Discovery Life Limited
[2017] APO 36
•18 July 2017
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Discovery Life Limited [2017] APO 36
Patent Application: 2016203283
Title:Method of managing a life insurance policy with a related medical scheme
Patent Applicant: Discovery Life Limited
Delegate: R Subbarayan
Decision Date: 18 July 2017
Hearing Date: Written record
Catchwords: PATENTS - examiner’s objections – computer implemented method for of managing a life insurance policy with a related medical scheme – abstract idea or mere scheme – no patentable subject matter disclosed – application refused.
Representation: Patent attorney for the applicant: Shelston IP Pty Ltd.
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2016203283
Title:Method of managing a life insurance policy with a related medical scheme
Patent Applicant: Discovery Life Limited
Date of Decision: 18 July 2017
DECISION
The subject matter of patent application 2016203283 is not a manner of manufacture. Consequently the application is refused pursuant to subsection 49(2) of the Patents Act.
REASONS FOR DECISION
BACKGROUND
Patent application 2016203283 in the name of Discovery Life Limited was filed on 20 May 2016. This application is a divisional application of 2012227307 which is a divisional application of 2012201469 which is a divisional application of 2011221367 which in turn is a divisional application of 2005201351. The earliest priority date for the present application is 16 April 2004.
Parent application 2012227307 lapsed due to failure to overcome the examiner’s objections and gain acceptance within the prescribed period. The examiner had rejected the application on the grounds that the claimed invention was not directed to a manner of manufacture and that it lacked an inventive step.
The applicant requested examination of the present application on 19 July 2016 and a first report was issued on 27 March 2017. As the claims of the present application are substantially the same as claims that had been rejected in the parent application, the examiner rejected the application on the same grounds of not being a manner of manufacture and lack of inventive step. The examiner adopting IP Australia’s Divisional Case Management practice also advised the applicant as follows:
My report below includes objections that are equivalent to objections raised in the examination of the related parent application which is directed to the same or essentially the same subject matter. As there has now been several adverse reports in relation to this subject matter, the application will be referred to a Hearing Officer to consider whether to accept or refuse the application under s49 or to direct amendment under s107. If you wish to be heard on this matter, you have 1 month from the date of this report to request a hearing. Fee item 230 applies.
The applicant however did not request to be heard. It rather filed a further divisional application number 2017202748 with exactly the same set of claims. As noted by the then Deputy Commissioner of Patents in Swiss Reinsurance Company Limited [2017] APO 12, this is “a course of action that, although permitted under the Act, does nothing for the reputation of the patent system and is likely to bring into question the generous availability of divisional applications to the detriment of other users of the system” [4]. I expect that this divisional application will very soon be examined and referred to a Hearing Officer for determination.
This decision is based on the written record for this application, its parent application AU2012227307 and its great great grandparent application AU2005201351. Both the grandparent and great grandparent applications were never examined.
SPECIFICATION
As the title indicates, the present invention relates to a method of managing a life insurance policy with a related medical insurance scheme.
The specification states that with a typical life insurance policy, the insured person (insured life) pays a premium to the life insurer and the life insurer pays a predetermined amount (sum assured) to the insured person or their beneficiary on the occurrence of an insured event such as disability or death. It further states that “it would be beneficial both to the insured life and the life insurer if the insured life were to maintain his/her health and extend his/her life” [0003] and that “It is an object of the invention to provide a method of managing a life insurance policy which addresses this goal” [0003].
The specification then states that “The present invention seeks to link the operation of a life insurance business to that of a medical scheme, by rewarding an insured life who is also a member of the related medical scheme for responsible use of the medical scheme benefits” [0018] and that it “provides a method of rewarding clients for managing their health, the idea being that a person who looks after their health should pay less for their life assurance than a person who leads an unhealthy lifestyle” [0027].
The specification then provides a description of a preferred embodiment of the invention. This embodiment operates in the following manner:
The insured life will also be required to be a member of a related medical insurance scheme. The insured life will pay premiums annually to the life insurance company, the amount of the premium being determined by the sum assured. A portion of the premium paid by the insured life during a predetermined period (e.g 5 years) will be allocated to a fund called the “PayBack Fund” according to certain predetermined criteria related to the status of the insured life with the medical insurance scheme. The predetermined criteria can include one or more of the following:
- The medical plan chosen by the insured life
- The number of dependents of the insured life
- The level of claims made on the medical scheme by the insured life and/or their dependents
- The insured life’s status in a reward program associated with the medical plan
If the insured life makes any claim against their life insurance policy during this predetermined period, this will correspondingly reduce the amount in the PayBack Fund.
