First, the cost: A reasonable average cost for getting an insurance or financial services patent in the U.S. is in the range $10,000 - $20,000 depending on how much work you, the inventor, do and how much work your patent agent/attorney does. So, around $15,000 is a reasonable expectation but costs could be driven higher if the invention is complicated or if, as you prosecute the initial application, you add new claims by filing additional applications.

The value of a patent lies in the following: A patent gives its owner the right to exclude others from making, using, or selling a patented invention. The financial value to a patent owner in this derives from, at least, three sources:

1. By preventing others from marketing a patented invention the owner reserves the right to receive all future profit for himself,
2. By allowing others to market the invention the owner can receive a royalty payment in lieu of profit the owner might have made from selling the invention himself,
3. A patent creates an asset that can be sold or assigned for a lump sum fee to someone else who sees value in it or used as collateral to raise investment capital.

Another element of cost in a patent is that if you as owner choose to enforce your patent against a possible infringer (as described in item #1 above), you will incur legal costs which, if you lose, will not be offset by any award.

So, in deciding to seek a patent you must decide whether or not you believe you will ever find yourself in a position in which you would have to or want to enforce it. That is, is your invention going to be so popular that others would want to use it also and, if they did, would it diminish profit you might otherwise have gotten?

Clearly, if your invention is ground breaking and enables a new insurance product in a newly defined market which effectively addresses a problem hitherto unsolved and for which hundreds of millions in new sales are likely, then seeking a patent to protect that market is a no-brainer. Even if you don't intend to pursue product development yourself, a patent provides value in future royalties or an outright sale - none of which could be realized if you did not have a patent.

However, if your innovative solution addresses needs in a niche market of short duration and which is so low on everyone's radar that it would go unnoticed until it was no longer relevant, then seeking a patent may be an unnecessary expense. Another thing to remember is that patent protection starts when a patent is actually issued. Prosecuting a patent application from filing to issue is, more likely than not, going to be a 3 - 5 year affair.

If your business plan is grander still, you would need to think international. A U. S. patent provides the aforementioned protections only within the U. S. Given that U. S. insurance and financial markets are somewhat unique in their operation, your invention may have no useful application outside the U. S. and seeking foreign patents may be unnecessary. For example, the market value of an invention may, in the U. S., be derived from regulation or law affecting the sale of insurance in the U. S. that is not applicable in other jurisdictions. But, if your invention applies to a broadly applied risk selection process useful throughout the world, then seeking international patents at costs reasonably within the range $100,000 - $200,000 might be a consideration.

Like all things in business it is (or should be) a cost / benefit analysis. If you are a lone inventor with one or two inventions to your name, you will look and evaluate this decision differently than if your business is large and must invent to survive and remain viable.

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There is a new tool available to challenge the validity of business method patents. It's called "Transitional Program for Covered Business Method Patents" (TBM). It is an adversarial procedure at the US Patent and Trademark Office that allows those that have been sued for infringing a business method patent (or under threat of being sued) to challenge the patent's validity in front of a panel of administrative patent judges. The USPTO estimates that the cost of this procedure will be approximately $200,000 for both the petitioner challenging a patent's validity and the patent owner defending its validity. A final decision will be rendered in a year.

The Transitional Program for Covered Business Method Patents went into effect on September 16, 2012. It will last until September 16, 2020. The USPTO has posted background information on the new procedure at their Inter Partes Disputes page. This web page includes additional links to the trial rules, frequently asked questions and other useful information.

TBM will be an "inter partes" procedure in the sense that the petitioner and the patent owner will present their arguments to a panel of judges. Each party will have discovery available as well as the ability to provide expert witnesses. The patent owner will be allowed to amend the patent's claims.

There are many additional caveats as to when a TBM can be filed, what patents it can be filed on, what causes it can be filed for, and what sacrifices you have to make in terms of defending yourself in a US district court. These caveats are presented on the USPTO web site links above.

The critical issue, however, is not so much can you file TBM, but should you file a TBM. That decision will depend on the facts and business strategies governing your particular situation. Nonetheless, there are a number of strategic issues everyone should consider.

Lower cost, faster decision, untested process. The promise of a TBM proceedings is that the validity of the challenged patent will be more clearly resolved in a much shorter time (less than a year versus multiyear) and at a much lower cost ($200,000 vs. $1,000,000+ for each party) than full-fledged litigation. The downside risk is that if the petitioner is not satisfied with the results, then said petitioner is barred (i.e. "estopped") from raising the same issues in district court. This risk will be especially acute in the early days of TBM because the process is new and untested. The startup of a new process is always the most dangerous time when things are most likely to go wrong.

You are helping the patent owner as well as yourself. There is an old saying, "What doesn't kill you makes you stronger". Based on my own experience with European patent oppositions (a European inter partes process for challenging patent validity), the inter partes nature of a TBM should result in patents that are much stronger, albeit more narrow, than patents that have not been through the process. The prior art searching will be much more thorough (see our article on Invalidity Searches). The legal arguments will be more fully developed. The opinions of experts will be taken into account. This all helps the patent owner as much as it helps the petitioner. Even if all of the claims are held invalid, the patent owner arrived at this holding at much less cost than if said owner had defended the patent in district court.

Consider relying on an "invalidity opinion" if you are only being threatened with patent infringement. If you are being threatened with patent infringement, it might be tempting to file a TBM. Before you file a TBM, however, you should get an opinion from a patent attorney that the patent is indeed invalid (i.e. an "invalidity opinion"). If you can get that opinion you may not need to file the TBM. An acquaintance of mine who is the former head of a major corporation's licensing division said that in past years, they would do an invalidity search on a threatening patent and if they found solid prior art, they would get an opinion from outside counsel stating that the patent was invalid. If the patent owner ever contacted them, they would inform the patent owner that they had prior art that would invalidate the patent. It was then up to the patent owner to decide whether or not to sue them for infringement without knowing what prior art they had uncovered. It was an effective strategy in the days before TBM when the patent owner had to literally make a million dollar decision on whether or not to sue in district court. Now that TBM is available, it still may make sense depending upon your particular circumstances and how effective the TBM process turns out to be.

The Transitional Program for Covered Business Method Patents (TBM) is a new procedure at the USPTO for invalidating Business Method patents. Patents that issue in class 705 will generally qualify. This includes insurance patents (class 705/004). The TBM process promises to be significantly faster and less expensive than the alternative of litigation in US district court. You have to be already sued for patent infringement or under threat of suit in order to file a TBM. Important strategic considerations in making a decision on whether or not to file a TBM include:

• Is the lower cost and faster process worth the higher risk right now of an untested process?
• Do I want to help the patent owner as much as I want to help myself by initiating a more thorough examination process?
• If I'm only being threatened with infringement, can I rely on my outside counsel's invalidity opinion and not bother with filing a TBM?

We look forward to following any TBMs that get filed and will report back results to our readers.