A patent is the granting of sole rights to produce and benefit from an invention, given for a set period of time, with the agreement that the inventor makes the invention available to the public. In the case on an insurance patent, the rights are given for the technical part of any insurance-related invention. In the United States, the patent can also be given for a method of operating a business or calculating an insurance claim or premium.
The majority of patents given are for the creation of a technology or process to create something. With regard to an insurance patent, the same was the case, at least in the US, until 1998. This was the year the US Court of Appeals for the Federal Circuit ruled in the State Street Bank decision that a way a doing business could be patented. Since then, the number of insurance patents in the US for business process-type patents is more than 15 times what it was prior.
There are a variety of uses for an insurance patent, ranging from ways to calculate risk based on a terrorist attack to methods for calculating the ways life insurance will be paid off in the case of multiple deaths. The wide variety of potential insurance patents that could be created spawned its own new branch of insurance business, the insurance patent entrepreneur. These entrepreneurs are often small companies that create a new patent and then sell it to another larger insurance company.
One of the outcomes of an increased amount of insurance patents, as seemingly with any patents, is the increase in litigation. Owing to the fact that many of the patents are for processes, it could be argued that a similar process did not fall under the patent. There have been several high-profile cases that took several years to resolve.
The increase in insurance patents has brought a new wave of security to the insurance field. Previously, many insurance companies had ideas that they could not implement, or were reluctant to implement, because they could be easily copied. If the company holds a patent for the process, this renders the reluctance to implement a moot point. Some experts believe, however, that the increased amount of patents will create a glut of unnecessary license fees, and this will further inhibit innovation and practical use of any new patent.
One possible deterrent in the US is the peer-to-patent program initiated as a joint venture between the New York Law School and the United States Patent Office. It offers a way for patents to be reviewed in a public forum. Participation in the program could possibly eliminate some of the issues that have been problematic for insurance patents, such as determining if a patent is frivolous to begin with.