Second of Two Parts
Patents are starting to grab up the new, inventive insurance products, marketing methods or techniques, and risk selection mechanisms.
For example, patent #5,754,980, essentially patents a Reversionary Annuity, a product that pays a benefit to a beneficiary for as long as she lives following the death of the insured. Its unique because its issue is conditioned on the life expectancies of both an insured and a beneficiary.
Patent #5,974,390 creates a system in which policy owners can pool their polices. If the pool is large enough, this method allows policyowners to receive lower but predictable regular payments (resulting from deaths on policies in the pool) in exchange for the higher but unpredictable death benefit otherwise available if they did not assign their individual policy to the pool. This invention probably would be used as part of a life settlement or viatical marketing plan.
There are also a number of pending applications that propose systems for underwriting insurance in real time using the Internet, or other means, in order to eliminate the delays in regular underwriting. And, there are patents issued and pending for sales methods, illustration processes, and tax-advantaged marketing programs.
On the surface, it may seem that this is just a problem affecting big companies. But, competing in a patent-rich environment starts with the little guy. Inventors cant be companies. Only a natural person can patent an invention. So, a new product development model begins with a companys relationship to its employees or agents. A company cannot patent an invention but it can own an invention through an assignment by the inventor. So, the employee, employer, agent relationship needs to be clear.
The next thing for a company to do is recognize new limitations on how it conducts its business. Before a lot of time, effort and money is spent, developing a new product companies will need to determine if there are existing patents that they might be infringing if they introduced a product. This is especially true if they still have a “follow the leader” product development approach.
“Ignorance is no excuse” when it comes to patents. An infringer is liable for damages to a patent owner, even if the infringer was totally unaware of the existence of the patent he is infringing. If he is aware, its even worse. Intentionally infringing a patent can result in a liability equal to three times the damages inflicted on the patent owner.
In essence, damages are measured as the patent owners lost profits. It is essential that insurance companies and even agencies active in developing new products institute “patent watches” now to make sure that their new products do not infringe any existing or new patents that issue.
There also needs to be some concern about patent applications still pending. Clearly, if your product development cycle takes a year or longer (and many do), a pending patent could be issued before you get to market or shortly after. If you are infringing, you may have to pull your product from the market, and all your development costs would have been wasted. Your agents who wanted or expected the product may have to go to another company, perhaps the patent owner, to get it.
So, even if your company is not harnessing the intellectual property of its employees and aggressively seeking patents, you still have a problem that has to be dealt with if other companies are doing that. And, if your company decides to aggressively participate in a patent-rich environment, you may have internal problems. You must be on good terms with your inventive employees. You will need to recognize inventiveness in employee-job descriptions. You will, probably, need to introduce employment contracts that clearly spell out rights, privileges and expectations with respect to inventiveness. It will have to factor in, somehow, compensation.