Lincoln National Life Insurance Co. v. Transamerica Life Insurance Co. (Fed. Cir. 2010)
It is not unusual to see insurance companies in litigation. What is unusual here is that the context is patent infringement. Lincoln is pursuing Transamerica and others for infringement of its patents covering a method of administering a variable annuity plan with a guaranteed minimum payment that continues even after an account had been exhausted. Although clearly a business method, the asserted claims do recite (in the preambles) that the method is "computerized." U.S. Patent No. 7,089,201.
A jury found the claims valid and infringed and awarded $13 million in damages. On appeal, Transamerica asked for reversal of the infringement verdict and for an opportunity to present its case on patentable subject matter. The Federal Circuit reversed on infringement.
Non-Infringement: The asserted claims require that scheduled payments be made "even if the account value is exhausted before all payments have been made." Transamerica argued that it could not infringe because (1) none of its subscribers had ever "exhausted" their accounts and (2) that its computer system has not been configured to automatically pay on an exhausted account.
On appeal, the Federal Circuit agreed with the patentee that the claim did not require that any accounts actually be exhausted. Rather, the claim only requires a particular action if the accounts are exhausted.
On the second point, however, the Federal Circuit agreed with the accused infringer — finding that "nothing in the record" shows that Transamerica uses a computer system to make scheduled payments once an account has been exhausted.
Legal Obligation to Infringe: As an interesting tid-bit, Transamerica's contracts apparently do required the company to continue making scheduled payments even after its accounts had been exhausted. The Federal Circuit rejected the legal obligation as proof of infringement — holding instead that the claims require computer implementation of the method. Furthermore, a contractual obligation to perform a method does not constitute infringement. Rather, infringement requires performance: "A contractual obligation to perform an act is not performance; indeed, a party could avoid infringement simply by breaching its contract."
Non-Patentable Subject Matter: Based on its non-infringement holding, the Federal Circuit left the Section 101 question undecided as moot.
the court invalidated actuarial table patents
Actually, I’m not familiar with that one. If anyone can provide a citiation or link, that would be helpful.
“But, you haven’t commented on the qualifications needed to opine on insurance patents. Legal qualifications aren’t necessary?”
Malcolm’s answer is dead on: “Anybody can opine on anything“.
Neither lack of legal knowledge nor lack of technical (or material) knowledge will stop opinions from flowing.
No Mark, remember which case it was where the court invalidated actuarial table patents (or at least the one before the court atm)? We just got through talking about this a few months ago. I would have figured you were so into it you’d have faved it.
Remind us of the case involving actuarial tables from the 1800’s-.
602,035 is a nice example.
Remind us of the case involving actuarial tables from the 1800’s-.
link to google.com
But, you haven’t commented on the qualifications needed to opine on insurance patents. Legal qualifications aren’t necessary?
Good question. The gut level response is that of course legal qualifications are necessary.
And yet, the Orthokinetics decision seems to indicate that the critical qualification in understanding what is claimed is technical.
“The test for definiteness under 35 U.S.C. § 112, second paragraph, is whether ‘those skilled in the art would understand what is claimed when the claim is read in light of the specification.’ Orthokinetics, Inc. v. Safety Travel Chairs, Inc., 806 F.2d 1565, 1576 (Fed. Cir. 1986) (citations omitted).” (Ex parte Tichler, Appeal 2009-001045)
Would you agree?
Patent Infringement is a growing problem. Since law does not require manufacturers to inform patent owners that they are using the patent owner’s invention, Patent infringement can be unintentional. In most cases, it will be up to the owner of the patent to pursue Patent Litigation, a costly and time consuming process. It is always a good idea, if you are going to get a patent, that you do extensive research to make sure that no one already has a patent, and that you continue to monitor the industry to ensure that no one uses your patent with out your consent.
I was wondering when Mark would show up. I thought about you and your research Mark but I couldn’t remember your name really good, hadn’t seen you in a bit. Remind us of the case involving actuarial tables from the 1800’s-.
“before it seemed like a slam dunk.”
Patent attorneys can’t dunk silly.
“One of the fundamental barriers to high quality patent drafting in business methods is that few if any practitioners have formal accreditation in the financial arts (e.g. actuary, securities license, etc.). Hence it is quite challenge to understand and properly describe a financial invention in a patent application.”
