Updated @ 12:23 pm with quotes from Progressive and industry experts] Liberty Mutual has prevailed over Progressive Insurance in the U.S. Court of Appeals for the Federal Circuit. At issue was the validity of five Progressive patents related to online customer experience, insurance telematics and driving scores that support Progressive’s Snapshot program.
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Progressive previously had asserted in U.S. District Court that Liberty, Allstate, State Farm and The Hartford had infringed these five of Progressive’s “covered business method” patents, which are used to claim a method, apparatus or operation used in the practice, administration, or management of a financial product or service. Those cases later were consolidated in the case against Liberty.
"While we’re disappointed in the decision by the U.S. Court of Appeals for the Federal Circuit, the rulings do not diminish the fact Progressive has long been recognized as the leading innovator in usage-based insurance," said a spokesperson for Progressive. "Through our usage-based insurance program, Snapshot, we provide consumers the opportunity to control their insurance rates based on their actual driving behavior."
A spokesperson for Liberty Mutual said they were pleased with the results, but declined to comment on how the outcome will affect business going forward.
“While not being able to comment on the merits of each party’s legal and regulatory case," said Donald Light, director, North America Property/Casualty Practice at Celent, "it is a good thing for policyholders and the motor vehicle insurance market as a whole when more insurers have a wider latitude to develop their approaches to measuring driver performance risk and using feedback to lower risky behavior.”
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Liberty responded with a series of post-grant challenges to the validity of Progressive’s asserted patents and won in March 2014, resulting in the invalidation of claims related to the so called ‘088, ‘269, ‘358, ‘598 and ‘970 patents by the Patent Trial Appeal Board (PTAB) in April 2014.
"This ruling allows insurers to continue to move forward with their UBI plans, although many were anyway based on earlier legal proceedings," said Mark Breading, partner at Strategy Meets Action. "We expect UBI to become dominant in auto insurance over the next few years. While premium discounts are still the primary value proposition, to stay competitive insurers will need to enrich the value through a variety of other services triggered by the new data on location, driver behavior, and vehicle performance collected from the vehicle."
The PTAB and the post-grant review process are relatively new creations that resulted from the Leahy-Smith America Invents Act (AIA). Signed into law in 2011, the AIA required the U.S. Patent & Trademark Office (PTO) to implement these new proceedings. The PTO established the PTAB to adjudicate administrative trials, expanding the authority to make validity determinations from federal courts to the PTAB, thereby granting the PTO the authority to grant patents, as well as to take them away.
The patents:
- The ‘088 covered business method patent relates to an insurance data communication and processing system that enables a policyholder to access, view and update insurance policy information via the Internet.
- The ‘269 covered business method patent is a continuation the ‘088 patent, and includes a description of an insurance policy adjustment module that generates an insurance document customized to the insurance policyholder and sends the customized insurance document to the insurance policyholder in response to the second data received from the insurance policyholder through the publicly accessible network; and wherein the existing insurance policy comprises a health, a property-casualty, or a liability insurance policy.
- Progressive’s ‘358 patent relates to a vehicle monitoring system that tracks the operation of a vehicle and/or operator behavior.
- Progressive’s ‘598 patent is to a monitoring system for determining and communicating a cost of insurance.
- Progressive’s ‘970 patent relates to a method for determining an automobile insurance premium based on data collected from monitored motor vehicle operational characteristics and operator’s driving characteristics.
“Telematics and pay-as-you-drive models have been proliferating over the past few years," said Matthew Josefowicz, president/CEO of Novarica, a research and advisory firm focused on insurance and technology strategy."While some insurers cited fear of litigation by Progressive as inhibiting their adoption, many of these were actually relieved to have an excuse not to adopt a new product type that they didn’t understand well. Assuming this ruling stands, personal lines insurers will have no excuses not to incorporate telematics into their pricing models.”
Having lost the appeals, Progressive could request rehearing, and eventually take the case to the Supreme Court, explains a patent attorney who attended the hearings on Aug. 5, 2015.
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