brief re modification of injunction for method patent

8/14/2019 Brief re modification of injunction for method patent

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TABLE OF CONTENTS

Page

I. INTRODUCTION AND SUMMARY OF ARGUMENT. .................................................. - 1 -

II. PROCEDURAL BACKGROUND....................................................................................... - 4 -

III. FACTUAL SUMMARY OF TRANSAMERICAS DESIGN AROUND ATTEMPTS.....- 6 -

IV. ARGUMENT...................................................................................................................... - 10 -

A. None of Transamerica's Three Alleged Design-Arounds Avoid Infringementof the Asserted Claims of the '201 Patent. .............................................................. - 11 -

B. Transamerica Continues to Infringe Even if Some of the Activity Relating toSteps (b) and (d) Occurs Outside of the United States ........................................... - 25 -

C. Transamerica's Sister Companies are Contributory Infringers Under 35U.S.C. 271(c). ...................................................................................................... - 28 -

D. Lincoln is Entitled to an Accounting and Royalty Payments for the Periodof Infringement After September 16, 2009.............................................................- 31 -

V. CONCLUSION................................................................................................................... - 31 -


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Lincoln National Life Insurance Co. (Lincoln) submits this memorandum in support of

its Motion for a Further Accounting and Ongoing Royalty Payments from Defendants

Transamerica Life Insurance Co., Western Reserve Life Assurance Co. of Ohio, and

Transamerica Financial Life Insurance Co. (collectively "Transamerica"), and in opposition to

Transamericas Motion for Relief and Modification of Permanent Injunction.

I. INTRODUCTION AND SUMMARY OF ARGUMENTUnder this Court's June 8, 2009 Permanent Injunction (Dkt. #313), Transamerica had one

hundred days to implement a non-infringing method for administering its variable annuities.

After the one hundred days, Lincoln could move the Court for an additional accounting and

royalty payments at the rate of 44 basis points for Transamerica's ongoing infringement. Rather

than taking concrete steps to install a method to administer its variable annuities different from

that which the jury found infringing, Transamerica has taken half measures, obfuscated the

manner in which it presently administers its variable annuities, and relied on tired legal

arguments already rejected by this Court. Transamerica has, therefore, failed to meet its burden

of showing to Lincoln's reasonable satisfaction that it has stopped using a claimed

computerized method to administer variable annuities. (Dkt. #313: Perm. Inj. 4).

Initially, Transamerica contends that on March 30, 2009, it modified its computerized

method to include a manual procedure to administer its variable annuity riders even if

account values become exhausted. This argument is, once again, contrary to the Court's

construction of step (e) of Claim 35 of the '201 Patent. In fact, the argument is no different than

the argument advanced at trial that was rejected by the jury through its verdict, and by this Court

through its denial of Transamerica's motion for judgment as a matter of law (JMOL Order).1

1 Transamerica's attempted design around still includes the use of its Repetitive Payment System, thesame computer software system referenced in its interrogatory answers (Lin. Ex. 20: PX678 and 679)


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In fact, Transamerica equates manual with the use of over a dozen computerized systems and

subsystems, including its Vantage Policy Administration System.

Not reasonably satisfied with its own argument regarding step (e), Transamerica next

contends that it temporarily moved performance of step (b) of its infringing method outside the

United States. The first of two offshore arguments is that from July 6, 2009 to September 11,

2009, Transamerica computed the first Maximum Annual Withdrawal Amount (MAWA) for

newly issued and upgraded policies in Canada and, therefore, it did not determine an initial

scheduled payment under step (b) for this limited group of policies in the United States. Initially,

this attempted design around had no effect on the administration of the 60,000 plus policies

issued before July 6, 2009. As to the newly issued policies, this argument is directly contrary to

the jury verdict and this Court's Markman and JMOL Orders, as an initial scheduled payment

can be calculated more than once.2

The second offshore argument is that since September 12, 2009, Transamerica

transmits all of the data for the MAWA and related Total Withdrawal Base (TWB) equations

to a third party in Canada who returns the results of the formula to Transamerica via the internet

through a virtual private network (VPN).3 Lincoln has learned through post-judgment

discovery that this argument is a sham. First, Transamerica simply has not moved all MAWA

and TWB calculations to Canada. Rather, Transamerica continues to calculate the MAWA for

that Transamerica tried disavowing at trial. (Lin. Ex. 17: Ziegler TT at 1019:6-1021:11). The new

method also continues to use Vantage, AWD, various computerized accounting systems, and othercomputer systems and software programs to practice step (e). (Lin. Ex. 5: 30(b) Dep. Tr. 204:20-205:6; 209:6-9; 209:25-210:24; 214:10-13; 217:6-219:5).

2 This post-verdict change could likewise have no impact on any policies previously administeredthrough the adjudicated infringing system that were upgraded between July 6 and September 11.

3 For purposes of implementing this modification, Money Services, Inc. (Money Services), an entitywithin Transamericas corporate structure, contracted with Citigroup Fund Services Canada, Inc.(Citigroup). (Lin. Ex. 10: Contract between Money Services and Citigroup).


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every single policy in the United States when determining hedging for growth purposes

associated with variable annuity policies, calculates MAWA when creating illustrations of

policies for potential policyholders, and may calculate MAWA in the United States for purposes

of establishing sufficient reserves in the administration of its variable annuities. Second,

Transamericas own documents show it continues to perform the doCalculation[s] instruction

within the United States. Third, even assuming Transamerica moved all MAWA calculations to

Canada as it has represented to Lincoln and this Court, this argument is contrary to the Court's

interpretation of the determining and adjusting steps of Claim 35 and ignores the fact that

claim steps (b) and (d) are actually performed in the United States even if Transamerica's method

causes data to be transmitted across the Canadian border via the VPN.4

Transamerica continues

to calculate the MAWA for every single policy in the U.S. within the Courts definition of

calculating by initiating the process from the United States and by transforming data received

from Canada in the United States for use in policy administration.

