In a decision that issued shortly before the Supreme Court decision in In re Bilski, the U.S. Court of Appeals for the Federal Circuit found that a patent directed to “computerized method” was not infringed where at least one step was not performed by a computer. Lincoln Nat’l Life Ins. Co. v. Transamerica Life Ins. Co., Case Nos. 09-1403, -1491 (Fed. Cir., June 23, 2010) (Moore, J.)
Transamerica filed a declaratory judgment action seeking a declaration of non-infringement and invalidity (but not based on 35 U.S.C. §101), and Lincoln, the patent owner by assignment, counterclaimed for infringement. The claim-in-issue was directed to a computerized method for administering variable annuity plans. The claimed method required the offering of a guaranteed minimum payment “even if the account value is exhausted before all payments have been made.” Transamerica sold and administered riders to annuities guaranteeing a minimum payment regardless of market performance. After the district court found Transamerica infringed and assessed $13 million in damages, Transamerica appealed.
The Federal Circuit agreed that under the district court’s construction of the claims, actual exhaustion of an account was not necessary to establish infringement. The “even if” clause was considered a contingent limitation that could be infringed even without actual exhaustion. Instead, infringement could be established by showing that Transamerica’s computer system was configured to make a scheduled payment once an account was exhausted, even if exhaustion never occurred in practice.
However, the Federal Circuit reversed the infringement holding, finding that the claim was not infringed as Transamerica’s computerized system did not make a scheduled payment after an account was exhausted. Instead, the computerized system stopped making automated payments, and procedures were set forth for manual, rather than computerized, distribution of further payments. Although Transamerica was obliged under its policies to make payments after exhaustion, this contractual obligation did not by itself, establish infringement.
Transamerica also argued on appeal that the claimed method was ineligible under §101. However, having determined the claims not infringed, the Federal Circuit did not render a decision on this point. Going forward, the question of whether a general purpose computer provides a “particular machine” that ipse dixit imparts eligibility under the machine-or-transformation test will be determined under the Supreme Court’s §101 Bilski analysis (see IP Update, this issue).
Practice Note: U.S. Patent and Trademark Office (USPTO) guidelines issued in August 2009 provided official acceptance of computer-implemented method claims as §101 eligible subject matter under the Federal Circuit’s Bilski “machine-or-transformation” test, when presented appropriately. That aspect of the USPTO guidelines remains intact and is unlikely to be disturbed in light of the Supreme Court’s Bilski decision. However, as this decision illustrates, if a claim preamble broadly recites a method as “computerized” or “computer-implemented,” infringement may be avoided if even a single step is not implemented by computer.