but consistent argument throughout his written
submissions. That is not the same as failing to present an
argument entirely or presenting an argument only briefly or in
passing. His statements regarding the legal transfer of rights
to the felodipine formulation via the 1998 Agreement and
March 2000 Engagement Letter were sufficiently consistent
to preserve his argument on appeal.

        Responding to these arguments, the Majority contends
that this dissent focuses on the question of which instruments
transferred the rights to liquisolid felodipine, at the exclusion


19
   For example, in Keenan v. City of Philadelphia, a case in
which we stated that “the crucial question regarding waiver is
whether [a party] presented the argument with sufficient
specificity to alert the district court,” we nonetheless based
our finding of waiver on the fact that the argument presented
by the defendants on appeal appeared “[n]owhere in their
submissions to the district court (or to this court before oral
argument).” 

, 471 (3d Cir. 1992). In a similar
vein, in In re Insurance Brokerage Antitrust Litigation, we
noted that arguments “properly preserved for appeal are
limited to those . . . presented with at least a minimum level
of thoroughness to the District Court,” even if they were
presented in a “conclusory fashion.” 

, 262 (3d
Cir. 2009).




                               8
of considering when the transfer took place.20 This is a false
distinction. All parties to this appeal agree that there are, at
most, two possible “instruments of transfer”21—the 1998
Agreement and the March 2000 Engagement Letter—and the
Tax Court record reflects a consistent focus on these
documents. There were no other instruments governing the
transfer of rights. If, as the Majority contends, Spireas’s
argument below depended solely upon a post-March 2000
transfer of rights, then the extensive discussion of the 1998
Agreement and March 2000 Engagement Letter in Spireas’s
briefs22 and trial testimony23 would be incongruous.

       The Majority opinion also incorrectly concludes that
an inventor cannot avail himself of § 1235 if he has not
reduced an invention to practice before transferring the rights
to that invention.24 As a result, the Majority’s approach
forecloses reliance on the 1998 Agreement. But the law is
not as absolute as the Majority opinion would lead us to
believe. Although it may be the “general rule” that “an
invention must have been actually reduced to practice at the




20
   Maj. Op. at 11-12.
21
   Cf. 26 C.F.R. § 1.1235-2(b).
22
   See supra notes 8-11 and accompanying text.
23
    See e.g., 2 T.C. Rec. 77 (trial testimony of Spiridon
Spireas) (describing the March 2000 Engagement Letter as
“the agreement . . . to transfer to Mutual those specific three
products at the time to be worked and developed based on
some technologies that were available at the time.”).
24
   See Maj. Op. at 16.




                               9
time of the sale,”25 in order for the seller to receive favorable
tax treatment under § 1235, it is equally true that transfers of
future inventions are valid26 and that “parties can agree in
advance that upon reduction to practice the inventor will
convey the property to the purchaser.”27 In these situations, a
seller may be entitled to the benefit of § 1235, particularly
where, as here, the future inventions are improvements on an
existing invention.28

       Moreover, the Majority’s position not only precludes
reliance on the 1998 Agreement, it would also seem to have
us throw out the March 2000 Engagement Letter, as that
agreement similarly predates the felodipine formulation’s
reduction to practice. By the Majority’s own account, the
felodipine formulation was not reduced to practice until May
2000 at the earliest.29 The Majority erroneously concluded
that “Spireas’s original theory hinged on a post-invention
transfer of rights” that occurred at some point after May

25
    William H. Byrnes & Marvin Petry, TAXATION OF
INTELLECTUAL PROPERTY AND TECHNOLOGY § 6.05[3][b]
(2017).
26
   

(citing Dreymann v. Comm’r, 

(1948)).
27
   

See also New Britain Mach. Co. v. Yeo,

, 405 (6th Cir. 1966) (discussing construction of
contracts assigning future inventions and improvements).
28
   

. For purposes of patent law, the liquisolid
felodipine formulation was an “improvement” of the general
liquisolid technique. See 35 U.S.C. § 101. All parties
acknowledge that Spireas conveyed limited rights to the
general liquisolid technique via the 1998 Agreement.
29
   Maj. Op. at 18.




                               10
2000.30     This conclusion reinforces the Majority’s
misunderstanding of the distinction between the physical
transfer of the completed formulation and the transfer of
rights. Moreover, it is difficult to reconcile with the extensive
discussion of both the 1998 Agreement and the March 2000
Engagement Letter in Spireas’s Tax Court briefs.