At the end of the predetermined period, the balance in the PayBack Fund will be paid to the policyholder.
The specification also then describes a computer system for implementing the invention, the computer system comprising a processor, a graphics processing unit and a memory. The computer system is programmed with a set of instructions for linking the life insurance policy with the medical insurance policy, calculating and allocating a portion of the life insurance premium to the PayBack Fund based on the predetermined criteria for the insured life, deduct from the balance an amount related to any life insurance claims made and at the predetermined intervals paying any balance in the PayBack Fund to the life insurance policyholder or their beneficiary.
The specification ends with 9 claims that read as follows:
1. A method, with an information processing system, of managing a life insurance policy, the method comprising:
linking, by an information processing system, a life insurance policy associated with an individual with a medical policy associated with the individual wherein the individual pays one or more life insurance premiums to a provider of the life insurance policy, and wherein a provider of the medical policy undertakes liability on behalf of the individual in return for one of a premium and a contribution made by the individual to the provider of the medical policy and provides to the individual relevant health services and/or assistance in defraying expenses occurred in connection with rendering such relevant health services;
calculating, by the information processing system, a portion of the one or more life insurance premiums paid by the individual during a predetermined period to a payback account;
allocating, by the information processing system, the portion of the one or more life insurance premiums paid by the individual, wherein the portion is based on predetermined criteria associated with a status of the individual with the medical policy during the predetermined period; and
at predetermined intervals, paying, by the information processing system, the balance in the payback account to one of the individual and a beneficiary nominated by the individual, wherein the predetermined intervals are independent of an insured event.2. The method according to claim 1 including:
deducting from the balance of the payback account an amount related to life insurance claims made by a member during the predetermined period.
3. The method according to claim 1 or claim 2, wherein the predetermined criteria in terms of which a portion of the premiums paid by the insured life are allocated to the payback account include one or more of the following:
a specific medical plan chosen by the insured life; a number of dependents of the insured life; a level of claims made on the medical policy by the insured life and his/her dependents during the predetermined period; anda status of the insured life in a reward program associated with the medical plan.
4. The method according to any one of the preceding claims, wherein the predetermined period is at least one year.
5. The method according to claim 4, wherein the predetermined period is a five-year period.
6. The method according to any one of the preceding claims, wherein the allocating of a portion of the life insurance premiums paid to the payback account is made annually.
7. The method according to any one of the preceding claims, wherein a payment is made into an account that the insured life or nominated beneficiary has with a financial institution.
8. The method according to any one of claims 1 to 6, wherein a payment is made into a medical savings account that the insured life has with the medical scheme or into a credit or debit card of the insured life, which credit or debit card is associated with the life insurance policy or medical policy.
9. A method, with an information processing system, of managing a life insurance policy substantially as herein described with reference to any one of the embodiments of the invention illustrated in the accompanying drawings and/or examples.
DETERMINATION OF MANNER OF MANUFACTURE
The Examiner’s Objection
The examiner has objected that the present application is not for a manner of manufacture. His objection reads as follows:
The application is not for a manner of manufacture within the meaning of paragraph 18(1)(a) of the Patents Act because the subject matter of the claims 1-9 represents nothing more than a scheme, considered to be not patentable; as discussed in item 7 of the third exam report, dated 18 April 2011, of the family member application AU2005201351.
Applicant's attention is also drawn to the objection item 6 of the second exam report, dated 18 September 2015, for the parent application AU2012227307; wherein it was addressed in further detail that the claimed invention is not a manner of manufacture.
It is noted that independent claim 1 that was examined and reported upon in each of these related earlier applications is substantially the same as claim 1 of the present application. Therefore the submissions made by the applicant in relation to the patentability of these earlier applications are also relevant to the present application and I will therefore consider these in the absence of any new submissions from the applicant as a consequence of them choosing not to be heard in respect of the present application.