It would be even more of a challenge for them to describe such an imaginary animal if they did have credentials. Then they might take some sht srs.
EG, over two months before Transamerica filed this DJ action, we saw Justice Breyer’s famous/infamous (depending on your perspective) dissenting opinion re the dismissal of LabCorp v. Metabolite. As you may recall, Justice Breyer, joined by Justices Stevens and Souter, went out of his way to cast doubt on the 101 validity of business method patents — even though LabCorp involved medical diagnostics.
There was much press coverage of this. See, e.g., link to blogs.wsj.com In short, anyone staying current with patent law at the time this case was filed should have seen that there was a serious 101 issue here.
Now, how it would have been resolved is certainly open to question. Still, it could not by any stretch be that raising the 101 issue would have been “a waste of time”. It was almost a purely legal question, which had the potential to drastically shorten the duration and reduce the expense of the case from Transamerica’s perspective.
I’m not calling this malpractice, but I am questioning the decision (assuming it was even contemplated by counsel) not to raise the 101 issue in 2006.
Until the Federal Circuit’s Bilski decision came out in 2008, both State Street and Excel would have suggested to Transamerica that arguing invalidity under 35 USC 101 was a waste of time and effort. … After Bilski, obviously the law on patent-eligibile subject matter under 35 USC 1010 had changed drastically.
The law had changed drastically because somebody bothered to waste their time and effort arguing it, before it seemed like a slam dunk.
That was the time for Transamerica to plead 101 invalidity.
MM: >>Right. Because nobody was discussing the reams >>of crrrrp issuing from the USPTO before 2008.
And that is relevant to 101 how?
But, you haven’t commented on the qualifications needed to opine on insurance patents. Legal qualifications aren’t necessary?
Anybody can opine on anything, as long as they are not offering a legal opinion and suggesting that you can rely on their opinion in the course of doing business.
Or, they will hold Bilski over…
Thank you, Dr. Zaius.
Speaking of piles of crrrrp, it’s beginning to look like Bilski is going to be the final pile of the session. The flaming bag left on the doorstep, the Justices running for vacation. Then the CAFC will step all over it, trying to put out the flames, and then the USPTO will spread the remainder around, real thin.
A method of playing chess, comprising playing chess under a pecan tree, even if it is raining outside.
Can I has my patent, PTO?
Sad fact is Kappos is still issuing this crrrrp, and worse.
EG Until the Federal Circuit’s Bilski decision came out in 2008, both State Street and Excel would have suggested to Transamerica that arguing invalidity under 35 USC 101 was a waste of time and effort.
Right. Because nobody was discussing the reams of crrrrp issuing from the USPTO before 2008.
One of the fundamental barriers to high quality patent drafting in business methods is that few if any practitioners have formal accreditation in the financial arts (e.g. actuary, securities license, etc.). Hence it is quite challenge to understand and properly describe a financial invention in a patent application.
ROTFLMAO
A poster above raises an important issue on the qualifications necessary to draft and/or opine on an insurance patent.
…
Our solution is to bring in outside financial experts when needed in patent drafting and prosecution.
Your solution works for me (as well as for the Office and Enrollment and Discipline), Mark, provided a registered agent remains responsible for both. But, you haven’t commented on the qualifications needed to opine on insurance patents. Legal qualifications aren’t necessary?
In regards to “In far more important IP-related news“, one might choose to compare:
link to dailycaller.com
“Our solution is to bring in outside financial experts when needed in patent drafting and prosecution. That certainly adds cost, but the dramatic improvement in quality, efficiency, and success rate in prosecution makes it a worthwhile investment.”
Or work with the inventor.
A poster above raises an important issue on the qualifications necessary to draft and/or opine on an insurance patent.
One of the fundamental barriers to high quality patent drafting in business methods is that few if any practitioners have formal accreditation in the financial arts (e.g. actuary, securities license, etc.). Hence it is quite challenge to understand and properly describe a financial invention in a patent application.
One would hope that experience would eventually make up for this, and for those that draft multiple applications for the same client, that seems to work.
The vast majority of patent applications in the financial arts, however, are drafted by practitioners who have no experience in these fields. In insurance, for example, 373 different law firms prepared the 676 patent applications filed over the past five years. (link to bakosenterprises.com ) To make matters worse, most inventors have no experience with patents.
