[co-author: Robert Ling]*
In late June 2019, first-time patent plaintiff Trupanion sued first-time patent defendant Embrace Pet Insurance – two competitors in the fast-growing pet insurance industry – in the Northern District of Ohio over patents underlying Trupanion’s cloud-based integrated claims-processing system. Trupanion markets itself as “the only company with the technology to pay your veterinarian directly in minutes at the time of checkout.” Trupanion achieves that by directly integrating their cloud service with veterinarians’ computer systems. Embrace’s service similarly integrates with veterinarians’ computer systems and receives electronic claims submitted by the vet during a patient visit. In its complaint, Trupanion claims that Embrace brazenly knocked off Trupanion’s patent-protected technology.
According to the North American Pet Health Insurance Association (NAPHIA) – a trade organization founded in 2007 by, among others, Trupanion – the first pet insurance policy sold in America covered the Hollywood celebrity Lassie. Since Lassie’s owners sought financial protection from the perils of cave spelunking in 1982, pet insurance has grown to cover some 1.6 million animals in North America today, supporting an industry valued at nearly $775 million dollars. The industry picked up momentum in the 2010s, as Trupanion’s own enrollment bounded from 31,207 at the start of 2010 to 181,634 in early 2014. In 2014, Trupanion went public at least in part to fund development of their cloud technology. By 2017, Trupanion had rolled out their system and announced to their competitors – through NAPHIA – their pending patent application on it.
Embrace unleashed their competing service later in 2017. The next summer, Trupanion obtained the first patent on their technology, covering a “Pet Insurance System and Method.” With patent in paw, Trupanion turned right around and highlighted it in a letter to Embrace containing – in Trupanion’s words – an offer “to work together to ensure that Embrace did not use any of Trupanion’s intellectual property.” Embrace declined to heel to Trupanion’s offer. In 2019, Trupanion went from bark to bite by filing a complaint in Embrace’s backyard of Ohio.
At a high level, Trupanion’s complaint is simple. Trupanion casts itself as a leading innovator in pet insurance and accuses Embrace of chasing its tail to market. In particular, Trupanion asserts two related patents and asks the court to enjoin Embrace from continuing to infringe Trupanion’s patents and to award Trupanion compensation from Embrace for infringement already done. But Trupanion is looking for more than just compensation for business it alleges Embrace unfairly competed away from it. Trupanion claims this case is “exceptional” and asks the court to punish Embrace by tripling damages and making Embrace cover Trupanion’s attorneys’ fees.
And a few things do make this case if not exceptional, then at least fishy. First, Trupanion’s aggressive patent posture. Trupanion announced their interest in obtaining and asserting patent protection to the industry generally on several occasions. Once Trupanion had retrieved a first patent from the USPTO, they announced their interest in asserting it against Embrace to that company directly. So, Trupanion claims that they warned Embrace and then gave Embrace an opportunity to cooperate with them, but that Embrace disregarded their rights and trampled right over them.
Trupanion bolsters their claim that Embrace knew about Trupanion’s innovation strategy by citing to a 2017 episode of the “Pet Insurance Guide Podcast.” In an interview on that program, Embrace’s “Director of Territory Outreach” acknowledged that Trupanion beat their own integrated system to market. After Trupanion brought this podcast to Embrace’s attention, the episode disappeared from the Pet Insurance Guide Podcast’s index. Trupanion alleges that Embrace “directed, or was otherwise involved in, the scrubbing of the . . . podcast from the web in an attempt to cover up Embrace’s infringement.” Unfortunately for Embrace, the Internet – like an elephant – rarely forgets, and Trupanion archived the podcast before it was mysteriously “scrubbed.” At the time of this piece’s publication, the Pet Insurance Guide Podcast has apparently gone defunct, its domain abandoned.
As more services move to the cloud, and more companies become “tech companies,” more domains become eligible for patent protection and susceptible to patent attacks. Innovators in young industries especially might consider following Trupanion’s lead by marking their territory. By establishing and publically pursuing a patent strategy early, Trupanion might be about to successfully fence in its competition. At the same time, cloud service providers of all types should stand on guard from bulldog patent plaintiffs.
* Summer Associate