Item 7 of the third exam report, dated 18 April 2011, of AU2005201351 reads as follows:
“Objection item 4 of the previous report is maintained. The application is not for a manner of manufacture within the meaning of paragraph 18(1)(a) of the Patents Act because the subject matter of amended claims 1-9 represents nothing more than a scheme, considered to be not patentable.
In your last response, page 1, you have mentioned that, ‘Accordingly, the present issue consolidates to a very simple question: does the working of the method defined by claim 1 result in some physical phenomenon or effect? This is the test under Australian law; there is no legal basis for any tests that, for example, assess the application as a whole as opposed to assessing the specific invention defined by the claims’. However, please note that to interpret the claims the rules of construction apply wherein inter alia the document must be read as a whole.
In your last response, page 2, you have also mentioned that, ‘The working of the method of claim 1 results in the making of a payment. This is most certainly a "physical phenomenon or effect" under any sensible or logical interpretation. Accordingly, if the precedent of Grant is to be followed, the objection to claim 1 under Section 18(1)(a) should be withdrawn. If the Examiner proposes to maintain an objection to claim 1 under Section 18(1)(a), we respectfully request a comprehensive and logical explanation as to why the making of a payment is not considered to be a physical phenomenon or effect’.
I consider that making a payment is just an agreement between the parties involved and as such there is no physical effect involved in this process. Making a mere payment offer is not considered to be an artificially created state of affairs. Also, in response to your above underlined query, please see Iowa Lottery [2010] APO 25; paragraph [14], where it was mentioned that ‘… it is said that the requirement stated in Grant [30] for a “concrete, tangible, physical or observable effect” is met by the payment of prizes. I fail to see how this is in any way different to the situation in Grant where the method involved a number of legal and financial transactions’.
It is apparent from the Grant v Commissioner of Patents [2006] FCAFC 120 decision that it is the useful product or effect of the method considered as a whole that must result in an artificially created state of affairs, in the sense of a concrete, tangible, physical, or observable effect. The mere use of a physical form or device in the method, or a physical effect or transformation that arises incidentally or indirectly in its operation is not sufficient to change the fundamental character of the subject matter claimed.
As mentioned in the previous report, regarding the incidental use of information processing system/computer in the claims, applicant’s attention is also drawn to the hearing decision of Invention Pathways Pty Ltd [2010] APO 10; at paragraph [41] of the Pathways decision, it was said that ‘Computers and the internet are now as ubiquitous as paper and the postal service as means of collecting, displaying and disseminating information and their use as elements in a business scheme without something more, some substantial physical effect produced in the operation of the method, does not in my view and within the terms of NRDC result in an “artificial state of affairs” any more than were those actions to be taken on paper…’. And at paragraph [43] it was further said that using a machine merely as a matter of convenience [and which does not result in a substantive effect] does not result in a claim being patentable.
Therefore, claims 1-9 are not for a manner of manufacture”.
Objection item 6 of the second exam report, dated 18 September 2015 of AU2012227307 reads as follows:
“Notwithstanding objection item 5, the application is not for a manner of manufacture within the meaning of Section 18(1)(a) of the Patents Act because the subject matter of the claims 1-18 as proposed to be amended represents nothing more than a scheme, considered to be not patentable.
The alleged invention of the present application is directed to a method/system of calculating/allocating a portion of the one or more life insurance premiums paid by an individual to a payback account; at predetermined intervals transferring the balance of the payback account to an account of one of the individual and a beneficiary nominated by the individual, where the predetermined intervals are independent of an insured event. This is merely an abstract idea based on business scheme and hence not a manner of manufacture.
In the last response, pages 4-5, you’ve mentioned the following:
‘In this case, the present invention clearly falls into the former category. Specifically, what we have here is an invention with its substance being the integration of two (otherwise) independent information systems in which the resulting methods and systems of the present invention can only be achieved as data specific to the two independent systems is required to achieve a particular result.