Finally, even if it had actually moved one or more of the claimed steps of its infringing

method outside the United States (and it did not), Transamerica is nevertheless still infringing the

'201 patent because it is selling and offering to sell the infringing method in the United States in

direct contravention of 35 U.S.C. 271(a).

Lincoln therefore requests that this Court order Transamerica to provide monthly

accountings and monthly royalty payments pursuant to paragraph 4 of the Permanent Injunction

at the rate of 44 basis points for the period of continued infringement from September 22, 2009

4 This attempted design-around merely adds Transamerica's sister companies, Transamerica Capital andMoney Services, to the list of infringers, albeit contributory infringers who are importing a materialunder 35 U.S.C. 271(c) for use in Transamerica's actual performance of the claimed steps.


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then Lincoln may move the court for a further accounting and royalty payment at the rate of

0.44% for the period of further infringement. (Perm. Inj. at 4).

Thus, Transamerica had a safe harbor until June 22, 20096 to implement non-infringing

alternatives. Transamerica had another window until September 21, 2009 (ninety days after the

implementation period) to continue to use a claimed computerized method by providing an

accounting and royalty payment at the rate of 0.22%. Finally, Transamerica had until September

21, 2009, in which to show to Lincoln's reasonable satisfaction that it had implemented a non-

infringing alternative.

Transamerica did not even attempt to make this showing until September 8, 2009. (See

Lin. Ex. 1: 9/8/09 Felter Corresp.). At that time, Transamerica advised Lincoln, without any

evidentiary support, that it either had implemented or would implement on or before September

16, 2009, modifications to Transamerica's infringing administrative method to: (1) include a

manual procedure to administer a variable annuity rider even if its account value becomes

exhausted; (2) relocate to Canada all calculations of initial scheduled payments (MAWA) for

newly-issued variable annuity riders and all upgrades to existing variable annuity riders; and (3)

relocate to Canada all calculations of MAWA and Total Withdrawal Base (TWB) for existing

variable annuity riders.7

(Id.).

Lincoln responded to Transamerica the very next day explaining its surprise as to the

tardiness of the attempted showing and requested information and verified statements relating to

6According to Fed.R.Civ.P. 6(a), calculation of time periods excludes intermediate Saturdays andSundays when the period is less than 11 days. Fed.R.Civ.P. 6(a)(2), (3).

7 Transamerica contends that the modification described in (1) above avoids infringement of step (e)and the modifications described in (2) and (3) avoid infringement of steps (b) and (d). (Lin. Ex. 1:Felter Corresp.). Transamerica further alleges that the modification related to step (e) occurred inMarch 2009. Yet Transamerica included sales of riders after this date in its July 7, and September 28,2009 accountings and royalty payments to Lincoln. (See Lin. Ex. 11: 7/7/09 Felter Corresp.).


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the claimed modifications. (Lin. Ex. 2: 9/9/09 Brown Corresp.). Thereafter, the parties jointly

moved the Court to extend certain of the injunction-related deadlines as Transamerica attempted

to substantiate its design around claims. (See Dkt. ##338 and 342).

Transamerica is accurate in its representation that it has produced volumes of documents

relating to its modifications to Lincoln, permitted Lincoln's consultant and counsel to review

Transamerica's administrative system in action on October 8-9, and presented witnesses

pursuant to Fed.R.Civ.P. 30(b)(6) on October 14, 2009.8

However, Transamerica did not show

(because it cannot) to Lincoln's reasonable satisfaction that the modifications to its computerized

method for administration of variable annuities bring the method outside the scope of the

Permanent Injunction. To the contrary, the information produced by Transamerica confirms that

Transamerica continues to disregard the Court's Markman, JMOL, and Permanent Injunction

Orders.

III. FACTUAL SUMMARY OF TRANSAMERICAS DESIGN AROUND ATTEMPTSTransamericas first attempted design around, which was instituted on March 30, 2009,

comes from the same failed playbook as its trial argument that step (e) of Claim 35 is performed

manually after the policy is exhausted. Transamericas design around attempt conveniently

ignores the multiple computer systems implicated. Transamericas so-called manual process

uses the Vantage Policy Administration System to identify, on a monthly basis, any policies that

8 Notably absent from Transamericas Brief is any citation to Transamericas 30(b)(6) deposition.Instead, Transamerica cites to Declarations of several witnesses, including the 30(b)(6) deponents.

Despite likely having already prepared these declarations prior to the 30(b)(6) deposition,Transamerica did not provide them to Lincoln in advance of the deposition. Further, thesedeclarations are inconsistent with Transamericas 30(b)(6) testimony. For example, Mr. Neill,Transamericas Mainframe Product Manager, testified that following the September 12, 2009implementation of the third design around, he was unaware of any further MAWA calculations beingperformed in the United States. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 37:7-11). Yet in his declaration signedOctober 18, 2009, he stated that Transamerica continued to calculate MAWA in the United States dueto a bug in the software after September 12, and that modifications to the design around were stilloccurring as recently as October 14, the date of the deposition. (Dkt. # 345-15: 92-97).


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have a policy value less than twice the MAWA. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 205:7-10).9 If

Vantage identifies any such policies, Vantage automatically generates a letter to Transamericas

policy owner indicating that the policy is at risk of reaching a low value. (Id., 206:5-10). In

addition, information about the policy, including the current MAWA value, is moved from

Vantage to a computer spreadsheet. (Id., 206:19-207:20; Lin. Ex. 15: Dep. Ex. 707). The

actuarial department and distribution services group access the computer spreadsheet on a shared

computer server located in the United States to continue administering the policy. (Lin. Ex. 5:

30(b)(6) Dep. Tr. 209:6-22).

Transamerica also uses its Repetitive Payment System (RPS) to administer these

policies after exhaustion. (Id., 210:21-24). Transamerica pulls information from Vantage to set

up a shell account in RPS. (Id., 212:3-9). Transmerica uses the notify function in RPS to

determine when a payment needs to be made. (Id., 210:16-211:3). RPS generates a report that

the distribution services group receives to know payments are coming due. (Id., 213:4-13).

