Bancorp Servs., L.L.C. v. Sun Life Assurance Co. of Canada

687 F.3d 1266

103 U.S.P.Q.2d 1425

BANCORP SERVICES, L.L.C., Plaintiff–Appellant,

v. SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.), Defendant–Appellee,andAnalect LLC, Defendant.

No. 2011–1467.

United States Court of Appeals, Federal Circuit.

July 26, 2012.

David A. Perlson, Quinn Emanuel Urquhart & Sullivan, of San Francisco, CA, argued for plaintiff-appellant. With him on the brief was Charles K. Verhoeven; and Ian S. Shelton, of Los Angeles, CA.

Matthew B. Lowrie, Foley & Lardner, LLP, of Boston, MA, argued for the defendant-appellee. With him on the brief were Aaron W. Moore and Kevin M. Littman.

Before LOURIE, PROST, and WALLACH, Circuit Judges.

LOURIE, Circuit Judge.

Bancorp Services, L.L.C. (“Bancorp”) appeals from the final decision of the U.S. District Court for the Eastern District of Missouri, which entered summary judgment that the asserted claims of U.S. Patents 5,926,792 and 7,249,037 (the “'792 patent” and “'037 patent”) are invalid under 35 U.S.C. § 101. See Bancorp Servs., L.L.C. v. Sun Life Assurance Co., No. 4:00–cv–1073 (E.D.Mo. May 25, 2011) (Final Judgment), ECF No. 411. We affirm.

Background

Bancorp owns the '792 and '037 patents, both entitled “System for Managing a Stable Value Protected Investment Plan.” The patents share a specification and the priority date of September 1996. The '792 patent has been the subject of two prior appeals to this court. See Metro. Life Ins. Co. v. Bancorp Servs., L.L.C., 527 F.3d 1330 (Fed.Cir.2008) (vacating summary judgment of noninfringement); Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367 (Fed.Cir.2004) (reversing summary judgment of invalidity for indefiniteness).

As explained in our earlier opinions and in the district court's opinion now on appeal in this case, the patents' specification discloses systems and methods for administering and tracking the value of life insurance policies in separate accounts. Separate account policies are issued pursuant to Corporate Owned Life Insurance (“COLI”) and Bank Owned Life Insurance (“BOLI”) plans. Under separate account COLI and BOLI plans the policy owner pays an additional premium beyond that required to fund the death benefit, and specifies the types of assets in which the additional value is invested. Banks and corporations use the policies to insure the lives of their employees and as a means of funding their employees' post-retirement benefits on a tax-advantaged basis. See Hartford, 359 F.3d at 1369.

The value of a separate account policy fluctuates with the market value of the underlying investment assets. That poses a problem from an accounting standpoint, as BOLI and COLI plan owners must ordinarily report, on a quarter-to-quarter basis, the value of any policies they own. Id. The volatility inherent in short-term market values has made some banks and companies reluctant to purchase these plans. Bancorp Servs., L.L.C. v. Sun Life Assurance Co., 771 F.Supp.2d 1054, 1056 (E.D.Mo.2011). Stable value protected investments address that problem by providing a mechanism for stabilizing the reported value of the policies, wherein a third-party guarantor (the “stable value protected writer”) guarantees a particular value (the “book value”) of the life insurance policy regardless of its market value. To offset the risk to a potential guarantor for providing that service, the guarantor is paid a fee and restrictions are placed on the policyholder's right to cash in on the policy. Hartford, 359 F.3d at 1369. As we previously explained, the asserted patents “provide[ ] a computerized means for tracking the book value and market value of the policies and calculating the credits representing the amount the stable value protected writer must guarantee and pay should the policy be paid out prematurely.” Id.

The asserted patents disclose specific formulae for determining the values required to manage a stable value protected life insurance policy. For example, the specification discloses creating and initializing a fund by performing particular “calculations and comparisons” to determine an “initial unit value of the policy.” '037 patent col.12 ll.56–58; see also id. col.11 l.67–col.12 l.57, fig. 11. The specification then discloses “processing [that] is required at regular intervals to track existing funds.” Id. col.12 ll.60–61; see also id. col.12 l.59–col.15 l.10, figs. 12–16. Such processing includes the calculation of “fees” for the individuals who manage the life insurance policy. Id. col.12 l.65–col.13 l.15. That processing also includes the computation of values used for determining “surrender value protection investment credits,” which, as we previously explained, “means the difference between the actual value of a protected investment and the targeted return value of that investment at the time the protected life insurance policy is surrendered.” Hartford, 359 F.3d at 1372. Those computations include the concept of a “targeted return,” calculated as follows:

The Stable Value Protected funds provide an initial targeted return for the first period of an investment. Upon completion of the first period, the value of the fund, the “market value,” is compared with the “calculated” value of the fund which is the “book value.” The “calculated” value of the fund is calculated by multiplying the initial value of the fund by (1+targeted return), wherein the targeted return for the next period is calculated using the formula:

TR=[ (MV/BV) ^(1/D)x(1+YTM) ]–1,

where [TR] is the targeted return, MV is the market value of a fund, BV is the book value of a fund, D is the duration of a fund and YTM is the current yield to market....

'037 patent col.3 ll.18–30; see also id. col.13 ll.44–53 (disclosing formulae for calculating a “policy value for the present day” and a “policy unit value for the present day”). Those computations also include the “duration of a fund,” which is calculated according to a formula well-known in the prior art. Id. col.3 l.28–col.4 l.5. As the specification explains, “[u]sing the concepts of duration and targeted return, the actual performance of the underlying securities in the fund is smoothed over time.” Id. col.4 ll.6–8.

At issue on appeal from the '792 patent are asserted claims 9, 17, 18, 28, and 37. The asserted claims include methods and computer-readable media. Claims 9 and 28 are independent method claims. Claims 9 reads:

9. 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 members of the management group which manage the life insurance policy, and

accumulating fee units on behalf of the management group.

'792 patent col.16 l.55–col.17 l.8. Independent claim 28 claims “A method for managing a life insurance policy” comprising steps that are not materially different from the steps of claim 9. Id. col.19 ll.10–22. Claims 17 and 37 depend from independent claims 9 and 28, respectively, and require that the methods steps “are performed by a computer.” Id. col.17 ll.60–61; id. col.20 ll.32–33. Claim 18, the computer-readable medium claim, reads: “A computer readable medi[um] for controlling a computer to perform the steps” set out in method claim 9. Id. col.17 l.63–col.18 l.15.

Before us on appeal from the '037 patent are asserted 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. Independent claims 9, 28, and 52 claim a “method for managing a life insurance policy” that is not materially different from the methods claimed in the ' 792 patent. For example, claim 9 reads:

9. A method for managing a life insurance policy comprising:

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;

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

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

determining an investment value and a value of the underlying securities of the stable value protected investment 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

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

'037 patent col.16 ll.31–50. Each independent method claim is further limited in a dependent claim requiring that the method be “performed by a computer.” Id. claims 17, 37, 60. Independent claims 18 and 63 are directed to a “computer readable medi[um] for controlling a computer to perform the steps” set out in the method claims. Claim 18 for example, recites the same seven steps set forth in method claim 9, above.

Independent claims 1, 19, and 42 of the '037 patent are system claims, which track the content of the aforementioned method and medium claims. For example, claim 1 reads:

1. 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...