This is not a win-win situation.
Our solution is to bring in outside financial experts when needed in patent drafting and prosecution. That certainly adds cost, but the dramatic improvement in quality, efficiency, and success rate in prosecution makes it a worthwhile investment.
“It’s an “even if not”, which is a negative limitation.”
Not so sure that labeling it a “negative limitation” is quite accurate. You are still doing something, and it is the doing something that is the limitation. Sure, the condition preceding is a negative condition, but that is not all that unsual.
An interesting example is US 467,872, “Means for Securing Travelers Against Loss by Accident”.
Interesting indeed. Though it’s not really a business method. The claimed invention “consists of a sheet” with information written on it, so I guess this is an early Beauregard claim.
“Basically the rule for any patent should be, if an 8th grader can understand it, then it’s not patentable.”
Also funny you should say that as some corporations want all their patents to be understandable by 9th graders so that the jurors and judges can understand the patent.
A quick check on the USPTO public database reveals more than 1,000 patents with “insurance” in the claims including the beaut 4491725 from 1982
Insurance patents go back quite a bit further. Google patents is a good way to find them. An interesting example is US 467,872, “Means for Securing Travelers Against Loss by Accident”. It issued in 1892.
More here at the Wikipedia article “insurance patent” link to en.wikipedia.org
What the intelligent Examiner should do is restrict the claim into different inventions, depending on whether the “if” event occurs or not.
I don’t mind conditional statements, as long as they’re phrased so that one step depends on the outcome of a previous step, i.e. “if” is tantamount to “in response to”. I would find infringement (or anticipation) if the actual condition arose or if an appropriate test for the condition was coded for.
The problem here is that it’s not an “if”. It’s an “even if not”, which is a negative limitation. You perform the step irrespective of the condition, which is pretty much the same as not reciting the condition at all.
Now, there’s an argument to be made that paying money irrespective of whether there is money to be paid is contrary to what insurance companies normally do, but it’s still hard to construe the claim to mean anything other than “pay the money every time the payment date rolls around”.
I haven’t read the patent. Is there a box in a flowchart somewhere that says “don’t check the account balance”?
“Basically the rule for any patent should be, if an 8th grader can understand it, then it’s not patentable.”
You see hindsight is the problem.
Yours truly finds it comforting when his brethren show up here clacking their cymbals together every time business methods are mentioned. The Zaius Nation is becoming a reality 1900 years before its time.
“Not raising the 101 issue right out of the gate is a real head-scratcher.”
Andrew,
Not to me, Until the Federal Circuit’s Bilski decision came out in 2008, both State Street and Excel would have suggested to Transamerica that arguing invalidity under 35 USC 101 was a waste of time and effort. What is truly surprising is the district court’s refusal to permit Transamerica to amend its DJ complaint to assert invalidity under 35 USC 101. After Bilski, obviously the law on patent-eligibile subject matter under 35 USC 1010 had changed drastically.
A quick check on the USPTO public database reveals more than 1,000 patents with “insurance” in the claims including the beaut 4491725 from 1982 that did nothing more than introduce a computer to do previously manual steps.
Malcolm, have you been kvetching since that time?
“ I believe the constitution says to promote the “PROGRESS” of science and the useful arts”
Hey Sunshine, I’m just making an observation that fits your question. The reason for the uproar is that certain things were in mind for the founding fathers and certain things were not in mind.
I am not saying that you cannot apply science to something that was traditionally thought of as a “non-useful” art, or that the “useful” arts of the 18th century lock in forever what should be considered a useful art – but those are different discussion points. All I be saying is that people’s undies are all twisted because the advances don’t fit into an 18th century mindset.
“Basically the rule for any patent should be, if an 8th grader can understand it, then it’s not patentable.”
That’s quite possibly the dumbest thing I have ever heard. Considering that your jury in an infringement trial will likely have only an 8th grade education on average, that is exactly the audience to whom you should write a patent application.
When I write a specification, I start at the very basics and build up to the specifics. An 8th grader could understand the basics, and thus in general how the invention works, of any application I write, whether it’s a manufacturing method, an antenna, or a circuit. They won’t understand the specifics, but they’ll at least get, in general, what it is and how it works.
Actual Inventor, given your last comment, I’d say your name is a misnomer.