Additionally, RPS interacts with the Enterprise Client System to populate data about the policy

that resides in RPS. (Id., 221:21-222:16).

Multiple computer systems are also used in actually completing the payment.

Transamericas internal email systems are used to advise the actuarial and separate accounts

departments that payment needs to be made. (Id., 217:6-218:11). The Automated Work

Distribution (AWD) system houses the data necessary for cutting the check. (Id., 219:4-8).

9 In another discrepancy between Transamericas deposition testimony and its declarations, Ms. Martin,Transamericas Director of Post Issue Operations for Annuities, testified at deposition that there hadnever been any hits on the low policy value report. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 205:11-17). In herdeclaration, she testified that there have been hits on the low policy value report as a result of falsepositives.(Dkt. #345-12: Declaration of Tracy Martin, 37).


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Other computer systems, including the General Ledger, and Accounts Payable systems, are

implicated as part of this process. (Id., 219:9-14).

Transamericas second attempted design around occurred in July 2009. This interim

modification was limited to only new riders and upgraded riders sold between July 6, 2009 and

September 11, 2009. (Id., 9:19-10:2). The interim modification had no effect on any previously

sold riders that were not upgraded during that time period. (Id., 10:3-7). Even with respect to

the limited policies for which the interim modification was used - new and upgraded riders sold

during the interim time period - the interim solution only affected the first MAWA calculation.

(Id., 11:2-17). For the first MAWA calculation, Transamerica prepared a spreadsheet with

several data fields filled, except for MAWA. The spreadsheet was sent to a Transamerica

subsidiary in Canada that calculated the MAWA value for the policies in the spreadsheet and

sent the spreadsheet back to Transamerica. (Id., 18:2-10). Any subsequent MAWA calculation

was performed by Transamericas Vantage System in the United States. (Id., 11:12-17).

On September 12, 2009, the third design around attempt superceded the interim

modification. (Id., 11:12-20). In the third attempt, Transamerica attempted to modify the

Vantage system so that the software does not run the MAWA equations internally (i.e., on the

mainframe system), but instead determines MAWA by sending an MQ message to an Enterprise

Service Bus (ESB also called JCAPS) that requests the MAWA based on certain input data.

(Id., 96:18-24). The ESB, in turn, translates the request for the MAWA from the Vantage MQ

message into an XML message, and sends the XML message to a calculation engine located in

Canada. (Id., 96:25-98:12). The XML message sent from Transamerica includes a transaction

type identifier that signals to the calculation engine what input data to expect and which formula

to use. (Id., 98:20-99:1). The calculation engine in Canada basically presses the equal sign of


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the equation, and then sends an XML message to the ESB, which contains the MAWA value

prepared by the calculation engine. (Id., 99:6-15). The ESB translates the XML message into an

MQ message and sends it to the Vantage System. (Id., 99:13-100:3).

The ESB, which is located in the United States, is an important interim layer between

the Vantage system and the calculation engine. (Id., 132:22-133:6). For Transamerica to use the

data from the calculation engine in its Vantage Policy Administration System, the data in the

XML message must be transformed to an MQ message. (Id., 99:16-20). In other words, the data

received from the calculation engine cannot be used by Vantage until it is transformed in the

United States. (Id., 101:21-25).

The Vantage System drives the determination of MAWA by determining which

transaction type needs to be used. (Id., 88:13-18; 88:24-89:3). The calculation engine cannot

initiate any transaction in the United States. (Id., 88:19-23). Indeed, Transamericas Service

Implementation Guide indicates that the process is initiated in the United States by the

doCalculation instruction. (Lin. Ex. 9: Dep. Ex. 711, Bates No. 000071866). Further,

Transamerica provided Citigroup with the necessary calculations to build the calculation engine.

(Lin. Ex. 16: Dep. Ex. 709, Bates No. 000071784).

When a rider is purchased or upgraded, the Vantage System sends an MQ message to the

ESB that requests the MAWA calculation be made based on certain input data generated from

the Vantage System. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 122:2-11). The ESB translates the MQ

request into a XML message and sends the XML message to the calculation engine. The XML

message includes a transaction type identifier that signals to the calculation engine that the

requested value is a MAWA calculation at rider issue or upgrade. (Lin. Ex. 16: Dep. Ex. 709,

Bates No. 000071784). The ESB receives the response XML message from the calculation


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engine. The XML message is transformed into an MQ message by the ESB, as Vantage cannot

use the XML message. The MQ message is then sent to the Vantage System. The Vantage

System stores the calculated MAWA value into the rider segment. (Lin. Ex. 5: 30(b)(6) Dep. Tr.

122:2-11). Likewise, with an excess withdrawal transaction, the reduced MAWA value is stored

in Vantage in the rider segment. (Id., 134:15-22).

Until another transaction triggers a change in the MAWA value, the MAWA value stored

in the rider segment in Vantage does not change. The calls to the calculation engine during the

intervening period before a triggering event are essentially superfluous because the Vantage

System already knows the current MAWA value (it is stored in the rider segment) and does not

need to call the calculation engine. Indeed, the then current MAWA value stored in Vantage is

pulled and sent in the message to the calculation engine. (Id., 122:12-123:2).

IV. ARGUMENTThe Court has the power to grant the relief that is necessary to effect compliance with its

decree. Hartman v. Lyng, 884 F.2d 1103, 1106 (8th Cir. 1989) (quoting McComb v.

Jacksonville Paper Co., 336 U.S. 187, 193 (1949)). To avoid the scope of the Permanent

Injunction, Transamerica must make more than mere colorable changes to an infringing method.

Conoco, Inc. v. Energy & Environmental Int'l L.C., 460 F.3d 1349, 1365 (Fed. Cir. 2006);

Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc., 154 F.3d 1345, 1349-50 (Fed.

Cir. 1998). Transamerica has failed to show that it has made more than mere colorable changes

to its infringing method. Therefore, Lincoln is entitled to entry of an order requiring

Transamerica to provide a monthly accounting and monthly royalty payments at 0.44% for its

continued infringement of the '201 Patent.

