Judge Upholds $13.1 Million Verdict in Lincoln Annuity Patent Case

In February, the jury handed down the verdict against Transamerica Life Insurance, Transamerica Financial Life Insurance Co. and Western Reserve Life Assurance Company of Ohio (BestWire, Feb. 25, 2009). The Transamerica companies are subsidiaries of Aegon Group of the Netherlands. Its Aegon USA Group unit is based in Cedar Rapids, Iowa.

The claims in the case concerned a computer-based way for administering variable annuity products that combined guaranteed minimum payment features with systematic withdrawals, according to Lincoln. The patent also includes data processing methods used to administer variable annuities in the payout phase and withdrawals from mutual funds, especially systematic withdrawals from funds (BestWire, Feb. 25, 2009).

In a statement, Lincoln National Corp. ( NYSE:LNC), parent of Lincoln National Life, said the judge held that reasonable grounds supported the jury's verdict that its patent was not invalid and its determination that an appropriate damages award was $13.1 million.

The judge also entered an injunction against Transamerica, which stops the companies from using a computer to administer new or existing riders "in any infringing manner," Lincoln said.

Daniela Palmieri, a spokeswoman for Lincoln, said the claims asserted against Transamerica concerned Transamerica's guaranteed lifetime withdrawal benefit and guaranteed minimum withdrawal benefit riders.

In a statement, Transamerica said it's in the process of?appealing the verdict and injunction?to?the U.S. Court of Appeal for the Federal Circuit. The company said its position "is unchanged?since the verdict in February and we continue to believe that the patent is invalid. Even if the patent is?found to be valid,?Transamerica is confident that?its computer system does not infringe?the patent."

According to Lincoln National, Transamerica had filed an emergency motion, asking that the injunction be delayed during the appeal, but the Federal Circuit denied it.

Lincoln National Life is a top seller of stock-market linked variable annuities in the United States. At year-end 2008, it was No. 5, with sales of nearly $11 billion for these retirement income products, according to Morningstar Inc. (BestWire, April 15, 2009).

"We regard our patents and product solutions as valuable assets and we intend to vigorously protect our intellectual property against infringement," said Rob Grubka, head of product, retirement solutions, for Lincoln National, in a statement.

Lincoln National Life Insurance Co. currently has a Best's Financial Strength Rating of A+ (Superior), while Transamerica Life Insurance Co. currently has a Best's Financial Strength Rating of A (Excellent).