Patent News

Swiss Re Conference in Innovation and Intellectual Property in the Financial Services Industry

By:     Jerry Wilson, President, Washington Health Services, jdw725@aol.com

Every day someone solves a problem.  Occasionally the problem involves a business method that makes the solution so unique it falls into a special category.  It may be patentable because of its originality.  The United States Patent and Trademark Office (USPTO) will now consider applications to patent such inventions.

Patenting a business method is a relatively new concept.  For instance, a business method patent for an insurance invention was almost impossible until a relatively short time ago.  We think you will find our experience in obtaining a patent interesting.

We are insurance general agents and we’ve had many innovative ideas over the years.  The ones that worked were usually copied in short order.  Ironically, we would find ourselves competing with … ourselves! 

We love the senior market.  Our products included annuities, Medicare supplements, last expense whole life, short-term home recovery care and long-term care.

 Long-term care insurance (LTCi) was always the most difficult to sell.  Our prospects ranged from the super-affluent to middle income.  The affluent were fewer in number and usually wouldn’t buy long-term care at any price (unless they were unhealthy).  Most others couldn’t afford it.  Affordability was, as we saw it, the problem standing in the way of enormous new business production.  At that time the only way to lower the premium was to lower the benefit, but lowering the benefit to fit the pocket book of most could result in a benefit that was worthless.   A new concept was needed.

 A study for the federal government provided us the paradigm for a new business method—a solution—possibly the only solution:  Resource Utilization Groupings (RUGs).  RUGs are, essentially, a way to classify patients into groupings with common characteristics as to the severity of their medical condition and their need for care. This pointed the way for a better benefit design to make LTCi affordable.  It could be done by a tailoring of benefits—by eliminating unnecessary benefits to some so that necessary benefits could be made available to all.  Effectively, we thought it provided for a more efficient use of Long Term Care insurance premium dollars and was a better deal, a better design all the way around.

This was a new business method—it was intellectual property—and, we thought, it was patentable. 

 Our very first motivation to apply for a patent in 1997 inspiration we got from Signature Financial Group's early work on a business method patent.   This was well before the subsequent State Street Bank decision in 1998.   There was a path of sorts to follow and we couldn’t find any reason why we shouldn’t proceed.  Dumb luck?   Perhaps … but when it was all done and the beautiful Patent Document was put in safe-keeping, we knew we had gained a great deal from the experience.

 It is not easy to describe the entire process.  Suffice it to say it was difficult then and it is more difficult now, but there are certain truisms that would be no different today.

 First, the USPTO is part of the bureaucracy.  There are many forms to fill out, fees to pay and much that has to be written.  This includes history, background, references, citations, formulas, explanations, opinions and scope and nature of claims.

 There can be no allowance for mistakes, even simple typos.  If you make them, you will very likely have to live with them.  The patent examiner may make mistakes, also.  Again, if you don’t catch them, the outcome could be an unintended disaster.

The patent examiner will probably not be an expert in financial/insurance matters.  It will be assumed that you are.  You will be expected to prove it.  You will need legal and actuarial counsel that you can rely on.

 You will become convinced the examiner does not understand your invention, and it will be incumbent on you to explain it to his or her complete satisfaction.  This process compares, in our opinion, to a complicated lawsuit and, perhaps, a brief.

 You must not fear rejection.  There are time frames and remedial processes that come into play when a patent application is rejected.  In many cases, a rejection is just another way of saying to you, “prove it,” or, “tell us why we are wrong.”

 The good news, however, is that the patent examiner is a human being, earnest, pleasant, thoughtful, courteous and above all, available, when you have questions, comments or need help.  Telephone conferences were never a problem.  The USPTO people have no preconceived opinions or judgments, or axes to grind.  They just want everything done right.

 We eventually received US Patent # 6,014,632 for our efforts. 

 Keep in mind, the patent application starts a special clock running—exclusivity for 20 years from the date the patent application is submitted.  Imagine, even a two or three years head start with a great new idea like this has the potential for unlimited reward for the inventors/licensees.

Was it easy?  No.  It cost money and time.  Was it worth it?  Yes, because the patent protected our long years of effort and sizable expense.  Imagine a 3% license fee on, say, a hundred million of premium … or a billion. 

 Moreover, the additional compensation (including to the licensee) through sub-licensing possibilities and arrangements is mind boggling.

 There is a vast, underserved middle income market age 50 and over that is virtually untouched.  It is swelling by the day as “boomers” retire.   With the federal government vigorously conditioning the American public to embrace private long-term care insurance because of Medicaid and Medicare budgetary constraints—an insurer couldn’t hope for a better endorsement.

 Today, fewer business method patents are being approved and they are being more closely scrutinized. Maybe the good old days will eventually come to an end.  However, the window of opportunity, although narrowing, is still open. 

 The decision to explore the possibilities is the first and most difficult step. 

After that, consult with experts. You need a roadmap to avoid the mine fields and pitfalls along the way.  If you are not totally familiar with the process, consider a word of advice based on our actual experience in the trenches—seek help.