Machine-Or-Transformation Test Fails When Computer In Patent Claims Performs Only Calculations

In Bancorp Services, L.L.C. v. Sun Life Assurance Co. of Canada (U.S.), No. 11-1467 (Fed. Cir. July 26, 2012), the Federal Circuit affirmed the district court's grant of SJ in favor of Sun Life Assurance Company of Canada (U.S.) ("Sun Life") and held the patents-in-suit invalid.

Bancorp Services, L.L.C. ("Bancorp") owns U.S. Patent Nos. 7,249,037 ("the '037 patent") and 5,926,792 ("the '792 patent"), which are directed to systems and methods for administering and tracking the value of life insurance policies in separate accounts. Under separate account 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. The value of a separate account policy fluctuates with the market value of the underlying investment assets. Stable value protected investments address that volatility 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. 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." Slip op. at 3 (alteration in original) (quoting Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., 359 F.3d 1367, 1369 (Fed. Cir. 2004)).

The asserted patents disclose specific formulae for determining the values required to manage a stable value protected life insurance policy. The specification discloses, for example, creating and initializing a fund by performing particular "calculations and comparisons" to determine an "initial unit value of the policy." Id. at 4.

Bancorp sued Sun Life for infringement of the '792 patent. In 2002, in a separate patent infringement suit filed by Bancorp, the district court invalidated all claims of the '792 patent for indefiniteness. See Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., No. 4:00-CV-70, 2002 WL 32727071 (E.D. Mo. Feb. 13, 2002). Bancorp and Sun Life then jointly stipulated to dismiss their case due to collateral...