Insurance patents grant exclusive rights to the technical part of an insurance invention, including business processes, and have increased 15 times in the US since 1998. Insurance patent entrepreneurs create and sell patents to larger companies, but increased patents may lead to increased litigation and unnecessary licensing costs. The peer-to-patent program offers a public forum to review patents and eliminate frivolous ones.
A patent is the grant of exclusive rights to manufacture and benefit from an invention, given for a specified period of time, with the agreement that the inventor makes the invention available to the public. In the case of an insurance patent, rights are granted for the technical part of any insurance invention. In the United States, a patent can also be granted for a method of running a business or for calculating compensation or an insurance premium.
Most patents granted are for the creation of a technology or process for making something. As for an insurance patent, the same happened, at least in the United States, until 1998. That was the year in which the US Federal Circuit Court of Appeals ruled in the State Street Bank decision that one way of doing business could be patented. Since then, the number of insurance patents in the United States for business process patents is more than 15 times higher than before.
There are a variety of uses for an insurance patent, ranging from ways to calculate risk based on a terrorist attack to methods of calculating ways life insurance will be paid out in the event of multiple deaths. The wide variety of potential insurance patents that could be created spawned his new insurance business, the Insurance Patent Entrepreneur. These entrepreneurs are often small companies that create a new patent and then sell it to another, larger insurance company.
One result of an increase in the amount of insurance patents, as seemingly with any patent, is increased litigation. Given that many of the patents concern processes, it could be argued that a similar process was not covered by the patent. There were several high-profile cases that took several years to resolve.
The rise of insurance patents has brought a new wave of security to the insurance industry. Previously, many insurance companies had ideas that they could not implement, or were reluctant to implement, because they could easily be copied. If the company holds a patent for the process, that makes reluctance to implement a moot point. Some experts believe, however, that increasing the amount of patents will create excess unnecessary licensing costs and further inhibit innovation and the practical use of any new patents.
A possible deterrent in the United States is the peer-to-patent program initiated as a joint venture between New York Law School and the United States Patent Office. Offers a way to review patents in a public forum. Participation in the program could eliminate some of the issues that have been problematic for patent insurance companies, such as determining whether a patent is frivolous to begin with.
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