Since the substance of the present case is the integration of two (otherwise) independent information systems we submit that the invention is patentable based on Research Affiliates. See paragraph [98] of the Research Affiliates decision, which refers to paragraph [139] of RPL Central Pty Ltd v Commissioner of Patents [2013] FCA 871 which mentioned that "the involvement of the computer in the invention is described in these claims in such a manner that it is inextricably linked with the invention itself.’It is clear in the claims as proposed to be amended that the steps are to be performed by the computer/information systems. However, it is not sufficient to meet the requirement of manner of manufacture that the machine/computer be an essential feature of the invention as claimed (see the Full Court decision of Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150, para [117]).
As discussed above, your application is directed (i.e. the substance of the application) to an abstract idea (i.e. calculating/allocating a portion of the one or more life insurance premiums paid by an individual to a payback account; at predetermined intervals transferring the balance of the payback account to an account of one of the individual and a beneficiary nominated by the individual, where the predetermined intervals are independent of an insured event). The mere computer implementation/automation (i.e. the form in which the substance is claimed) of an abstract idea does not meet the requirements for a manner of manufacture.
See the paragraph [115] of the Research Affiliates decision, ‘As set out in the specification it may be, and in the claimed method it is, implemented in a computer, but the ingenuity of the inventors, the end result of which is the invention, is directed to the idea, which is not patentable. That method does not have an artificial effect falling squarely within the true concept of what must be produced by a process if it is to be held patentable (NRDC at 277)’.
The Research Affiliates decision makes clear that it is the substance of an invention that must be directed to patentable subject matter and that an abstract idea that is merely implemented in a computer, no matter how essential to the claimed invention that implementation may be, is not a manner of manufacture (see para [118] of the Research Affiliates decision, ‘The claimed method in this case clearly involves what may well be an inventive idea, but it is an abstract idea. The specification makes it apparent that any inventive step arises in the creation of the index as information and as a scheme. There is no suggestion in the specification or the claims that any part of the inventive step lies in the computer implementation. Rather, it is apparent that the scheme is merely implemented in a computer and a standard computer at that. It is no part of the claimed method that there is an improvement in what might broadly be called "computer technology’).
It is clear from the specification as a whole that the current invention for which protection is sought is concerned with a standard computer/information system(s) implementing a new set of abstract rules/idea.
Therefore, the present application does not satisfy the requirements for a manner of manufacture.
Also, applicant's attention is drawn to the Hearing decision of Discovery Holdings Limited [2011] APO 56, wherein the application with very similar subject matter to the current application has been refused since the application was not directed to a manner of manufacture.
In fact, after thorough reading of the whole specification as originally filed, I do not find any material within your application that could be considered patentable under the manner of manufacture requirements”.
Applicable Law
Section 18 of the Patent Act 1990 provides that:
(1) Subject to subsection (2), an invention is a patentable invention for the purpose of a standard patent if the invention, so far as claimed in any claim:
(a) is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies.
The High Court in National Research Development Corp (NRDC) v Commissioner of Patents [1959] HCA 67; [1959] 102 CLR 252, has provided a statement of the law in this regard. At page 275, it was stated that:
"a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art ...- that its value to the country is in the field of economic endeavour".
The decision of the High Court has since been applied in numerous cases including computer implemented inventions. For example, the inventions in International Business Machines Corporation v Commissioner of Patents [ 1991] FCA 625 (method and apparatus for producing curves on a computer graphics display) and CCOM Pty Ltd v Jiejing Pty Ltd [1994] FCA 1168 (apparatus for assembling text in Chinese language characters) were found to be patentable. Also in Welcome Real-Time SA v Catuity Inc [2001] FCA 445, a method involving smart cards storing traders' loyalty programs, and monitoring customer entitlements through a behaviour file in the cards relating to the behaviour (for example, spending history) of card holders towards the traders was found to be patentable.
However, in Grant v Commissioner of Patents [2006] FCAFC 120, the Full Federal Court found that a method of protecting an asset including the steps of establishing a trust, making a gift of a sum of money to the trust, making a loan of that money from the trust and securing the loan was not a manner of manufacture. While observing that the fact that a method may be called a business method does not prevent it being properly the subject of letters patent, the Court indicated that for an invention to be a manner of manufacture, it must give rise to an artificially created state of affairs in the sense of a concrete, tangible, physical or observable effect.
