Liberty Mutual Achieves Total Knockout of Progressive Patents in Series of Post-Grant CBM Proceedings

by Goodwin
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In an industry-wide patent fight involving five of the top automobile insurance companies in the United States, Liberty Mutual recently achieved a complete victory in the Patent Trials and Appeals Board (PTAB). Through the filing of 10 Covered Business Method Patent Review (CBM) petitions, Liberty Mutual successfully invalidated the asserted claims of five patents that Progressive Corp. had accused of infringement in several district court suits in the Northern District of Ohio. Liberty Mutual’s win will pay dividends for big players Allstate, State Farm, and The Hartford, among others, that were also sued by Progressive.

Progressive first launched its infringement allegations against Liberty Mutual in 2010, asserting U.S. Patent No. 6,064,970, which claimed a method for monitoring driver actions and vehicle data to determine insurance cost. Liberty Mutual then filed an ex parte reexamination request in late 2010, and the district court subsequently stayed the litigation pending reexamination. During that reexamination, all original claims of the ’970 patent were canceled or amended. The litigation restarted in 2012, with Progressive soon asserting two additional related patents, U.S. Patent Nos. 8,090,598 and 8,140,358, that had issued during the pendency of the reexamination. In a separate suit filed in 2011, Progressive also asserted U.S. Patent Nos. 7,124,088 and 7,877,269, which claimed systems that allowed a policyholder to access, view and update insurance policy information via the Internet. Liberty Mutual also filed ex parte reexamination requests against those patents, and the second litigation was stayed pending reexamination. Those patents survived unchanged and that litigation resumed in 2012.

The enactment of the America Invents Act (“AIA”) provided Liberty Mutual with another opportunity to attack the validity of the patents, and it shifted the fight to the newly created PTAB. Liberty Mutual filed a total of 10 petitions, two against each asserted patent, seeking institution of CBM review proceedings. Although the PTAB declined to institute three of the petitions, among the remaining petitions, it agreed to review all asserted claims, and Liberty Mutual successfully convinced the district court to stay all proceedings during pendency of the review proceedings. Liberty Mutual’s dual-filing strategy helped get around the 80-page limit (although at added cost) for review petitions, and for one patent, allowed it a second chance to challenge claims that the PTAB had previously determined not to review based on the first petition.

The PTAB conducted four consolidated hearings in less than a month last fall, with the final written decisions issuing over a two-month period ending in March. In the end, the PTAB canceled all asserted claims, even claims that had previously survived ex parte reexamination.

At the outset, Progressive challenged the PTAB’s jurisdiction to hear each of the proceedings, arguing that the PTAB was required to conduct a claim-by-claim analysis and determine that every challenged claim was directed to a covered business method before it was authorized to review those claims. The PTAB disagreed, finding that the AIA was unambiguous in defining the subject matter for review as a “patent that claims a method or corresponding apparatus performing data processing or other operations used in the practice, administration, or management of a financial product or service,” rather than merely a claim directed to that subject matter.

Liberty Mutual relied mostly on straightforward obviousness combinations in its invalidity arguments. Of the grounds considered in the seven instituted petitions, the PTAB invalidated the claims of the five patents based on two anticipation references, two single obviousness references, 14 two-reference obviousness combinations, nine three-reference obviousness combinations, and four four-reference obviousness combinations. Liberty Mutual’s experts were repeatedly credited over Progressive’s experts and, for the ’598 patent, Progressive did not even submit an expert declaration in support of its validity arguments (although it did submit declarations in trying to establish that the ’598 patent claims were entitled to a priority date that antedated Liberty Mutual’s two anticipation references).

The PTAB rejected several of Liberty Mutual’s attempts to rely on secondary references that allegedly described inherent functionality of prior art systems disclosed in earlier references. The PTAB found that Liberty Mutual failed to show that the features described in the secondary references were necessarily present in the earlier references and that it also had not shown that the systems in each reference were necessarily the same system. However, Liberty Mutual’s failure to substantiate these secondary references did not prove fatal to one of its challenges, and the PTAB still invalidated the claims of one patent based on the original reference without relying on the secondary reference.

One other notable procedural aspect of the proceedings was Progressive and Liberty Mutual’s failure to exclude the other side’s expert declarations, with the PTAB rejecting all motions to exclude. In refusing to exclude expert declarations, the PTAB held that it was well-positioned as a non-jury tribunal with administrative expertise to determine and assign appropriate weight to each side’s expert declarations. It further held that it would generally exercise its discretion to accord evidence the appropriate weight, rather than exclude a particular piece of evidence in a manner that might later be held reversible error. The PTAB’s rulings caution parties from expending resources on motions to exclude except in unusual circumstances.

After the issuance of the PTAB’s decision, Progressive sought rehearing of two of the decisions based on a novel argument. Progressive argued that the PTAB had improperly issued non-concurrent written decisions for two patents because the PTAB posted its second written decisions 50 seconds in one instance and one hour in another instance after the posting of the respective first written decisions. Progressive contended that the PTAB was therefore estopped from invalidating on different grounds the same claims that it had invalidated in its first written decisions, despite the PTAB’s statement that both sets of decisions were issued concurrently. The PTAB rejected Progressive’s request for rehearing, finding, among other reasons, that the entry date, not the entry time, governs when a decision is actually issued.

Liberty Mutual’s victory over Progressive (pending Progressive’s appeal to the Federal Circuit) demonstrated that the PTAB is a powerful forum for accused infringers seeking a quicker and less expensive route than full-blown district court litigation. Although the PTAB conducted four separate hearings, each lasted only two hours, compared to a costly and burdensome trial proceeding.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

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