Whether Transamerica has complied with the Permanent Injunction to Lincoln's

reasonable satisfaction is determined objectively. See Advantage Consulting Group, Ltd. v.


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ADT Security Systems, Inc., 306 F.3d 582, 589 (8th Cir. 2002) (contract satisfaction clause

evaluated under objectively-reasonable-man standard). The assessment of unsatisfactory

performance must be made both reasonably and in good faith. Rolscreen Co. v. Pella Products

of St. Louis, Inc., 64 F.3d 1202, 1212 (8th Cir. 1995). By any measure, (objective, subjective, or

otherwise) Transamerica is violating the Permanent Injunction, and Lincoln is entitled to the

accounting and royalty payment of 44 basis points outlined in paragraph 4 of the Permanent

Injunction.

A. None of Transamerica's Three Alleged Design Arounds Avoid Infringement of theAsserted Claims of the '201 Patent.

1. Despite the March 30, 2009 attempted design around of step (e),Transamerica continues to use a claimed computerized method to

administer variable annuities even if account value is exhausted in

violation of the Permanent Injunction.

Transamerica contends that it has implemented a manual procedure to administer a

variable annuity even if its account value becomes exhausted, and as a result is no longer using

a claimed computerized method. (Lin. Ex. 1: Felter 9/8/09 Corresp. at 2-3; Brief in Support of

Motion for Relief From and Modification of Permanent Injunction and Refund of Royalty

Payments Made Under Protest (Trans. Br.) at 1, 12-14). Transamerica merely recasts the

argument it raised and lost at trial and on JMOL, and as a result, cannot meet its burden to

establish that it is no longer using a claimed computerized method to administer variable

annuities.

At trial, Transamerica argued that it was not obligated to use its computerized RPS in the

event account value was exhausted despite its sworn interrogatory answers to the contrary.

Transamerica expressly directed the jury's attention to DX1146, a functional specification

explaining the use of multiple computer systems when the amount of a scheduled payment

exceeds the remaining account value balance. (Lin. Ex. 17: Ziegler TT at 1035:5-1037:7).


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DX1146 describes the use of Transamerica's Vantage, RPS, AWD, and General Ledger

computer software programs and systems that are implemented in the event account value is

exhausted. The jury (and this Court when considering Transamericas JMOL motion) rejected

Transamerica's argument that DX1146 did not involve computerized methods of ensuring

payments even if account value is exhausted.10

Moreover, Ron Ziegler admitted at trial that

Transamerica does guarantee scheduled payments, and Transamerica continues to guarantee

scheduled payments, thereby practicing step (e) under the Court's claim construction. (Lin. Ex.

17: Ziegler TT at 1029:20-1030:8).

Transamerica has not changed the nature of the guarantee it provides its customers.

Rather, it continues to guarantee payments even if account value is exhausted. (See Lin. Ex.4:

Manual Rider Administration at Exhaustion memorandum (Exhaustion Memo) at

000072034, 000072052). Further, the evidence presented by Transamerica post-trial shows that

Transamerica continues to use a computerized method to perform the step of periodically paying

the scheduled payment even if account value is exhausted. Transamerica's redesign uses

multiple computer systems, including the same Vantage, RPS, AWD, and General Ledger

computer systems and software programs previously identified for use even if account value is

exhausted. (Compare Lin. Ex. 3: DX1146 at 28 with Lin. Ex. 4: Dep. Ex. 718, Exhaustion

Memo at 000072034-39; 000072052-54; see also Lin. Ex 5: 30(b)(6) Dep. Tr. 204:20-205:6;

209:6-9; 209:25-210:25; 214:10-13; 217:6-219:5).

10

This was true, in part, because when it sells an accused rider, Transamerica becomes contractuallyobligated to perform according to the rider's features. (See Trans. JMOL Br. at 14-15 (citing andquoting Dr. Behan's trial testimony)). Importantly, Vantage was specifically programmed toimplement the features of the riders. (Lin. Ex. 18: Bennett June 14, 2007 Dep. at 13:20-14:6). AndTransamerica administered each and every accused rider using a computerized method, and continuesto use a computerized method should it need to fulfill the most extreme circumstance in which aguaranteed scheduled payment will be made. (Lin. Ex. 22: JX2: Stip. Fact No. 15; Lin. Ex. 17:Ziegler TT at 876:23-25, 1020:3-10; Lin. Ex. 19: Brunscheen Dep. at 78:17-25; Lin. Ex. 20: PX678 at8; Lin. Ex. 5: 30(b)(6) Dep. Tr. 204:20-205:6; 209:6-9; 209:25-210:25; 214:10-13; 217:6-219:5).


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As explained by Transamerica's own witnesses, Vantage and RPS11 are both used to track

those policies for which continued payments may be necessary when account value gets close to

zero. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 204:25-208:6). Based on the interaction between Vantage,

RPS, AWD, and multiple other computerized systems, Transamerica follows through on its

guarantee of continued payments even when the account value is less than the scheduled

payment. (Dkt. #64: Markman Order at 177-78).

Initially, Transamericas Policy Administration System, Vantage, searches for policies

that have a policy value of less than twice the MAWA on a monthly basis. (Lin. Ex. 5: 30(b)(6)

Dep. Tr., 204:20-205:6). When these policies are located, Vantage generates a letter to

Transamericas policyholder advising of the consequences of an additional withdrawal. (Id.,

202:20-203:2).

The policy information stored in Vantage, including policy value and rider information, is

then transferred to a computerized spreadsheet. (Id., 206:14-207:14). This spreadsheet resides

on Transamericas shared services computer server that is used in administering variable

annuities. (Id., 209:6-9; 209:16-22; 218:18-22).

Transamericas RPS is then used to notify Transamericas distribution services group

when to make a payment pursuant to Transamericas contractual guarantee. (Id., 210:16-211:3;

218:12-17).