Recently, in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150, the Full Federal Court considered a computer implemented method for generating a financial index and made the following observation at [106]:
“The determination whether the claimed invention is truly “an artificially created state of affairs” in satisfaction of NRDC is made not by some mechanistic application of the criterion of artificiality or physical effect, but by an understanding of the claimed invention itself. The invention is to be understood as a matter of substance and not merely as a matter of form.”
The need to consider the substance of the claimed invention was also reiterated by the High Court in D’Arcy v Myriad Genetics Inc [2015] HCA 35, where it was observed at [94]:
“Although it may be said in a formal sense that the invention as claimed, referring to isolated nucleic acids, embodies a product created by human action, that is not sufficient to support its characterization as a manner of manufacture. The substance of the invention as claimed and the considerations flowing from its substance militate against that characterization.”
Most recently, in Commissioner of Patents v RPL Central Pty Ltd [2015] FCAC 177, the Full Federal Court considered a computer implemented method and system for automatic collection of evidence of skills and knowledge, and concluded that the claimed invention was to a scheme or a business method that was not properly the subject of letters patent. The Full Court stated at [96]:
“A claimed invention must be examined to ascertain whether it is in substance a scheme or plan or whether it can broadly be described as an improvement in computer technology. The basis for the analysis starts with the fact that a business method, or mere scheme, is not, per se, patentable. The fact that it is a scheme or business method does not exclude it from properly being the subject of letters patent, but it must be more than that. There must be more than an abstract idea; it must involve the creation of an artificial state of affairs where the computer is integral to the invention, rather than a mere tool in which the invention is performed. Where the claimed invention is to a computerised business method, the invention must lie in that computerisation. It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions”.
It is clear from the above decisions that for a claimed invention to define a manner of manufacture within the meaning of Section 18(1)(a) of the Patents Act 1990, it is important to go beyond the form of words used and consider the substance of the claimed invention in the context of the specification as a whole.
Discussion
The following are some of the relevant submissions from the applicant arguing why the claimed invention is a manner of manufacture.
“….the present invention relates to the integration of two independent information systems, in particular, one system including information relating to life insurance policies and another system including information relating to medical policies.”
“The methods and systems of the present invention can only be achieved through integration of the two independent systems, as data specific to the two independent systems is required to determine the portion to be paid back to the individual, or a beneficiary nominated by the individual, at predetermined intervals that are independent of an insured event.”
“Thus, a core aspect of the present invention which relates to the integration of two independent information systems achieves a new commercial result.”
“The Federal Court decisions in RPL, International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218, and CCOM v Jiejing 28 IPR 481; (1994) AIPC 91-079 each demonstrated that the invention was inextricably linked with the computer itself.
In this case, the present invention clearly falls into the former category. Specifically, what we have here is an invention with its substance being the integration of two (otherwise) independent information systems in which the resulting methods and systems of the present invention can only be achieved as data specific to the two independent systems is required to achieve a particular result.”
“It is quite clear that the computer in RPL is not doing anything especially different, at a technical level, to any ordinary computer. It retrieves some information from a server, generates a set of questions, presents those questions to a user, and receives responses. The Full Federal Court, in Research Affiliates, regarded this claim to be patentable in view of the requirements of Section 18(1)(a).”
The applicant appears to be of the view that the Full Court in Research Affiliates has, by making reference to Justice Middleton’s decision in RPL, endorsed that decision. This is clearly incorrect as the Full Court has subsequently held that the claimed invention of RPL is not a patentable invention within the meaning of Section 18(1)(a). As noted earlier, the Full Court noted that it is important to go beyond the form of words used and consider the substance of the claimed invention in the context of the specification as a whole.
It is clear from reading the specification as a whole, that the substance of the present invention lies in the method of linking of the life insurance policy of the insured life with a related medical insurance policy with the aim of rewarding policyholders who take steps to manage their health with a monetary benefit at the end of a certain period. This is evident from a number of statements in the specification including the following:
[0018] Schemes exist which aim to encourage medical scheme members to use their benefits responsibly and which reward members for making use of health related services or facilities, and otherwise managing their health positively. An example of such a scheme is the "Vitality" scheme of Discovery Health Ltd that is described in South African Patent No 99/1746, the contents of which are incorporated herein by reference. The present invention seeks to link the operation of a life insurance business to that of a medical scheme, by rewarding an insured life who is also a member of the related medical scheme for responsible use of the medical scheme benefits.
