Protecting Ideas in the Insurance Business
By Sabra Chartrand, New York Times , June
30, 2003
Patents for methods of carrying out an idea have long generated controversy because they award exclusive ownership to a way of doing things, not a mechanical, electrical or chemical innovation. Patents have been granted for methods of doing surgery, business, scientific experiments, even cutting hair and brushing teeth
In 1998, after hearing a legal challenge to a patent for a way of pooling mutual fund assets, the United States Court of Appeals for the Federal Circuit ruled that methods of doing business could be patented. Since that ruling, known as the State Street Bank decision, applications for business-method patents have begun transforming the way products are created and marketed.
Those changes are starkly apparent in insurance. In the past, if an insurer
came out with a creative new kind of policy, other companies could simply
copy it, explained Mark Nowotarski, a patent agent in Stamford, Conn., who
specializes in business-method patents.
"There are a lot of very experienced people in the insurance industry,
like actuaries and underwriters and so forth, who for years had new ideas
and nothing to do with them," he said. Now many of those same people
are forming start-ups that Mr. Nowotarski calls "insurance development
labs."
"We're seeing new entrepreneurs arise, and they are by far getting the majority
of the patents," he said. Most then license their inventions to large
insurers.
Their ideas include coverage for just about anything that carries risk. Recent
applications — published by the Patent and Trademark Office — and
newly issued patents include those for terrorism insurance, divorce insurance,
insurance against frivolous lawsuits, coverage for gambling losses or foreign
exchange losses, and insured lottery tickets.
Two Virginia inventors, Anthony Beverina of Falls Church and Bryan Ware of
Fairfax, have two applications pending, Nos. 20010027388 and 7389, for a method
of computerized risk management that "allows users to evaluate the risk
of a terrorist attack at their site, determine their vulnerability to a terrorist
attack, assess the damage caused by a successful terrorist attack, and select
countermeasures to prevent terrorist attacks."
"One of the applications of this method is determining insurance risk," Mr.
Nowotarski said.
Another inventor, Lawrence M. Sherman of Westport, Conn., has filed patent
application No. 20030120521 for a method of shared life insurance, which would
pay beneficiaries in the event of the death of two or more insured parties.
The parties could be connected by family or business relationships, and that
might include people working in a place hit by a terrorist attack.
In Dallas, John R. Lee has filed patent application No. 20030074233 for
a method of donating life insurance benefits to nonprofit groups. A charity
could buy life insurance for willing donors, make the premium payments, then
collect when donors die.
Johan Renes, of Soest, the Netherlands, and his partner, Allen C. Turner,
of Salt Lake City, have filed application No. 20030074231 for an idea they
call "insurance for cessation of legal personal contract." Their
application calls it a "method of doing business in divorce insurance
policies," which includes figuring out a premium based on the spouse's
ages and projected earnings.
The inventors say the premium can be recalculated to take into account factors
like inflation, further education, children, or disability.
Engaged couples might be reluctant to buy such a policy, but the inventors
say it could be taken out on their behalf by other interested parties — perhaps
wary future in-laws.
To collect, the parties would have to provide proof of a legal divorce and
demonstrate that they have physically separated. Benefits could cover "child
support, alimony, children's or former partner's education, other maintenance
of a former partner or spouse (e.g., health and life insurance premiums),
etc.," the application said.
"Although the concept may sound cynical, the advantages of such a system
are many fold to both the insured parties and to society in general," the
inventors said. "For society, by taking the responsibility for payment
away from the parties there should be an increased certainty that child support
payments will actually be made, thus decreasing the burden on taxpayers. For
the individuals involved, there is no need to beggar one or both spouses unnecessarily
which should hopefully decrease the bitterness."
Jay S. Walker, a prolific inventor who founded Walker Digital in Stamford,
Conn., and James A. Jorasch of Stamford have won a patent for a method of
insuring against gambling losses. Under patent No. 6,561,903, gamblers would
be able to buy the policies with cash or credit cards from computerized terminals
in casinos.
Many gamblers are prepared to lose an initial stake. The insurance is designed
to limit a gambler's excessive losses, the inventors say.
"Once a player starts gambling, it is sometimes hard for the player
to keep accurate track of the amount of gambling losses, and even players
that can do so sometimes find it hard to control the urge to continue playing," they
write in their patent.
The same two inventors also won patent No. 6,128,598 for protecting against
foreign exchange losses. The method calculates type of currency, exchange
rate, amount of coverage and period of coverage to determine a premium, and
then would protect investors and even tourists against swings in the value
of the dollar.
In Terre Haute, Ind., Jeffrey J. Segal has won patent No. 6,272,471 for a
method of "deterring frivolous professional liability claims." He
calls it countersuit insurance and said it would pay the legal costs of professionals
who had to defend themselves from frivolous suits.
"As part of the insurance plan, the names of covered professionals are
posted on a publicly accessible database," he said, to warn anyone considering
filing a weak or frivolous claim.
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2003 The New York Times
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