Several other computerized systems are also used to generate the payment to

policyholders. (Id., 217:6-218:6). In fact, Transamerica admitted that it uses multiple computer

11 RPS monitors those policies whose account value has reached zero for purposes of identifying whenthe periodic payments are to be made. (Lin. Ex. 4: Dep. Ex. 718 Exhaustion Memo at 000072052(background and step 1's advance notify), 000072063 (glossary explaining that Transamericacreated the Advance Notify feature in RPS for a specific date. This will cause the policy toappear on an action required report for review); Lin. Ex. 5: 30(b)(6) Dep. Tr. 213:4-13).


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systems besides Vantage to administer policies in these circumstances, despite its argument that

this process is manual. (Id., 219:21-25).

Transamericas electronic mail system advises Transamericas personnel thataction needs to be taken. (Id., 218:23-219:1).

Transamericas facsimile system faxes data into the AWD system. (Id.,217:6-218:6; 219:2-219:8).

Transamericas AWD system stores the data necessary for a payment to bemade. (Id).

Word is used to generate a check requisition form. (Id., 217:24-25). Transamericas computerized accounting systems, including General Ledger

and Accounts Payable interact as the payment is made. (Id., 219:9-14).

Transamericas purported manual administrative process also employs additional

computerized systems and programs, including the following:

VOS system (Id., 221:7-10). Enterprise Client System (Id., 222:1-16). Checkfree (Id., 224:14-24). EnCorr and GDL (subparts of AWD) (Id., 225:15-20). PCATS (Id., 225:20-226:2). CMS (part of General Ledger system) (Id., 222:7-15).

All told, at least 15 computerized systems, subparts of computerized systems or computer

programs are used by Transamerica to administer variable annuity riders even if account value

reaches zero. This hardly constitutes a manual process.12

Transamerica also argues that because it will handwrite checks in these circumstances, it

no longer uses a computerized method. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 218:10-11).

12 The fact that humans operate the computer systems is both obvious and irrelevant. Indeed, Ziegleradmitted as much at trial. (Lin. Ex. 17: Ziegler TT at 1039:4-5).


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Transamerica, through Mr. Ziegler, made the exact same argument at trial. (Lin. Ex. 17: Ziegler

TT: 955:6-14). Yet Mr. Ziegler also admitted at trial, as Transamerica admits here, that even the

manual writing of checks requires the use of multiple computer systems to balance

Transamericas accounts and to withdraw funds from those accounts to be paid to

Transamericas policyholders. (Lin. Ex. 17: Ziegler TT: 1033:4-1034:2). The jury rejected the

argument at trial that simply handwriting checks took Transamerica outside the bounds of step

(e), and the Court rejected this argument in ruling against Transamericas JMOL. Simply put, a

manual system cannot include and rely upon interaction between at least 15 different computer

systems, sub-systems or programs. This ongoing computerized administration meets the Court's

definition of the extreme circumstance covered by step (e) precisely.13

Objectively, Transamerica's assertion that as of March 30, 2009 it had implemented a

non-infringing alternative manual method to perform step (e) is also expressly belied by the

fact that (1) Transamerica's July 7 and September 28, 2009 accountings and royalty payments to

Lincoln included cumulative account values for dates after March 30; (2) Transamerica

continued implementing additional changes to its method, including contracting with Citigroup

to perform the purported offshore design arounds discussed in detail below; and (3)

Transamerica is planning additional changes to its computerized method of administering

variable annuities in the fourth quarter of 2009. (Lin. Ex. 1: 9/8/09 Felter Corresp. at 2-3).

13 Further, the sale of an accused rider is evidence of infringement if the sale obligates Transamerica toperform the steps found in Lincoln's claimed method. (Jury Inst. No. 7 at 15) With respect to step (e),Transamerica's GMWB riders guarantee scheduled payments even if the account value is exhausted.(Lin. Ex. 22: JX2, Stip. Fact No. 15). This obligation is a current one. Transamerica provides theguarantee with the sale of and while administering its riders. (Id.). Transamerica's new plan is touse computerized systems that interact to administer riders whose account values were exhausted,should that extreme event ever occur. As a result, Transamerica continues to use a claimedcomputerized method.


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If, in fact, Transamerica believed that its new method of performing step (e) was more

than colorably distinct from a claimed computerized method, Transamerica could have presented

this purported design around to Lincoln and the Court promptly when the Permanent Injunction

issued in June 2009, and subjected itself to possible contempt. And there would have been no

need for Transamerica to purportedly move MAWA calculations to Canada as discussed below.

Instead, Transamerica included with its July 7 (and September 28) accounting and royalty

payment, policies administered after March 30, thus all but conceding that its new method is

not more than colorably distinct from a claimed computerized method.

If Transamerica itself is not confident in its design around, neither Lincoln, nor this

Court, can have confidence or be reasonably satisfied that Transamerica has ceased and

desisted from using a claimed computerized method of administering variable annuities.

Transamerica cannot now reasonably argue that its new procedure for administering step (e)

removes its method from the scope of the Permanent Injunction when Transamerica itself

believed that an accounting and royalty were due Lincoln after March 30, 2009.

2. Despite the July 6, 2009 attempted design around of step (b),Transamerica continues to determine an initial scheduled payment in the

United States in violation of the Permanent Injunction.

Transamerica contends that by temporarily moving the first calculation of MAWA for all

newly issued or upgraded variable annuity riders to Canada from July 6 through September 11,

2009, it no longer practiced step (b) of the claimed computerized method. (Lin. Ex. 1: 9/8/09

Felter Corresp.; Lin. Ex. 5: 30(b)(6) Dep. Tr. 21:23-22:14; Trans. Br., at 1, 10-11). This

attempted design around did not affect the multiple other instances in which Transamerica's

computerized method calculates the MAWA. Further, this attempted design around is no longer

being used by Transamerica, and as a result has no bearing on the current proceedings. This

attempt to avoid the permanent injunction fails, in any event, as it is inconsistent with the Court's


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claim construction referencing an not the initial payment, ignores clear Federal Circuit

authority, and was already rejected by this Court in denying Transamerica's JMOL.

