Bancorp Serv. v. Sun Life Assurance Co. of Canada

• Decision Date: 14 February 2011
• Docket Number: No. 4:00–CV–1073 (CEJ).,4:00–CV–1073 (CEJ).
• Parties: BANCORP SERVICES, L.L.C., Plaintiff,v.SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

771 F.Supp.2d 1054

BANCORP SERVICES, L.L.C., Plaintiff,

v.SUN LIFE ASSURANCE COMPANY OF CANADA, Defendant.

No. 4:00–CV–1073 (CEJ).

United States District Court, E.D. Missouri, Eastern Division.

Feb. 14, 2011.

Charles K. Verhoeven, David A. Perlson, Ian S. Shelton, Quinn and Emanuel, San Francisco, CA, Charles A. Weiss, Douglas W. King, Michelle L. Gravel, Rhiana A. Luaders, Bryan Cave LLP, St. Louis, MO, Patrick M. Shields, Quinn And Emanuel, Los Angeles, CA, James F. Bennett, Dowd Bennett, LLP, Clayton, MO, for Plaintiff.Aaron W. Moore, Kevin M. Littman, Matthew B. Lowrie, Foley and Lardner, LLP, Boston, MA, Alan C. Kohn, Thomas A. Durphy, Kohn and Shands, St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

CAROL E. JACKSONI, District Judge.

This matter is before the Court on the motion of defendant Sun Life Assurance Company of Canada (Sun Life) for summary judgment. Plaintiff Bancorp Services, LLC, (Bancorp) has filed a motion in opposition and the issues are fully briefed.¹

I. Background

Bancorp is the holder of United States Patent No. 5,926,792 (the '792 patent) and Patent No. 7,249,037 (the '037 patent). The patents describe a system for administering and tracking the value of separate-account life insurance policies issued pursuant to Corporate Owned Life Insurance (“COLI”) and Bank Owned Life Insurance (“BOLI”) plans. These plans are purchased by corporations and banks to insure the lives of their employees in order to fund future post-retirement benefits on a tax-advantaged basis. Bancorp Services, LLC v. Hartford Life Ins. Co., 359 F.3d 1367, 1369 (Fed.Cir.2004).

The value of a separate-account policy fluctuates with the market value of the underlying securities. The bank or corporation is required to report this fluctuating market value, and the volatility inherent in short-term market values has made some companies reluctant to purchase the plans. Stable value protected investments provide a mechanism for stabilizing the reported value of the policies by arranging for a third party guarantor—the “stable value protected writer”—to guarantee, for a fee, a particular value (the “book value”) of the life insurance policy, regardless of its market value, in the event the policy must be paid out prematurely. Id. The patents describe a computerized system for tracking the book value and the market value of the policies and calculating the credits representing the amount the stable value protected writer must guarantee. Id.

Bancorp asserts that Sun Life infringes claims 9, 17, 18, 28, and 37 of the ' 792 patent. Claims 9 and 28 are independent claims, with 9 representative of both. Claim 9 provides:

A method for managing a life insurance policy on behalf of a policy holder, the method comprising the steps of:

generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities;

calculating fee units for members of a management group which manage the life insurance policy;

calculating surrender value protected investment credits for the life insurance policy;

determining an investment value and a value of the underlying securities for the current day;

calculating a policy value and a policy unit value for the current day;

Storing the policy unit value for the current day; and one of the steps of:

removing the fee units for the members of the management group which manage the life insurance policy, and

accumulating fee units on behalf of the management group.

('792 patent, 16:55–17:8). Dependent claims 17 and 37 are the methods according to claims 9 and 28, wherein the steps of claims 9 and 28 are performed by a computer. Dependent claim 18 is a computer readable media for controlling a computer to perform the steps. ('792 patent, 17:61–18:15).

Bancorp asserts claims 1, 8, 9, 17–21, 27, 28, 37, 42, 49, 52, 60, 63, 66–68, 72–77, 81–83, 87, 88, and 91–95 of the '037 patent. Claim 1, a representative claim, provides:

A life insurance policy management system comprising:

a policy generator for generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities of the stable value protected investment;

a fee calculator for calculating fees for members of a management group which manage the life insurance policy;

a credit calculator for calculating credits for the stable value protected investment of the life insurance policy;

an investment calculator for determining an investment value and a value of the underlying securities of the stable value protected investment for the current day;

a policy calculator for calculating a policy value and a policy unit value for the current day;

digital storage for storing the policy unit value for the current day; and

a debitor for removing a value of the fees for members of the management group which manages the life insurance policy.

('037 patent, 15:28–48). The other independent claims in this patent describe a “life insurance management system” (42), a “computer system for administering an existing life insurance policy” (19), and a “computer readable media” for controlling a computer (18 and 63). Claims 9, 28, and 52 provide “a method for managing a life insurance policy.” The remaining dependent claims add limitations for calculating a targeted return for an upcoming time period; receiving a targeted return for an upcoming time period; adjusting the targeted return to amortize for an initial fee; adjusting the investment value to amortize for an initial fee; calculating fees for members of the management group; and removing and/or accumulating those fees.

Defendant Sun Life argues that, under Bilski v. Kappos, ––– U.S. ––––, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010), the asserted claims are not drawn to patent-eligible subject matter under § 101 of the Patent Act, but instead seek patent protection for an abstract idea.

II. Legal Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be entered “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” In ruling on a motion for summary judgment the court is required to view the facts in the light most favorable to the non-moving party and must give that party the benefit of all reasonable inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). The moving party bears the burden of showing both the absence of a genuine issue of material fact and its entitlement to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Fed.R.Civ.P. 56(c). Once the moving party has met its burden, the non-moving party may not rest on the allegations of his pleadings but must set forth specific facts, by affidavit or other evidence, showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e). Rule 56(c) “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corporation v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. Discussion

Section 101 of Title 35, United States Code, defines the subject matter that may be patented under the Patent Act:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

35 U.S.C. § 101.

By choosing “such expansive terms ... modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope.” Bilski v. Kappos, 130 S.Ct. at 3225 ( quoting Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980)). The Supreme Court has established three exceptions to § 101's broad patent-eligibility principles: laws of nature, physical phenomena, and abstract ideas. Id. “Phenomena of nature, though just discovered, mental processes and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work.” Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972).

Bancorp argues that to establish invalidity Sun Life must present clear and convincing evidence of facts underlying the invalidity. However, whether asserted claims are invalid for failure to claim statutory subject matter under 35 U.S.C. § 101 is a question of law. In re Comiskey, 554 F.3d 967, 975 (Fed.Cir.2009).

A. Preliminary Issues

Bancorp asserts that Sun Life's motion is premature because the Court has not yet completed claims construction. The parties have submitted two rounds of briefing on claims construction issues. In April 2007, Bancorp filed proposed constructions for three terms in the '792 patent: “Stable value protected investment,” “surrender value protected investment credit,” and “surrender value protected investment writer.” Sun Life, by contrast, proposed constructions for 63 individual claim terms. With respect to seven means-plus-function terms ( e.g., “generating means for generating a life insurance policy”), Bancorp asked the Court to construe the underlying structure as “computer hardware and software components.” Sun Life argued that means-plus-function claims that are directed to a general purpose computer programmed to perform a certain function must be construed to cover only the disclosed algorithm. This appears to be an accurate...