[0027] The invention essentially provides a method of rewarding clients for managing their health, the idea being that a person who looks after their health should pay less for their life assurance than a person who leads an unhealthy lifestyle.
[0028] Compared with existing methods that provide an upfront benefit to clients who manage their health by discounting their life policy premiums, the method of the present invention provides a long term benefit to clients who continue to look after their health by paying out a cash amount to them every five years.
While the claimed invention is directed to a method of using a computer system to carry out the steps of the linking the life insurance policy with the related medical insurance policy and providing a monetary payback at predetermined intervals, there is nothing in the specification to suggest that the invention lies in this computerisation. The computer utilised in the implementation of the method appears to be no more than a generic computer with a CPU and a memory that is programmed with a set of instructions for causing the computer to perform the disclosed methodology including linking the information relating to the life insurance scheme with the information relating to the medical scheme, allocating a portion of the life insurance premium paid to the fund according to predetermined criteria and at predetermined intervals paying the balance in the fund to the insured life or their beneficiary. What the claimed invention does is to no more than “‘put’ a business method ‘into’ a computer to implement the business method using the computer for its well- known and understood functions” (RPL at [96]). It is plainly a business innovation, a mere scheme. This is clearly not patentable subject matter.
I agree with the examiner’s objection. The claimed invention is not a manner of manufacture.
DETERMINATION OF INVENTIVE STEP
The Examiner’s Objection
The examiner’s objection in relation to lack of inventive step reads as follows:
“The invention defined in claims 1-9 does not involve an inventive step when compared with D1 in view of D2; as discussed in item 6 of the second exam report, dated 09 February 2011, of the family member application AU2005201351”.
Objection 6 of the report dated 9 February 2011 in turn reads as follows:
“The invention defined in claims 1-9 does not involve an inventive step when compared with
D1 in view of D2:D1: US 5,136,502 A (VAN REMORTEL et al.) 4 August 1992
*D2: DAVID RICHARDS, ‘Return of Premium Disability Insurance: The Black
Hole’, dated 6 January 2002 as per Wayback Machine, retrieved from the internet:
on 2 February 2011.Regarding independent claim 1, D1 discloses managing a life insurance policy (abstract) the
method comprising:linking, by an information processing system, a life insurance policy (“Life insurance contracts”, item 110 of figure 1) associated with an individual with a medical policy (“a Voluntary Employee Benefit Association (VEBA) trust”, item 104 figure 1) associated with the individual, wherein the individual pays one or more life insurance premiums to a provider of the life insurance policy, and wherein a provider of the medical policy undertakes liability on behalf of the individual in return for one of a premium and a contribution made by the individual to the provider of the medical policy and provides to the individual relevant health services and/or assistance in defraying expenses occurred in connection with rendering such relevant health services (see abstract and column 4, lines 3-67).
D1 does not explicitly disclose allocating, by the information processing system, a portion of the one or more life insurance premiums paid by the individual during a predetermined period to a payback account, wherein the portion is based on according to predetermined criteria associated with a status of the individual with the medical policy during the predetermined period; and at predetermined intervals, paying, by the information processing system, a balance in the payback account to one of the individual and a beneficiary nominated by the individual, wherein the predetermined intervals are independent of an insured event.
However, D2 discloses a return of premium disability insurance which includes an insurance company refunding an amount of premiums paid by the insured should the insured not make claims during the period (see D2: The “Return of Premium” option).
Because D1 and D2 are both directed towards similar subject matter, it is considered that a person skilled in the art would, in seeking a solution to the problem being addressed, be motivated to combine the disclosures of each of documents D1 and D2 and arrive at a solution which is the same as the claimed invention.
Therefore, claim 1 lacks an inventive step. Similarly omnibus claim 9 also lacks an inventive step”.
Discussion
The applicant has made the following submission in relation to D1 in their response (with my underlining).