The Court construed step (b)'s language, determining an initial scheduled payment, as

[c]alculating the amount of a first scheduled payment of a systematic withdrawal program

based on the account value associated with the plan. (See Markman Order at 152, 206

(emphasis added)). On this very issue, the Federal Circuit has repeatedly emphasized that:

[A]n indefinite article a or an in patent parlance carries themeaning of one or more in open-ended claims containing thetransitional phrases comprising. That a or an can mean oneor more is best described as a rule, rather than merely a

presumption or even a convention. The exceptions to this rule areextremely limited: a patentee must evince[] a clear intent to,limit a or an to one.

Baldwin Graphic Sys., Inc. v. Siebert, Inc., 512 F.3d 1338, 1342 (Fed. Cir. 2008) (quoting KCJ

Corp. v. Kinetic Concepts, Inc., 223 F.3d 1351, 1356 (Fed. Cir. 2000)). The inclusion of these

indefinite articles as opposed to the more definite word the alone is proof that there may be

more than one initial scheduled payment.14

Moreover, this is the exact same argument Transamerica made (and lost) at trial and in its

JMOL motion in connection with policies sold before the issue date of the '201 Patent.

Transamerica argued through Mr. Ziegler that those policies could not infringe because the

MAWA was calculated for the first time before the '201 Patent issued. (See, e.g., Lin. Ex. 17:

14 As Lincoln explained in its JMOL Resistance, Federal Circuit authority also establishes the use of thewords initial and subsequent and first and second as a common patent-law convention to

distinguish between repeated instances of an element or limitation. 3M Innovative Prods. Co. v.Avery Denison Corp., 350 F.3d 1365, 1371 (Fed. Cir. 2003) (holding district court erred in definingterm to require first and second steps to occur sequentially). Numerous other decisions reflect thiscommon patent-law convention. See,e.g., Whirlpool v. LG Electronics, Inc., 423 F.Supp.2d 730, 747(W.D. Mich. 2004) (noting the words first, second, and third merely distinguish one step fromanother);MyMail Ltd. v. America Online Inc., No. 6:04-cv-189, 2005 WL 6225308 at *6 (E.D. Tex.June 3, 2005) (noting first-time limitation is not absolute and, thus, there could be more than onefirst-time in claim relating to configuring and establishing communications with an ASP ornetwork).


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Ziegler TT at 1001:22-1002:3; Dkt. #299-2: Trans. JMOL Br. at 25-30). The jury expressly

rejected this argument in rendering its verdict for Lincoln and including the aggregate account

value of all policies in the royalty base. And the Court rejected the identical argument in

denying Transamerica's JMOL motion. (Dkt. # 313: 10-11). Despite this clear law of the case,

Transamerica again argues that calculating the amount of a first scheduled payment can only

occur once.15 This argument is contrary to substantial evidence at trial that the MAWA is

calculated automatically at least on an annual basis. (Lin. Ex. 17: Behan TT at 510:11-16,

628:15-19; Lin. Ex. 21: Ziegler Jan. 26, 2007 Dep. at 237:25-238:4). This argument is also

contrary to Transamericas admission post-trial that recalculations and subsequent calculations of

MAWA continue to occur in the United States. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 11:8-17).

Further, for all riders existing before Transamerica's new interim modification whose

owners had not yet started taking scheduled payments, Transamerica admits that the MAWA is

computed annually and as a result continues to be computed in the United States, establishing for

these riders, an initial scheduled payment has been determined in the United States even

though the owner may have elected not to take it. (Id.) As a result, this design around does not

remove Transamericas administration of variable annuities from a claimed computerized

method.

3. Despite the September 12 attempt to design around steps (b) and (d),Transamerica continues to determine initial scheduled payments and

adjust the amount of scheduled payments in response to unscheduled

withdrawals in the United States in violation of the Permanent Injunction.

Transamerica claims Citigroup built a black box calculator in Canada that calculates

MAWA and TWB for Transamerica based on data and formulas provided by Transamerica in the

15 See Lin. Ex. 1: 9/8/09 Felter Corresp. at 2-3 (contending that by moving the calculation of MAWA toCanada for all new riders the initial scheduled payment MAWA is determined for those riders at thetime of purchase in Canada).


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United States, and that calculations of and adjustments to MAWA are now made entirely

outside the United States. (See Lin. Ex. 1: 9/8/09 Felter Corresp. at 2-3; Trans. Br., at 1, 5-10).

Transamerica then argues that as a result, the determining portion of step (b) and the

adjusting portion of step (d) are now performed in Canada. Despite this modification,

however, Transamerica is still using a claimed computerized method in the United States in

violation of the Permanent Injunction. As explained below, the steps of determining an initial

scheduled payment and adjusting the amount of scheduled payments in response to an

unscheduled payment, as defined in this Court's Markman Order, still occur in the United

States.

Further, Transamerica continues to calculate MAWA in the United States for hedging

purposes, for running illustrations for new policyholders, and potentially for reserve purposes.

(Lin. Ex. 5: 30(b)(6) Dep. Tr. 32:7-15; 36:25-37:6; 39:6-8; Lin. Ex. 6: SecurePath Variable

Annuity Hypothetical Illustration, TA Doc. No. 000232255-69; Lin. Ex. 13: Dep. Ex. 705, at

71933).16 As a result, and as explained below, Transamerica's argument fails legally and

factually.

Legally, Transamerica distorts the requirement that performance of a claimed method

step occur in the United States with its argument that since some portion of its administrative

method occurs in Canada it cannot infringe. Yet Transamerica cannot avoid infringement based

16 Mr. Neill testified at deposition that he was not aware of any further calculations of MAWA in the

United States after September 12, or of any further validation of the MAWA data after September 12.(See Lin. Ex. 5: 30(b)(6) Dep. Tr. 37:7-11; 85:9-86:25). This testimony contradicts Mr. Neillsdeclaration filed in support of Transamericas Motion that in fact several thousand MAWAcalculations were performed in the United States after September 12 due to bugs in the software, andthat even as of the date of his deposition, Transamerica was continuing to fix software code bugs thatcontinued to cause MAWA to be calculated by Transamerica within the United States. (Dkt. # 345-14: 92-94). Transamerica admits that it has not worked out all of the bugs in its system. Thisdiscrepancy is yet another reason that Lincoln cannot be reasonably satisfied with Transamericaspurported design around attempt.


