In covered business method post-grant proceeding Liberty Mutual Insurance Co. v. Progressive Casualty Insurance Co., the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) held all of the challenged claims of U.S. Patent No. 6,064,970 ("the '970 patent") unpatentable as obvious under 35 U.S.C. § 103(a). CBM2012-00002, Paper 66 (Jan. 23, 2014). The PTAB found that the Challenger met its burden of proving, by a preponderance of the evidence, each of the three grounds of invalidity on which the PTAB instituted the review. Because this is the first decision in which the PTAB held claims invalid based on a combination of references, the PTAB's analysis in its Final Written Decision might impact further obviousness challenges in other post-grant proceedings at the USPTO. However, as this was only a decision of one panel, how much of an impact this decision will have on other panels is yet to be determined.
Claim 4 of the '970 patent, which is illustrative of the other challenged claims, covers "[a] method of insuring a vehicle operator for a selected period based upon operator driving characteristics during the period." The claimed methods comprise two main components. First, a base insurance premium is calculated based on an initial collection of information associated with an operator that is related to motor vehicle characteristics or driving characteristics. Second, this base insurance premium is adjusted according to information collected by monitoring the vehicle operator's driving characteristics.
Based primarily on the disclosure of the '970 patent itself, the PTAB found that the "level of ordinary skill in the art is high." Id. at 16. The challenged claims require actuarial knowledge that underlies calculating risk to value insurance premiums as well as some level of expertise in telematics. The PTAB found that the background section of the '970 patent reflected the level of ordinary skill. First, the level of ordinary skill includes a thorough understanding of using the principle of actuarial classes to determine vehicle insurance costs. Further, the background section disclosed that vehicle tracking systems were known in the art and that these systems could be modified to obtain the desired types of information relevant to determine the cost of insurance. This disclosure of the '970 patent was corroborated with evidence that companies during the time of the alleged invention were already developing vehicle telematics systems that monitored exactly the type of data relevant for adjusting insurance premiums. Thus, the PTAB concluded that the level of ordinary skill included "knowledge of determining insurance premiums using monitored vehicle data." Id. at 18. In addition, the PTAB held that one of ordinary skill would possess knowledge of the "basic principles, standards, and practices of insurance premium determination," as such knowledge was likewise disclosed in the background of the '970 patent. Id. at 18-19.
The framing of the level of ordinary skill to span two separate fields of study—insurance pricing and telematics—strengthened the Challenger's obviousness arguments. For example, the PTAB agreed that a person of ordinary skill would have found it obvious to combine a reference directed to insurance pricing (Florida Guide), with a reference discussing vehicle telematics equipment (Kosaka), even if the latter reference only made a passing reference to insurance. Furthermore, the PTAB reiterated throughout the Final Written Decision that "prior art references must be 'considered together with the knowledge of one of ordinary skill in the pertinent art.'" Id. at 19 (quoting In re Paulsen, 30 F.3d 1475, 1480 (Fed. Cir. 1994)). Although the Patent Owner read the prior art references much more narrowly than the Challenger, the PTAB explained that "it is proper to take into account not only specific teachings of the reference but also the inferences which one skilled in the art would reasonably be expected to draw therefrom." CBM2012-00002, Paper 66 at 19-20 (quoting In re Preda, 401 F.2d 825, 826 (C.C.P.A. 1968)). In other words, an obviousness analysis does not require precise teachings, since inferences and creative steps a person of ordinary skill in the art would employ factor into the analysis as well. See id. at 20.
The PTAB considered such inferences and creative steps when evaluating how a person of ordinary skill would understood the Black Magic reference, which concerned the use of so-called "black box" data recorders in vehicles. The Challenger relied upon Black Magic to disclose "a time and location of vehicle operation and a corresponding log of vehicle speed for the time and location," as recited by the claims. Id. at 41. The Patent Owner argued that the phrase "time and distance travelled" teaches only recording the distance and duration of a trip, not the time of day during which data are recorded. Id. at 41-42. The PTAB dismissed the Patent Owner's argument as too literal, focusing on "whether there should be a comma between the words 'time' and 'and.'" Id. at 42. The proper inquiry requires considering Black Magic, as a whole, "from the perspective of one of ordinary skill in the art." Id. This perspective includes "basic knowledge of the functionality of black box data recorders and GPS satellite technology," including correlating data points such as speed with absolute time and location. Id. at 43. Such functionality, the PTAB found, is consistent with the purpose of black box recorders. Id. Thus, the PTAB found the Patent Owner's reading of Black Magic overly narrow.
The PTAB's decision provides insight for future parties to post-grant proceedings addressing obviousness challenges. First, tying the level of ordinary skill to the background of the challenged patent will strengthen the challenger's position, especially for patents with more detailed backgrounds. Second, arguments that may successfully convince the PTAB that the prior art does not disclose a claimed element in an anticipation argument may not be as successful when addressing obviousness grounds. It is not enough to rely on the explicit disclosures of the references without the context of the general knowledge of one of ordinary skill in the art. Finally, post-grant challenge petitioners should consider challenging claims on obviousness bases even when the ground is predicated on a single reference, as the inferences and creative steps of a person of ordinary skill can supplement less-detailed disclosures.
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