D1 is directed to a system for an employer to fund and manage retiree health care benefits. For example, D1 teaches employing a Voluntary Employee Beneficiary Association (VEBA) trust which in turn purchases variable life insurance contracts on the lives of a selected group of employees covered by the VEBA trust. The premiums from the life insurance contracts are used as investments, the inside build-up of which are non-taxable under unrelated business income as it applies to trusts (UBIT) or under alternative minimum tax (AMT). The resulting death benefits are then placed into the trust and are used to pay for the actual health care cost. The funding organisation is used in conjunction with a computer system that estimates tax contribution limits of the trust, forecasts the yearly liabilities and premiums to be purchased by the VEBA and estimates tax savings, earnings per share, and determines income sheet statements in accordance with Financial Accounting Standards Board (FASB) 106 (see D1, Abstract).
As set out in the field of the invention of D1 the patent is directed towards using a funding system to fund present and future healthcare liabilities. Reading further into the document this is particularly relevant for retired employees of a company. The present invention is not at all concerned with this. Rather, as mentioned above, the present invention relates to the integration of two independent information systems wherein the resulting method and system automatically calculates a portion of the one or more life insurance premiums paid by the individual based on predetermined criteria associated with the status of the individual with the medical policy during a predetermined period; automatically allocates the portion of the one or more life insurance premiums paid by the individual to a payback account and updating a data repository that maintains a balance in the payback account; and transfers, at predetermined intervals, data indicative of the balance in the payback account from the data repository to an account of one of the individual and a beneficiary nominated by the individual, wherein the predetermined intervals are independent of an insured event.
We respectfully submit that D1 fails to teach or suggest all the features recited in independent claims 1 and 9. D1 merely teaches that the employer pays for the healthcare benefits and that the VEBA account is used to fund present and future healthcare liabilities. Nowhere does D1 teach or suggest allocating a portion of the life insurance premiums paid by an individual to a payback account according to predetermined criteria related to the status of the individual with a medical policy, and then very importantly paying the balance in the pay back account to the individual making the premium payments (or a beneficiary). Accordingly, we submit that the presently claimed invention is novel over D1 for at least these reasons.
The applicant has also made the following submission in relation to D2 in their response (with my underlining).
Regarding D2, the document discloses a refund of a premium of a life/disability insured person based on a no claim status on their life/disability insurance policy. In particular, in D2, "The 'Return of Premium' option on the disability contract basically says that the insurance company agrees to refund 80% of the total premiums paid into the plan after 10 years minus any claim dollars paid to the insured. The insurance company charges approximately 60% extra for this option over and above the basic cost of the insurance. There is no investment vehicle attached to the policy, and no real return on the extra money that is put into the plan ... When the insured enters into one of these "Return of Premium" contracts, they are merely paying about 60% extra for their coverage in the hopes that they'll receive an 80% refund after 10 years. Any "return" on the investment that is shown by agents selling this coverage is "phantom" return ... the refund is reduced dollar for dollar for every claim dollar that the insured receives over the 10-year period." (See D2, The "Return of Premium" option paragraphs 1 and 2).
In D2, there is no health incentive, and no suggestion or teaching of basing payments into a payback account on predetermined criteria associated with the status of an individual with a medical policy. In D2, extra funds are paid to the insurer, and a portion of these funds are returned much later, without regard to status of the individual with a medical policy. D2 even further does not suggest or teach payments with respect to a life or medical insurance policy.
Although the examiner maintained that the claimed invention lacked an inventive step, his objection never really addressed the above submissions in relation to the disclosure and relevance of both D1 and D2 to the claimed invention. After reading D1 and D2, I admit that I am in agreement with applicant. While there is some mention in D1 of linking a medical insurance with a life insurance, the system of D1 works very differently to that of the claimed invention. While D2 does talk about refunding a portion of the premiums paid, the refund is not in any way linked to a medical insurance policy. The author of D2 even strongly recommends against choosing a “Return of Premium” option when buying life insurance.
I can find no motivation to combine the disclosures of D1 and D2 and even if I did, the combined disclosure would still fall well short of disclosing all of the features of the claimed invention.
I disagree with the examiner’s objection. The claimed invention is not lacking in inventive step.
CONCLUSION
I have found that the claims are not directed to a manner of manufacture although I have found them to be inventive. Furthermore I do not consider that there is any patentable subject matter disclosed in the specification and consequently the application should be refused.
R Subbarayan
Delegate of the Commissioner of Patents
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