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on use merely by moving unclaimed steps of its policy administration system to Canada. To

the contrary, the claimed step itself must occur outside of the United States. And here,

Transamerica's argument falls apart factually when its computerized method is compared to the

claims as construed by the Court.

Transamerica continues to determine an initial scheduled payment in the United States.

The only difference between its prior computerized system for administering variable annuities

and its purported design around is the addition of the calculator in Canada. (Lin. Ex. 5:

30(b)(6) Dep. Tr. 48:4-7; Lin. Ex. 7: Dep. Ex. 703; Lin. Ex. 8: Dep. Ex. 704).

Initially, Transamericas own documentation of its design around refers to the step of

doCalculation that occurs in the United States. (Lin. Ex. 9: Dep. Ex. 711). The step of

doCalculation occurs long before Transamerica calls Citigroup in Canada. (Id. at 000071866).

In fact, Transamerica admitted that the doCalculation step of the determination of MAWA

occurs within the United States. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 108: 5-13).

Further, Transamerica determines the specific calculations to be made by the

calculator in Canada. (Id., 91:16-21; Lin. Ex. 16: Dep. Ex. 709, 000071784). The specific

determination to call the calculator in Canada is also made by Transamerica in the United States.

(Lin. Ex. 5: 92:6-21). Further, Transamericas Vantage Policy Administration System initiates

the determination of MAWA by sending an MQ request that is received by Transamerica s

Enterprise Service Bus (ESB). (Id., 95:10-12; 96:18-24; Lin. Ex. 9: Dep. Ex. 711).

Transamericas ESB then continues the determination by transforming the MQ message into an

XML message. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 96:25-97:3). Transamericas Vantage System in

the United States then calls Canada through a VPN in a step labeled Call Calc Engine Block.

(Id., 97:22-98:7). Transamerica, through its Vantage System in the United States, determines


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based on one of twenty-four transactions which data to send, including the prior total withdrawal

base, the principal back total withdrawal base, life withdrawal percentages, and life maximum

annual withdrawal amount. (Id., 118:2-11; 118:19-22). In fact, the life MAWA data is already

stored in Transamericas Vantage System. (Id., 121:18-122:1).17

Citigroup then sends data back

to Transamerica, which is received in the United States through the VPN in a step labeled

receive calc engine response. (Id., 99:6-11). Transamerica then continues the determination

of MAWA by transforming the data from Citigroup from an XML message to an MQ message.

(Id., 99:16-100:3). Without this transformation, Transamerica could not use the data from

Citigroup in its Vantage System. (Id.) In other words, the determination of MAWA is not

possible without the transformation of data that occurs within the United States. (Id., 101:11-

25). These data results are then used in Transamericas Vantage System. (Id., 103:18-23).

The determination of MAWA within the meaning of this Courts claim construction is

carried out by Transamerica through its decision within the United States to initiate the call to

Canada, through its determination of the specific transactions to be sent to Canada, through its

transformation of this information both before and after sending to Canada, and through its use

of the resultant data in its Policy Administration System in the United States.

Transamericas assertion that the determining of a first scheduled payment is now

performed in Canada is also inconsistent with this Courts Markman order. The Court construed

this portion of step (b) as follows: Calculating the amount of a first scheduled payment of a

systematic withdrawal program based on the account value associated with the plan. (Dkt. #

64: 206). Transamerica interprets the term calculating to mean the simple act of pushing the

17 For non-growth riders for which no transactions occurred in which the MAWA equations were initiallyperformed in the United States, the MAWA amount sent to Citigroup would be identical to the amountreceived back from Citigroup. (Id., 133:18-134:6).


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equal sign on a calculator located in Canada. Yet this Court determined that calculating does

not necessarily suggest just simple arithmetic, or even use of only mathematical processes.

(Dkt. # 64: at 120-1). Instead, calculating also means to reckon by exercise of practical

judgment and to solve or probe the meaning of. (Id.). Transamerica calculates the MAWA

in the United States, exercis[ing] practical judgment by deciding which transactions to send to

Citigroup, by deciding what information and data to send to Citigroup, and by deciding to initiate

the call to Citigroup. Transamerica further calculates MAWA in the United States through the

transformation of data received from Citigroup and used by the Policy Administration System by

exerc[ising practical judgment and solv[ing] or prob[ing] the meaning of.

18

The mere fact

that the equal sign is pressed in Canada fails to establish that Transamerica is no longer using a

claimed computerized method.

Even assuming that Transamericas tortured claim interpretation has some merit,

Citigroups calculator does not handle all MAWA calculations. Transamerica admittedly still

continues to use the Vantage System and the data stored therein to determine MAWA on a daily

basis in the United States for each variable annuity for hedging purposes. (Lin. Ex. 5: 30(b)(6)

Dep. Tr. 36:25-37:6; 38:2-11; 39:6-8; 39:17-18; 41:12-14). Transamericas failure to bring this

fact to the Courts attention in its opening Brief is understandable, as it was not capable of

moving all MAWA equations overseas within the ninety day window provided in the Permanent

Injunction. Robert Frederick, Transamericas Business Unit Chief Operating Officer and Senior

Vice President, testified in his declaration in support of Transamericas Motion to Stay

Permanent Injunction Pending Appeal filed with the Federal Circuit that removal of all MAWA

equations from Transamericas computer systems in the United States would be difficult and

18 Transamerica further calculates MAWA in the United States as Transamerica has complete controlover the data and its use. (Id., 137:9-11; 138:20-24).