        It is clear that Spireas’s position before the Tax Court
was consistent with his position here. When looked at
closely, Spireas has waived nothing because he presented the
full facts and legal argument to the Tax Court. The Tax Court
erred in its interpretation of what was presented. Spireas has
brought the same facts and the same legal argument before us.
In view of his consistent position, I would reverse the opinion
of the Tax Court and remand this case with instructions to
grant Spireas long-term capital gains treatment of the royalty
payments in question.

                                     II.

       In light of the above, I submit that consideration of the
issue of waiver is not necessary. However, the Majority
depends on waiver, and I believe it is helpful to review the
errors of the Majority’s position on waiver.

       “[T]he crucial question regarding waiver is whether
[the party] presented the argument with sufficient specificity
to alert the [trial] court.”31 Although the case law does not
prescribe a specific list of factors to consider in evaluating
waiver, an assessment of waiver must be grounded in the

30
     

983 F.2d at 471.




                                11
prudential origins of the doctrine. The guiding principle is
that parties should have a chance to present all relevant
evidence at trial and should “not be surprised on appeal by . .
. issues upon which they have had no opportunity to introduce
evidence.”32 The waiver doctrine is most strictly applied
where a party’s failure to timely raise the issue below has
resulted in an incomplete factual record on appeal.33 In
contrast, “we are less inclined to find a waiver when the
parties have had the opportunity to offer all the relevant
evidence and when they are not surprised by issues on
appeal,”34 and we are “reluctant to apply the waiver doctrine
when only an issue of law is raised.”35

       Courts of appeals may exercise discretion in
considering issues or arguments not directly raised below.36
Ordinarily, “[f]or an issue to be preserved for appeal, a party
‘must unequivocally put its position before the trial court at a
point and in a manner that permits the court to consider its


32
   Hormel v. Helvering, 

, 556 (1941).
33
   Shell Petroleum, Inc. v. United States, 

, 219
(3d Cir. 1999) (“‘This general rule applies with added force
where the timely raising of the issue would have permitted
the parties to develop a factual record,’ because we cannot
know on appeal what evidence the adverse party would have
presented or brought out through cross-examination.”
(quoting Harris v. City of Phila., 

, 845 (3d Cir.
1994))).
34
   Huber v. Taylor, 

, 75 (3d Cir. 2006).
35
   

36
    See, e.g., Singleton v. Wulff, 

, 121 (1976);
Bagot v. Ashcroft, 

, 256 (3d Cir. 2005).




                              12
merits.’”37 Waiver is not an absolute bar, however, and must
be considered on a case-by-case basis. Even when an issue or
argument is otherwise waived, exceptions may apply.38

       Our decisions in this area39 reflect the sliding scale that
we have applied to questions of waiver. They reinforce the
discretion that has always been a part of our waiver analysis
in civil cases. Each of our waiver decisions is grounded in
the prudential considerations underlying the doctrine: that
parties have an opportunity to present all relevant evidence at

37
   In re Ins. Brokerage Antitrust 

(quoting Shell Petroleum, 

).
38
    

(“There may always be
exceptional cases or particular circumstances which will
prompt a reviewing or appellate court, where injustice might
otherwise result, to consider questions of law which were
neither pressed nor passed upon by the court or administrative
agency below.”); 

(“[E]ven if an issue
was not raised, ‘[t]his Court has discretionary power to
address issues that have been waived.’” (quoting 

)).
39
   See e.g., 

(emphasizing the
“prophylactic and prudential origins of the [waiver] doctrine”
and holding that a purely legal argument could and should be
considered on appeal, even if it had been waived); In re
Insurance Brokerage Antitrust 

(holding the waiver doctrine did not bar consideration on
appeal of arguments presented to the District Court in a
“conclusory fashion”); 

(holding an
argument to have been waived where its presentation on
appeal would “raise important issues of first impression . . . as
well as difficult questions of fact”).




                               13
trial and develop a complete factual record, and that the
parties not be surprised by new issues on appeal.

