Transamerica Prevails in GMWB Variable Annuity Case

The Federal Circuit reversed a district court verdict finding that Transamerica had infringed a patent owned by Lincoln National.  The product in question is a variable annuity that includes a guaranteed minimum withdrawal benefit (GMWB).

The Federal Circuit found that Lincoln failed to show that payments would be made by computer even after the account value was exhausted, as required by the patent claims.  The court declined to rule on whether the district court committed error by refusing to allow Transamerica to amend its complaint to alleged that the patent was invalid under 35 USC § 101, finding the issue moot in light of the determination of noninfringement.

This is an important victory for Transamerica, and numerous other insurance companies who offer similar products.  However, the rational for the decision may not be completely fatal to Lincoln.  To fall within the safe harbor created by the decision, insurance companies will need to make arrangements to administer the exhausted accounts without the use of computers–which may be difficult.  A ruling based on Section 101 could have been fatal to Lincoln.