Lincoln Nat'l Life Ins. Co. v. Transam. Life Ins. Co.
| Decision Date | 17 September 2010 |
| Docket Number | 2009-1491.,No. 2009-1403,2009-1403 |
| Citation | 609 F.3d 1364 |
| Parties | LINCOLN NATIONAL LIFE INSURANCE COMPANY, Plaintiff-Appellee,v.TRANSAMERICA LIFE INSURANCE COMPANY, Western Reserve Life Assurance Co. of Ohio, and Transamerica Financial Life Insurance Company, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Federal Circuit |
D. Randall Brown, Barnes & Thornburg LLP, of Fort Wayne, IN, argued for plaintiff-appellee.
With him on the brief was Gary C. Furst.
Steven M. Bauer, Proskauer Rose LLP, of Boston, MA, argued for defendants-appellants. With him on the brief were Kimberly A. Mottley, Sandra J. Badin; and Charles S. Sims, of New York, NY. Of counsel on the brief were James R. Myers, Ropes & Gray LLP, of Washington, DC, and John Kenneth Felter, of Boston, MA.
Before, MAYER, CLEVENGER, and MOORE, Circuit Judges.
Opinion for the court filed by Circuit Judge MOORE.
Transamerica Life Insurance Company, Western Reserve Life Assurance Company of Ohio, and Transamerica Financial Life Insurance Company (collectively, Transamerica) appeal from a final decision of the district court denying Transamerica's motion for judgment as a matter of law that it does not infringe claims 35-39 and 42 of U.S. Pat. No. 7,089,201 (the '201 patent). Because the evidence of record does not support the jury's verdict of infringement, we reverse and remand.
Lincoln National Life Insurance Company (Lincoln) is the assignee of the ' 201 patent, which is entitled “Method and Apparatus for Providing Retirement Income Benefits.” The '201 patent relates to computerized methods for administering variable annuity plans. An annuity is a contract that guarantees the payment of money to an annuitant upon certain intervals. Annuities are typically used to provide individuals with long-term economic protection against the risk of outliving their assets. '201 patent col.1 ll.30-34.
Although a number of different types of annuities exist, the annuities relevant to this case are variable deferred annuities. Administration of a deferred annuity begins with an “accumulation phase,” during which the annuity owner deposits money into an account controlled by the insurer. Id. col.1 ll.36-42. For variable annuities, the deposits are invested in one or more funds representing a particular asset class, such as U.S. corporate bonds or money market instruments. Id. col.2 ll.10-20. The overall account value varies according to the performance of the funds in which the deposits are invested. Id. col.2 ll.22-26. The accumulation phase is followed by a “distribution phase,” during which the insurer uses the account to periodically make benefit payments to the annuitant. The dollar amount of each benefit payment depends on the current value of the account and, consequently, also varies according to the performance of the underlying funds. Id. col.3 ll.18-33. Thus, given sufficiently poor fund performance, the dollar amount of an annuitant's benefit payments could theoretically decrease to zero under a variable annuity option. Id. col.3 ll. 43-44.
The uncertainty associated with these benefit payments may cause an annuitant to be apprehensive about choosing a variable benefit option, even if a variable option is in his long-term best interest. Id. col.3 ll.41-43. The '201 patent discloses that insurers may therefore find it valuable to offer annuitants a minimum benefit feature that guarantees a minimum payment regardless of market activity. Id. col.3 ll.41-51. The asserted claims of the '201 patent are directed to computerized methods for administering a variable annuity plan that has such a guaranteed minimum payment feature.
Transamerica sells and administers Guaranteed Minimum Withdrawal Benefit (GMWB) riders 1 that guarantee its policy owners the right to receive a minimum payment regardless of market performance. On August 8, 2006, Transamerica filed a complaint seeking declaratory judgment that its method of administering GMWB riders does not infringe any claim of the ' 201 patent. Transamerica also sought declaratory judgment that the ' 201 patent was invalid under 35 U.S.C. § 102, § 103, and § 112. Transamerica did not allege invalidity under 35 U.S.C. § 101. Lincoln filed a counterclaim for infringement, and the court issued an order realigning Lincoln and Transamerica as plaintiff and defendant, respectively, for trial.
Claim 35, the only independent claim at issue, reads as follows:
'201 patent col.25 ll.12-33 (emphasis added). The applicants added the final “even if” clause during prosecution to overcome a rejection over the prior art.
The district court construed the disputed claim terms in a March 2008 order. Transamerica Life Ins. Co. v. Lincoln Nat'l Life Ins. Co., 550 F.Supp.2d 865 (N.D.Iowa 2008) ( Claim Construction Order ). In construing step (e), the court relied on Figure 6 of the '201 patent as “most clearly show[ing] how the payment guarantee [of step (e) ] works, in relation to account value.” Id at 965. Figure 6 illustrates the operation of the claimed systematic withdrawal program:
--------
| |Withdrawal |Account Value |Withdrawal |Investment |Account Value ||
| |Number |BOY |Amount |Return |EOY ||
|--|--------------|--------------|--------------|--------------|--------------||
|1 |$100,000.00 |$7,500.00 |12% |$103,600.00 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|2 |$103,600.00 |$7,770.00 |16% |$111,162.80 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|3 |$111,162.80 |$8,337.21 |12% |$115,164.66 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|4 |$115,164.66 |$8,637.35 |- 5% |$101,200.95 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|5 |$101,200.95 |$8,637.35 |-10% |$ 83,307.24 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|6 |$ 83,307.24 |$8,637.35 |-21% |$ 58,989.21 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|7 |$ 58,989.21 |$8,637.35 |5% |$ 52,869.45 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|8 |$ 52,869.45 |$8,637.35 |-14% |$ 38,039.61 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|9 |$ 38,039.61 |$8,637.35 |1% |$ 29,696.28 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|10|$ 29,696.28 |$8,637.35 |-15% |$ 17,900.09 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|11|$ 17,900.09 |$8,637.35 |- 5% |$ 8,799.61 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|12|$ 8,799.61 |$8,637.35 |15% |$ 186.60 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|13|$ 186.60 |$8,637.35 |23% |$ 0.00 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|14|$ 0.00 |$8,637.35 |10% |$ 0.00 | ||
|--|--------------|--------------|--------------|--------------|--------------||
|15|$ 0.00 |$8,637.35 |8% |$ 0.00 | ||
--------
In the example of Figure 6, the guaranteed withdrawal amount is 7.5% of the highest value attained by the account. '201 patent col.11 ll.35-36. The account reaches its highest value, $115,164.66, in year 4. Pursuant to the guaranteed payment feature, the account owner is entitled to withdraw $8,637.35 (7.5% of $115,164.66) in years 5 through 15, regardless of the account's actual value. Thus, the scheduled payment of $8,637.35 is still made in years 13 through 15 even though the account value is exhausted, i.e., less than the guaranteed withdrawal amount. Id. col.11 ll.29-34.
The court explained that Figure 6 was “consistent with the court's suggested reading of [step (e) ] as claiming, first and foremost, a guarantee that the scheduled payment will be made for the period of benefit payments in question.” Claim Construction Order at 966. The court construed step (e) to mean “[a]t the regular intervals required by the plan, paying the scheduled payment to the owner for the period of benefit payments, even if the account value is less than the scheduled payment amount or zero before the payments guaranteed under the plan have been made.” Id. at 967. Prior to trial, ...
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