       The Majority, much like the Commissioner, rests its
analysis almost entirely on United States v. Joseph,40 a case it
characterizes as “our seminal precedent” on waiver.41 Joseph
was a criminal case, and the question of waiver arose in the
narrow context of a motion to suppress evidence, pursuant to
Federal Rule of Criminal Procedure 12.42 As such, the
Joseph majority expressly noted that it “d[id] not have
occasion to consider whether the framework explained here
applies in other waiver contexts, such as . . . waiver in civil
cases.”43     Thus, although Joseph remains instructive,
particularly with regard to the distinction between issues and
arguments, it does not and cannot undermine our prior
precedent that civil waiver is a prudential doctrine to be
applied in a case-specific manner. Both the majority opinion
in Joseph itself44 and subsequent decisions applying Joseph in
the civil context reflect this reality.45 Yet the Majority relies
on Joseph at the exclusion of our precedent on civil waiver.

40
   

(3d Cir. 2013).
41
   Maj. Op. at 13.
42
   See 

.
43
   

n.3
44
   Id. (citing 

-75).
45
    See, e.g., Gen. Refractories 

(discussing the waiver standard in Joseph and concluding that
“even if [Appellant’s] argument had not been placed before
the District Court, we would nevertheless consider it in
reaching our conclusion”). The Majority opinion relies on In
re J&S Properties, LLC, 

, 146 (3d Cir. 2017),
for the proposition that Joseph applies to civil cases. J&S




                               14
        As noted, waiver is a prudential doctrine, not an
absolute rule.      Its purpose is to provide parties “an
opportunity to offer all evidence they believe relevant to the
issues” and ensure “that litigants may not be surprised on
appeal by final decision there of issues upon which they have
had no opportunity to introduce evidence.”46            These
justifications inform our approach to the waiver doctrine and
explain the flexible approach we have taken across various
decisions.47 In cases that do not present the particular
problems the waiver doctrine protects against, we are less
likely find that an issue has been waived.48 This is such a
case.

        The evidentiary record in this case is fully developed.
The relevant documents—primarily the 1998 Agreement and
the March 2000 Engagement Letter—have been available to
all parties from the outset of this litigation. On appeal,
neither Spireas, nor the IRS in response, rely on any evidence
not presented to the Tax Court. The substantive question of
whether the 1998 Agreement effected a transfer of future
rights to Products can be resolved fully based on the current
record.


Properties includes only a brief discussion of waiver and a
single citation to Joseph, with no substantive analysis of the
case or its applicability in the civil context. Other recent
cases, such as General Refractories, make clear that Joseph
may be instructive in the civil context but does not alter the
prudential and fact-specific nature of the civil waiver
doctrine.
46
   

.
47
   See 

-75.
48
   

                              15
       In addition, the IRS cannot credibly claim to be
“surprised” by any of the issues presented on appeal. As
Section I demonstrates, Spireas’s position regarding the 1998
Agreement was apparent throughout his written submissions
to the Tax Court. Furthermore, the Tax Court actually
decided the question of what agreement served as the
instrument of transfer.49 The Tax Court’s ruling certainly
gave the IRS sufficient notice that the issue might be raised
on appeal.

       This case presents none of the core problems that the
waiver doctrine is designed to protect against. The relevant
issues can be decided based on the available record without
prejudice to either party. Thus, Spireas has preserved his
current argument, and the circumstances of this case weigh
against applying the waiver doctrine strictly and in favor of
deciding this appeal on the merits.

                               III.




49
    See App. at 25-34 (T.C. Op.).            The Tax Court,
unfortunately, misstated Spireas’s position on this issue by
relying almost exclusively on the testimony of George Gould.
See 

& n.6 (treating Gould’s testimony as
Spireas’s position regarding the 1998 Agreement and March
2000 Engagement Letter).           Spireas’s post-trial briefs,
however, include no mention of the alternative theory Gould
concocted at trial and cite almost exclusively to Gould’s
expert report rather than his trial testimony. See 

-
44 (Spireas’s Post-trial Opening Brief); 

(Spireas’s Post-trial Answering Brief).




                              16
        For the above reasons, I conclude that the Majority has
misinterpreted the facts of record and has erred in concluding
that Spireas waived his argument on appeal. I therefore
respectfully dissent. The Majority, having found Spireas’s
argument waived, does not reach the merits of this appeal.
Were we to reach the merits, I would conclude that Spireas is
entitled to long-term capital gains rate under I.R.C. § 1235
because he received the royalty payments in exchange for all
substantial rights to the liquisolid felodipine formulation.




                              17