Usage-Based Insurance and the New Arsenal of Patent Law

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Liberty Mutual has had a string of recent successes in its efforts to challenge Progressive Insurance’s patent claims, an important step in defending itself, Allstate, State Farm and The Hartford, against Progressive’s patent infringement suit.

Progressive asserts that Liberty infringed five of Progressive’s “covered business method” patents, which claim a method, apparatus or operation used in the practice, administration, or management of a financial product or service. Through a series of post-grant challenges, Liberty Mutual has prevailed in having claims cancelled from the five patents Progressive has accused the company of infringing, including the ‘088, ‘269, ‘358, ‘598 and ‘970 patents, by the Patent Trial Appeal Board (PTAB).

See also: Progressive UBI Patents Cancelled

“The new post-grant challenges to patent validity have changed the battlefield of patent litigation,” says Joshua Pond, principal within the litigation practice at Fish & Richardson, a global law firm. “Within patent law, it has been a big deal.”

Companies accused of patent infringement in federal district court, like Liberty Mutual, now can challenge the validity of those patents asserted against the company in an expedited proceeding, and at much less cost than in district court, Pond explains, adding that district court litigation can cost more than $5 million and take more than three years to judgment. A post-grant review, on the other hand can cost less than a million dollars and take less than 18 months to judgment. “Those can be some significant advantages for post grant challengers,” Pond says.

The PTAB and the post-grant review process is a relatively new creation 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 determinations from federal court to PTAB and granting the PTO the authority to grant patents, as well as to take them away.

“Congress plays an important role in this,” Pond says. “Congress instituted the AIA in reaction to calls for a low-cost expedited way to challenge the validity of some of the patents that were being asserted. And thus came the America Invents Act.

Under the new process, the odds clearly have been in favor of defendant challengers so far, Pond says. Of the more than 1,000 post-grant petitions filed since the post-grant process came available in September of 2012, roughly 400 challenges have been instituted, and only 80 have been denied.

“Already, the accused infringers are doing pretty well. Of those 400 that have been instituted, only 25 decisions have been decided on the merits. And of those 25 decisions issued on the merits, claims have survived from only two challenged patents,” Pond says.

“That’s significant. Post-grant review flips the patent infringement defendant to the offense, attacking the validity of the asserted patents,” Pond says. “In effect, post-grant review can lessen a patentee’s leverage because the accused infringer now has a lower-cost expedited validity attack available.” In addition, Liberty Mutual has succeeded in getting a stay on the patent infringement case against it, Allstate, State Farm and The Hartford, while the post-grant reviews are conducted, which Pond characterizes as a critical element of Liberty Mutual’s apparent strategy.

While the patent claims cancellations have presented a setback for Progressive, the insurer is likely to appeal the decisions and continue the fight.

“Despite the decisions by the Patent Trial and Appeal Board, our patents and the license agreements we have in place remain viable and enforceable until all of our appeals are exhausted,” says

Jeff Sibel, Progressive public relations. “We have been developing and refining our usage-based Insurance program for over 15 years and our commitment to Snapshot remains unchanged.”

Progressive Patent Claims

Progressive Insurance accused Liberty Mutual, Allstate, State Farm and The Hartford, of infringing the following patents. Liberty Mutual has succeeded in having claims on the following five patents cancelled.

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.

“Liberty has demonstrated, by a preponderance of the evidence, that claims 1-46 of the ‘088 patent are unpatentable based on the grounds of unpatentability,’ the PTAB said.

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.

“In consideration of the foregoing, it is ordered that claims 1-59 of the ‘269 patent are cancelled,” PTAB said.

Progressive’s ‘358 patent relates to a vehicle monitoring system that tracks the operation of a vehicle and/or operator behavior.

“Liberty has shown, by a preponderance of the evidence, that claims 2-18 of the 358 patent are unpatentable,” PTAB said. “In consideration of the foregoing, it is ordered that claims 2-18 of the ’358 patent are cancelled.” Separately, Liberty Mutual was able to show that claims 1-20 of the 358 patent were unpatentable and PTAB cancelled them.

Progressive’s ‘598 patent is for a monitoring system for determining and communicating a cost of insurance. The PTAB cancelled the patent claims, saying they were obvious based on prior patent applications.

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.

“Liberty has met its burden of proof, by a preponderance of the evidence, in showing that claims 1, 3-6, and 9-18 of the ’970 patent are unpatentable,” PTAB said.

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