A hot set of insurance patents is getting tested in the courts and at least one is being further tested in a USPTO do-over called a “reexam”.  These are the Lincoln National Life patents (6,611,815; 7,089,201, & 7,376,608) claiming various processes associated with the very popular Guaranteed Minimum Withdrawal Benefit (GMWB) commonly used with variable annuity products.  This is a trillion dollar industry (that’s 12 zeros), so you can believe that the best counsel money can buy is being brought into play.  What we’d like to know, however, particularly with respect to the reexam, is “Where are the Experts?” 

Lincoln has asserted its patent rights through filing patent infringement lawsuits against, so far, three insurance companies (Transamerica, Jefferson National, and Sun Life).  This guarantees that these patents will be tested in the courts.  In addition, an ex parte reexamination request was made and granted by the USPTO with respect to a limited number of claims in patent 7,089,201.  The reexamination request was granted due to the submission of prior art that hadn’t been considered before and which raised a “substantial new question of validity”.

Inventors seek patents to protect their inventions from unauthorized use or outright theft in order to preserve the significant value or effort the inventor invested in originating and developing his or her ideas.  Getting a patent to issue is a significant step but it is certainly not the end of the process.  Patents don’t enforce themselves.  It is the patent owner’s responsibility to enforce the patent.  If reminding potential infringers that you have a patent doesn’t work, then you must sue them in court.  A cornerstone of any defense against infringement is to challenge the patent’s validity, but the law says that issued patents are presumed valid.  The burden of proof to demonstrate invalidity in a court, therefore, is fairly high. 

Not so in a reexamination carried out at the USPTO.  A characteristic of the reexamination process is that the patent office does not start with the presumption that the patent it issued is valid – at least with respect to the prior art issues that must exist in order to justify a reexamination request. 

There are two types of reexamination requests:

·         ex parte wherein the requester cannot participate in the reexamination beyond the initial request and filing a response to the patent owners statement, if made.

·         Inter partes wherein the requester may participate more actively by filing written responses to issues raised by the patent owner in response to the Office action letters produced by the patent office.

The prior art cited by the requester must raise “a substantial new question of patentability”.  The “existence of a substantial new question of patentability is not precluded by the fact that” the prior art was previously cited by, to, or considered by the patent office (35 U.S.C. §303).  Expert affidavits might be submitted by the requester in order to help the patent office to determine whether or not a substantial new question of patentability exists.

The Lincoln reexam is ex parte.  No expert affidavits were submitted.  If the anonymous requestor was serious about overturning the patent, then they have to give it their best shot when they file the request.  After that, they are no longer part of the process.  Which brings us back to the original question, “Why are there no expert opinions in the Lincoln reexam request?”  There are knowledgeable and thorough explanations by patent attorneys, but it has been our experience that USPTO patent examiners give a lot more credence in sworn statements by experts.  This is particularly true in insurance inventions where the in-house expertise in the patent office is limited. 

One possibility is that Lincoln itself requesting a reexam.  This is not uncommon when a patent owner discovers previously unknown prior art.  They submit it to the patent office in a reexamination request to make sure that it is considered before they enforce their patent.  We don’t think that is the case here judging from the thoroughness and tone from the reexamination request, but it is an interesting tactic.

When we reviewed the Lincoln National Life patent filings we also wondered why more use was not made of experts during the initial examination or even in the initial drafting of the patent.  There is a lot of confusing aspects of this patent that could have been clarified if it had been properly reviewed beforehand.  That might have avoided a lot of problems we see coming down the road in both the court infringement lawsuits and the reexam.  See the August issue of the Bulletin and in particular Tom Bakos’ letter to Commissioner Dudas for more on these problems caused by lack of expertise. 

The Lincoln court cases and reexamination case are important to the insurance industry as a whole.  Greater use of experts in the drafting and examination of these patents might well have clarified many of the issues now causing the disputes between the parties.  It’s not clear why this hasn’t happened yet.

A European (EU) Perspective on In re: Bilski

By: Jeremy Morton, Partner - Fasken Martineau, 17 Hanover Square, London W1S 1HU (www.fasken.co.uk)     email: jmorton@fasken.co.uk

Pure business methods, like Bilski's method of hedging risks in commodities trading, are not patentable in Europe, but the topic has to be considered in the context of patentability of software inventions.  No doubt, if pure business methods are not patentable in the US, patent applicants will seek to dress up their applications in more technical language, incorporating software and computers, to make them look more tangible and patentable.  The Federal Circuit in Bilski left open the question of patentability of software inventions. 

In Europe, the patentability of software-based inventions is a very hot topic, with the UK and the European Patent Office (EPO), respectively, often taking a different approach, and an increase in the activity of patent 'trolls' seeking royalties in the fields of finance, telecoms and e-commerce.  Very recently the Court of Appeal in Symbian said that the UK Intellectual Property Office's approach was too narrow and that, although the EPO's approach was sometimes too broad, it was possible to reconcile the two for the most part - and that the English courts should always strive to follow EPO reasoning in this area.  The UK patent examiners had been too tough on applicants for software-based patents. 

Meanwhile, on October 22, 2008 the President of the EPO took the unexpected step of referring the question of software invention patentability to the Enlarged Board of Appeal, whose task is to ensure uniformity of interpretation of the European Patent Convention.  The reference states that "Diverging decisions of the boards of appeal have indeed created uncertainty . . . Currently there are concerns, also expressed by national courts and the public, that some decisions of the boards of appeal have given too restrictive an interpretation of the breadth of the exclusion [of patentability for software as such]".  Such references to the Enlarged Board are rare and in this case even more unexpected because the previous EPO President already refused to make a reference to the Enlarged Board on this subject when invited to do so by the English Court of Appeal in the Macrossan judgment.  It is not clear why the new President now feels that a reference is appropriate, since nothing has changed about the way the EPO examiners look at software patents in the interim.  This might call into question the procedural standing of the reference.  But if it does go ahead, the result could be a narrowing of the rather broad approach taken by some EPO examiners when faced with software-based inventions.   It is possible that the EPO wishes to reduce the volume of applications, by tightening up the rules.  But some argue that this is only likely to result in more appeals, not fewer applications. 

At the heart of both the US and European issues is the difficulty in defining the boundaries of patentability.  The reference to the EPO Enlarged Board states that "It is hoped that the referral of these questions . . . will lead to more clarity concerning the limits of patentability in this field". The US court has clung to the notion of the transformation of physical materials, whilst in Europe the focus is on finding sufficient 'technical' content.  In Symbian, Lord Neuberger (descending from the House of Lords to join the Court of Appeal panel for this case) suggested that it would be "dangerous to suggest that there is a clear rule available to determine whether or not a program is excluded [from patentability]".  There is still much to be played for in terms of how business method concepts, particularly in areas like insurance, translate to the world of patentable computer technology. 

Nevertheless, in Europe the prospects will remain extremely slim without hard technical elements to the invention, and even in the U.S. patent protection for insurance processes now looks like less and less of a sound investment.