Recognizing
What Is Patentable In An Insurance Product
By Tom Bakos and Mark Nowotarski, National Underwriter,
May 26, 2003
Part
Three of a Series
One television network used the idea that if you hadn’t seen its
programming before, it’s new to you in order to promote the summer
reruns. That was an innovative approach to selling used stuff. In patents,
however, ignorance of the past does not make an old idea new again. Patentability
is bestowed on inventions that are publicly new to everybody. They also
have to be useful and "not obvious."
Usefulness is a fairly easy threshold to meet. An invention needs only to
have some credible, "specific and substantial utility" to
be patentable. In the field of software, it must produce a "useful, concrete
and tangible result." A software program that merely manipulates numbers
does not have utility. However, if the resulting numbers can make a useful
product, such as the price for an insurance offering or an illustrated benefit
result, then the software meets the utility requirement.
"Not obvious" is a much more difficult threshold to meet. The full
quote from the law is:
"A patent may not be obtained…if the differences between the
subject matter sought to be patented and the prior art are such that the subject
matter as a whole would have been obvious at the time the invention was made
to a person having ordinary skill in the art to which said subject matter
pertains."
The term "obvious" has been given specific meaning in the United
States Patent and Trademark Office through various court cases. This meaning
is subtly and significantly different from its common meaning. In everyday
usage "obvious" means "what another skilled person might
have done in a similar situation." In the patent office, however, it
means, "what another skilled person might have done if they relied only on
what the prior art has taught or suggested." If it’s not
in the prior art, it’s not obvious.
To the patent office "prior art" is any written publication that
was publicly available prior to the date an invention was made.
Misunderstanding this difference in meaning leads to missed opportunities
in terms of what can and cannot be patented. Too often, inventors dismiss
the patentability of their innovations because they figure "anyone could
have done it." Alternatively, inventors can be overconfident in the patentability
of their innovations because they are not fully aware of everything previously
published in their area. The solution to both problems is to do a thorough
prior art search before a patent application is filed.
In his or her innovative, "ah ha" moment of invention, the path
to an inventive solution may, indeed, be obvious to the inventor. There is
absolutely no requirement that invention be difficult or take a long time.
It’s the rest of us who need to be impressed by the inventor’s
ability to put together perhaps ordinary materials or methods in ways they
have never been combined before to produce a surprising result. If you are
an inventor and you can surprise yourself, all the better.
Thomas Frey of the DaVinci Institute sees innovation and invention as being
composed of a series of failures capped ultimately by a final success. This
implies that a characteristic of innovation is that it is a process that almost
always involves early failure. This characteristic is completely at odds with
the way companies in general, and especially insurance companies, are managed.
Failure, especially repeated failure, is not normally tolerated. It can get
to be rather expensive.
So, it could be said that you can recognize innovation by the failures that
precede it and anticipate it by the level of determination in the inventor.
Determination is critical in getting a patent because the process can take
years.
In the world of insurance, innovation leading to a patentable invention almost
always involves what is called a "business method." A business method
is an abstract idea of a new or better way to do business. But, an abstract
idea alone is not patentable. Typically, in the insurance industry the abstract
idea is made practical as a computer implemented business method.
The Patent Office uses a classification schedule to keep track of the patents
it issues. In 1997, the Patent Office created Class 705, which is titled:
Data Processing, Financial, Business Practice, Management, or Cost/Price Determination.
Generically this class defines what can be called business methods.
Class 705 has many subclasses. Subclass 4 is reserved for insurance business
methods, which are described as computer implemented systems or methods. By
way of example these methods include processes for writing insurance policies;
processing insurance claims; marketing insurance; and may also include ways
of structuring or packaging insurance products so as to produce new and useful
results, such as insurance at reduced cost, reduced or spreading of risk,
tailoring benefits to specific needs or claim exposures.
Insurance patents need not be specifically associated with a computer. Progressive
Insurance, for example, recently patented its "pay as you go" auto
insurance invention. The patent describes the logical steps required to determine
an insurance cost for a vehicle based on the operator profile and monitored
driving characteristics. The invention uses a computerized GPS plus cell phone
system to monitor driving characteristics.
Since this is the first embodiment of a way to implement a "pay as you
go" auto insurance product, however, Progressive has been able to claim
exclusive right to any method of insuring a vehicle that incorporates
all its steps, irrespective of whether or not a computer or any other specific
piece of equipment is used to carry it out.
Usually, an innovative idea comes as the result of a search for a solution,
or a better solution, to a problem. Innovation is, in a sense, problem-solving.
Often it is based on improving the functionality of earlier problem-solving
work done by others. Innovation that solves a problem clearly produces a tangible
result and is going to be useful, assuming, of course, the problem needs a
solution.
An important requirement of a patentable invention is that it must work.
The inventor must describe his or her invention in a patent application with
enough detail so that anyone else skilled in the art of the invention could
make it and use it. If you can’t do that, then you haven’t really
invented anything and you will know how the "inventors" of cold
fusion felt when they were denied a patent because no one as skilled in the
art as they were could reproduce their results.
On the plus side of invention, however, you need not let current laws or
regulations get in the way of your innovative spirit. Inventions may be patented
even if they do not satisfy existing law or regulation. A patent, however,
will not be issued if the invention is contrary to public policy. In the highly
regulated insurance industry, focusing innovation only on that which is permitted
or enabled by existing law or regulation could be quite inhibiting.
Insurance law and regulation tends to narrowly focus on existing practice,
as does tax law affecting insurance products, because of a philosophy that
that which is not being done does not need to be regulated. Accelerated Death
Benefit provisions provide what many feel to be a valuable additional benefit
in a life insurance policy, but they initially stretched existing tax law,
which eventually was changed to accommodate the new, inventive benefit.
So, if you have an idea you’ve been mulling over for a while and are
afraid someone else might steal it, you might have valuable intellectual property
worth protecting with a patent. The process of applying for a patent is the
subject of the next article in this series.
Reproduced
from National Underwriter Life & Health/Financial Services Edition,
May 26, 2003. Copyright © 2003 by The National Underwriter Company
in the serial publication. All rights reserved. Copyright in this article
as an independent work may be held by the author.
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