I fail to see how patenting a “method” to pay an account when its funds are exhausted promotes anything. It’s like patenting common sense or rational thinking. I’d love to have the monopoly on that but can guarantee it would not promote progress.
Posted by: ping | Jun 23, 2010 at 08:08 PM: “so kind to explain why this is “clearly” a business method?”
Because insurance isn’t one of the traditional “useful” arts.
Can you really be progressive and conservative at the same time? I believe the constitution says to promote the “PROGRESS” of science and the useful arts. Not PRESERVE the TRADITIONAL useful arts.
Amazing what gets patented. Basically the rule for any patent should be, if an 8th grader can understand it, then it’s not patentable.
These “business” methods are a joke, all of them. If it is truly so unique and not obvious, then keep it as a trade secret.
Solution:
All the patent attorneys/agents that filed “business method” patents get disbarred or suspended for 2 years for obvious abuse of the system and a waste of resources.
Next patent fad:
How about “life method” patents which include how to wipe after going to the bathroom when the toilet tissue is exhausted? Or perhaps a method on how to solve a basic problem using common reason? I even have the steps…err claims:
1) identify standard for some life practice.
2) identify a possible deviation from standard (no need to go wild here, just pick something that may happen).
3) write a common sense step by step method to resolve said problem in #2.
4) Profit.
Not raising the 101 issue right out of the gate is a real head-scratcher. This was 2006, and the controversy surrounding a patent of this sort was well-known in the art, so to speak. The accused infringer might have escaped on an early summary judgment.
“Moving money from one account to another is a pure business transaction.
I think that’s pretty clear”
So why is moving money between accounts, your so called “pure” business transaction, “clearly” a business method? If anyone dare try and ban business methods they dang well better be able to answer that question with some substance. Or be declared a resident troll.
You go off topic it’s okay. But, if someone else that’s not a Lawler goes off topic.. Like you all do in EVERY THREAD here. But I’ll take the digg. She was an awesome comedienne.
Moving money from one account to another is a pure business transaction.
I think that’s pretty clear.
I assume the return of the World’s Lamest Patent Teebxgger is related to the imminent Bilski decision.
Would you ( or anyone intellectually brave enough) be so kind to explain why this is “clearly” a business method?
Well, it’s not a method of manufacturing anything, and it’s not a method of treating an animal, and it’s not a method of making a computer compute more efficiently. It’s a method of moving money from one account to another. Pure business.
Seems pretty clear to me.
It’s also entirely clear that patents are completely unnecessary for the promotion of such “inventions” and the only beneficiaries of such patents are patent trolls and/or wannabe “inventors” out to make a buck at the expense of a functioning patent system.
“so kind to explain why this is “clearly” a business method?”
Because insurance isn’t one of the traditional “useful” arts.
“Vilecom loses its bid to shut down YouTube.”
Yes it is vile indeed to have intellectual property and assert your rights. Death to capitalism and its vile patents and copyrights. Long live socialism!
Ned Said: “If we are going to hold “business methods” unpatentable, lets do it like a man. Let’s elevate substance over form for a change.”
But if you elevate substance over form thEN you can’t hold “business methods” unpatentable. At least not do it and still be a man. But a resident troll and court jester, no problem they do it everyday.
Posted by: sarah mcpherson | Jun 23, 2010 at 02:32 PM wrote: If an Oven carries out a step for the special patented cake pan, Then why can’t a computer do the same?”
And if an oven or a computer carries out a step then why can’t a human being? Oh..wait.. that must be when it “clearly” becomes a business method.
“Although clearly a business method, the asserted claims do recite (in the preambles) that the method is “computerized.” U.S. Patent No. 7,089,201.”
Dennis,
Would you ( or anyone intellectually brave enough) be so kind to explain why this is “clearly” a business method?
In far more important IP-related news, Vilecom loses its bid to shut down YouTube:
link to wired.com
Cy nical, true the issue of validity was not before the court. I was just lamenting the hypocrisy of a system that gives weight to the recitation of a computer in the claim when the invention has nothing at all to do with computers or computer programs. We know the limitation was added to the claim by the patent attorney prosecuting the case way back when in order to avoid a Section 101 rejection. It cost his client here.
