On February 13, 2009, in Transamerica Life Insurance Co. et. al. v. Lincoln National Life Insurance Co., (USDC, ND Iowa, Case No. 06-cv-00110-MWB), a jury found that certain Transamerica Life Insurance Company benefit riders infringed a Lincoln National Life Insurance Company patent. The Lincoln National patent, U.S. Patent Number 7,089,201 was issued in 2006 and is entitled “Method and Apparatus for Providing Retirement Income Benefits.” The patent describes a computerized method for administering variable annuity plans, including provisions for guarantees related to retirement income and death benefits in both the accumulation and distribution phases (also known as “Guaranteed Minimum Withdrawal Benefits” or “GMWBs”). The jury found the patent valid and ordered Transamerica to pay Lincoln National $13.1 million for the sale of the infringing variable annuity products. The jury award was based upon a .11 percent royalty on the $11.9 billion in assets derived from the company’s variable annuity products during the infringement period.
A separate patent litigation is pending in Massachusetts involving Sun Life, the ‘201 patent, as well as other Lincoln National patents concerning GMWBs.
Lincoln National’s ‘201 patent is known as a “business method” patent, and is classified by the USPTO under “apparatus and corresponding methods for performing data processing operations, in which there is a significant change in the data or for performing calculation operations wherein the apparatus or method is uniquely designed for or utilized in the practice, administration, or management of an enterprise, or in the processing of financial data.” Although patents on processes involving business methods had previously been issued, for many years the USPTO held that methods of doing business were not patentable. The USPTO changed their position in the 1980’s and 1990’s with the emergence of patent applications on internet or computer enabled methods of doing business. In the 1998 decision of State Street Bank v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), the Federal Circuit held that the USPTO was correct in finding that a computerized accounting system for managing a mutual fund investment structure was patentable matter.
There was substantial concern by intellectual property practitioners that the State Street decision would open the floodgates for patenting common business methods, and thereby stifle business, rather than reward innovation. This argument, while not new in the intellectual property community, generated a mountain of commentary and controversy regarding business method patents. In fact, the filings of applications for business method patents have exponentially increased since State Street. The issue recently came to the forefront again in the Federal Circuit’s 2008 decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), in which the Federal Circuit upheld a ruling by the USPTO denying a patent for methods of hedging in commodities trading. The Bilski decision reflects a growing tendency among courts to subject patents to increased scrutiny, and suggests a return to the pre-State Street views on business method patents. In January 2009, Bilski petitioned the U.S. Supreme Court for a writ of certiorari seeking to overturn the Federal Circuit decision. Should the U.S. Supreme Court decide to grant cert., its decision will have a multi-billion dollar impact on both the viability of business method patents for future inventions, and the enforceability of business method patents that have already issued.
Robert A. Gutkin is Of Counsel in the firm’s Intellectual Property Litigation and Insurance and Reinsurance practices. Mr. Gutkin has tried cases in state and federal courts before judges and juries, and participated in all aspects of alternative dispute resolution, including arbitrations and mediations. Mr. Gutkin has also been successful in developing innovative approaches and strategy to resolve significant disputes and avoid litigation. Mr. Gutkin received his bachelor’s degree from Brandeis University, his master’s degree from the University of Chicago and his law degree from the University of California.