In an idealistic world, the patent owner should have been able to claim his invention without adding “computer” to the claim and should have won this case. If we are going to hold “business methods” unpatenable, lets do it like a man. Let’s elevate substance over form for a change.
the two variations aren’t restrictable because the version of the method where the optional step is invoked is just a more specific version of the version of the method where it isn’t invoked.
Oh, so the result doesn’t change?
Odd that it made a difference during Examination, then. Almost as if the Examiner was asleep at the wheel or maybe just intellectually challenged.
MM: In this case, the two variations aren’t restrictable because the version of the method where the optional step is invoked is just a more specific version of the version of the method where it isn’t invoked. In other words, ABC and ABCD aren’t restrictable.
A more nuanced view of this case is available at:
link to patenthawk.com
A very thorough analysis of this patent was done by a Fellow of the Society of Actuaries, Tom Bakos. Details here: link to bakosenterprises.com
Hmmm… A registered patent agent hawking his non-agent, non-lawyer, partner’s legal analysis of his former employer’s patent portfolio. There’s a lot going on there. It’s almost worth the $9500 price of admission. Ok, maybe not.
That’s sloppy and requires ignoring claim langauge. In prosecution, just require the claims recite “when” instead of “if.”
There’s no difference between “when” and “if” for this purpose unless the “when” necessarily (i.e., as a matter of physical law) follows an earlier step in the method. What’s “sloppy” is pretending that the limitations at the branchpoints are real limitations when, in fact, they are not.
A method claim has steps which must be carried out. The first step in construing the claim is determining what are the steps that MUST be carried out. Those are the ONLY steps that should be examined in light of the prior art. Any other steps in the claim belong to different, distinct methods and should be examined separately.
…or the patenting industry.
“What the intelligent Examiner should do is restrict the claim into different inventions, depending on whether the “if” event occurs or not.”
That’s sloppy and requires ignoring claim langauge. In prosecution, just require the claims recite “when” instead of “if.” In litigation, just require the patentee to show that a party’s actions went down or must physically go down every branch (obv at different instances). Oh wait, that’s what the court did.
very thorough analysis of this patent was done
Check out 7,246,070, a method of increasing insurance company profits by attaching a pet insurance rider to a homeowner’s insurance policy. Oh, I forgot to mention the really awesome part: it’s a “computer-based electronic method,” claiming priority way back to 2004 when hardly anyone even knew what a computer was.
Sample text from the description:
“If the homeowner insures the house with a non-allowed insurance policy, such as that provided by a second insurance company that is not on the list of approved insurance companies as specified in the rider contract, then the rider would lapse and the major medical coverage for the dog would terminate….The non-monetary switching costs have increased by the emotional distress that the homeowner would experience by having to make the difficult decision of whether or not to euthanize their dog due to the unaffordable expense of treating its chronic condition.”
Increasing insurance company profits by causing emotional distress to policy-owners is the definition of a socially useless invention. Actually, it’s more of anti-social invention. Let’s hope the Supremes crush this nonsense out of existence.
Cy Nical: I think you’re thinking of Emily Litella.
Oh, you’re right… Never mind (again).
A very thorough analysis of this patent was done by a Fellow of the Society of Actuaries
Check out 7,246,070, a “computer-based electronic method” for increasing insurance company profits by attaching a pet insurance rider to a home insurance policy.
Have your barfbag ready.
“One of skill in the art will recognize that insurance is a regulated industry.”
LOL. Just like the petroleum industry.
The case just touches the surface of the wrongness that is granting patents on flowcharts, i.e., methods which comprise “if/then” branchpoints, wherein infringement occurs only when particular decisions are made during the course of a process.
It’s an easy way to turn something that appears unpatentable on its face into something that appears patentable on its face (at least, if you’ve got an unclever Examiner and/or judge reviewing the claims).
What the intelligent Examiner should do is restrict the claim into different inventions, depending on whether the “if” event occurs or not.
The “even if” limitation was added to get around the prior art.
LOL
What a fracking joke.
A very thorough analysis of this patent was done by a Fellow of the Society of Actuaries, Tom Bakos. Details here: link to bakosenterprises.com
Cy Nical: I think you’re thinking of Emily Litella.
One interesting thing here: The “even if” limitation was added to get around the prior art. On the other hand, that limitation could have been omitted, and Transamerica would have then been infringing.
I haven’t read the prior art, but most likely, it was completely silent on the topic of what to do when the account became exhausted. Funny thing, though, since Transamerica has never had an account become exhausted, their activity was *also* completely silent on that topic.
In other words, the claim was amended to overcome prior art, and Transamerica was essentially doing the same thing as that prior art, yet the district court upheld the jury finding of infringement (and, had it not been for the “computerized” wrinkle, so would the CAFC).
Smells of indefiniteness to me, but I’m not aware of any case law that would actually bear that out.
Transamerica’s contracts apparently do required the company to continue making scheduled payments even after its accounts had been exhausted.
If those contracts were in place prior to the filing of the application, it seems that they would render the claims obvious, at least with respect to that stu pet ss limitation.
On appeal, the Federal Circuit agreed with the patentee that the claim did not require that any accounts actually be exhausted. Rather, the claim only requires a particular action if the accounts are exhausted.
I wonder if this distinction was raised by the patentee during prosecution, when the prior art was discussed.
In any event, a total pile of crrrrrpola. The idea that such an “invention” merits patent protection is laughable.
The appeal was successful
Whoops, of course it was.
As Roseanne Rosannadanna used to say – … Never mind …
The appeal was a non-starter.
The appeal was successful.
The hypocrisy of the whole regime is illustrated in this case. Simply reciting a computer made this claim patentable. But the “invention,” was in the business method.
You’re indicting the wrong regime, Ned. The court didn’t address whether “simply reciting a computer” made this claim patentable, because that question wasn’t before the court. Do you think the policy of not deciding qestions that aren’t before the court is hypocritical?
For what it’s worth, my off-the-cuff view is that the claim is invalid under Bilski. But the question is nt properly before me, either.
You’d think this point would be as straightforward as checking whether Transamerica’s software checks for sufficient funds before paying.
It was that straightforward. And Transamerica’s software did. Thus, the result was that “nothing in the record” shows that Transamerica uses a computer system to make scheduled payments once an account has been exhausted.
The appeal was a non-starter. But I suppose it was relatively cheap compared to what they’d already invested in the case.
If an Oven carries out a step for the special patented cake pan, Then why can’t a computer do the same?
From a claim drafting perspective, the Court is construing the claim preamble “A computerized method for…” to mean that all recited steps are carried out by “a” computer. What got Transamerica off of the hook was that their standard administration system stopped making payments after account value was exhausted. A “manual check” was done to see if the annuitant was entitled to continued payments. If so, the continued payments would be made by “another” computerized system.
From a claim drafting perspective, the Court is construing the claim preamble “A computerized method for…” to mean that all recited steps are carried out by “a” computer. What got Transamerica off of the hook was that their standard administration system stopped making payments after account value was exhausted. A “manual check” was done to see if the annuitant was entitled to continued payments. If so, the continued payments would be made by “another” computerized system.
Meanwhile …Examiners assert that a recitation in the preamble of a computer is not sufficient to get around 101 issues.
If BMPs are to be allowed as patentable methods, it should make no difference whether there is any computer involved at all.
For patentability, I agree with you. It’s kind of a silly requirement.
For infringement, if the claim says a computer carries out a step, a contractual obligation to carry out the step should not be relevant absent an appropriately-programmed computer.
Except that in this case the relevant claim limitation involved the computer ignoring a particular piece of information (whether the account was exhausted), so it didn’t actually require specific code at all, and I don’t see why the parties had to make the trip from Iowa in the first place.
Delicious. The contracts require the continued payments but the computers are not so programmed so no infringement.
If BMPs are to be allowed as patentable methods, it should make no difference whether there is any computer involved at all. The hypocrisy of the whole regime is illustrated in this case. Simply reciting a computer made this claim patentable. But the “invention,” was in the business method.
What a joke.
I look forward to some clarity on this issue from the Supreme Court.
“nothing in the record” shows that Transamerica uses a computer system to make scheduled payments once an account has been exhausted.
You’d think this point would be as straightforward as checking whether Transamerica’s software checks for sufficient funds before paying.
Speaking of insurance patents – Progressive pulls patent trigger on Liberty Mutual for Pay as You Drive Auto Insurance link to bit.ly
They’s some biatches that dodged a bullet right hea. Pity, it probably would have made for a wonderful 101 smackdown case too.
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