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complex. (Lin. Ex. 12: Declaration of Robert Frederick, 10).19 Specifically, the move of

MAWA equations for hedging to account for growth, and for the establishment of sufficient

reserves, would require Transamerica to identify all of the places in the code where MAWA is

calculated, revise that code, and debug it. Id. Mr. Frederick testified that because of the

complexity of the design around, the implementation of this change could not occur until January

16, 2010. Id. In other words, Transamerica did not complete the transition of all MAWA

equations within the ninety day window provided by this Court, and as a result, continues to

perform these equations of MAWA in the United States.20

In addition, Transamerica continues to perform MAWA equations in the United States

for the illustration system used by brokers to illustrate the specifics of variable annuity policies,

including the initial scheduled payment. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 195:1-5; 196:10-18;

32:7-15; 36:25-37:6; 39:6-8; Lin. Ex. 6: Secure Path Variable Annuity Hypothetical Illustration,

TA Doc. No. 000232255-69). Further, these calculations of MAWA are performed in the United

States. Id. Therefore, Transamerica continues to practice step (b) of claim 35 by determining an

initial scheduled payment within the United States through its illustration system.

19 In yet another discrepancy between Transamericas deposition testimony and its declarations, Mr.Blankenship, Transamericas Director of Business Applications, testified at deposition that he neverprovided an estimate of the time necessary to complete this modification, and that there was nodetailed effort to determine an estimate. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 177:21-178:22). Yet in hisdeclaration, filed four days after his deposition, he stated that there had been an initial estimatedcompletion date of January 2010, and that certain factors contributed to the earlier completion. (Dkt. #345-10: 41-58). These discrepancies raise the question of whether Lincoln or this Court can rely on

any of Transamericas deposition testimony or sworn declarations.20 Further, Transamerica itself does not know whether MAWA continues to be calculated within the

United States for purposes of maintaining a sufficient amount of reserves. While Transamericasdesign around implementation documents show that the calculation of MAWA for reserves willremain in-house (see Lin. Ex. 13: Dep. Ex. 705, at 71933), Transamericas witness testified that hebelieved this statement to be inaccurate. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 58:19-59-14). Again,Transamerica cannot meet its burden because its contradictory statements raise questions about theaccuracy of its documents and testimony.


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Transamerica now argues that calculations for hedging and reserves purposes are

unrelated to rider administration, and as a result, Transamericas failure to move these

calculations offshore is insignificant. Trans. Br. at 7. This argument is belied by Transamericas

prior statements to the Federal Circuit that it was necessary to move the calculation of MAWA

for hedging and reserve purposes offshore. (Lin. Ex. 12: Declaration of Robert Frederick, 10).

Further, Transamerica uses the very same Vantage Policy Administration System for these

calculations. In addition, Figure 11 of the 201 Patent includes establish reserves as part of the

administrative process. (Lin. Ex. 14: 201 Patent, Fig. 11). Transamerica puts forth the after the

fact rationalization that moving the MAWA calculations for hedging and illustration purposes is

unnecessary due to its inability to move these calculations overseas.

The Federal Circuit's decision in NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282

(Fed. Cir. 2005) reinforces Lincoln's position. There, because each of the steps of the asserted

method claims included the limitation of an interface switch or an interface, there could be

no direct infringement in the United States by use of the patented method since defendant

RIM's relay (or interface) was located in Canada. In this case, there is no such limitation.

Further, in this case, each step of the method is still being performed by Transamerica in the

United States. And unlike NTP, which had always located its relay in Canada, Transamerica

only attempted to move a portion of one of the steps of a claimed computerized method outside

of the United States to avoid future infringement.

The factual analysis concerning step (d) is similar. The Court construed Adjusting the

amount of the scheduled payment in response to said unscheduled withdrawal to mean

Reducing the amount of the scheduled payment in response to said unscheduled withdrawal.

(Dkt. # 64: 208). Transamerica continues to make this reduction in the United States.


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Transamerica testified that when the Citigroup calculator returns lower MAWA data, the actual

reduction is stored and used by Transamericas Policy Administration System. (Lin. Ex. 5:

30(b)(6) Dep. Tr. 136:5-137:3). In other words, the data received from Citigroup is used by

Transamericas Policy Administration System within the United States to update rider values

with a reduced MAWA. (Id., 138:20-139:18). As a result, Transamerica performs the

reducing portion of step (d) within the United States.21

B. Transamerica Continues to Infringe Even if Some of the Activity Relating to Steps(b) and (d) Occurs Outside of the United States.

As explained above, Transamerica has not shown that steps (b) and (d) are performed

outside of the United States. However, even if Transamerica had made such a showing, it is

nevertheless infringing Lincoln's '201 Patent and violating the Permanent Injunction because

Transamerica is selling and/or offering to sell a claimed computerized method within the United

States in violation of 35 U.S.C. 271 (a).

On its face, 271(a) prohibits making, using, selling, offering for sale, or importing a

patented invention in the United States. Transamerica's argument focuses on the use prong of

271(a). This focus is intentionally too narrow. The Federal Circuit has made clear that it

remains an open question as to whether a method claim can be infringed under the sale or offer

for sale portion of 271(a). SeeRicoh Co. Ltd., v. Quanta Computer Inc., 550 F.3d 1325, 1335

(Fed. Cir. 2008) (declining to determine whether a process may ever be sold so as to give rise to

liability under 271(a)); NTP, Inc., 418 F.3d at 1320-21 (We need not and do not hold that

method claims may not be infringed under the sells and offers to sell prongs of section

271(a).). At least two district courts have rejected arguments (like Transamerica's implicit

21 Transamerica admittedly continues to perform the monitoring portion of step (d) within the UnitedStates. (Lin. Ex. 5: 30(b)(6) Dep. Tr. 129:10-25).


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argument) that method claims cannot be infringed through sales or offers for sale. See Recycling

Sciences Int'l v. Soil Restoration and Recycling, L.L.C., 2001 WL 969040 at *1-2 (N.D. Ill. Aug.

24, 2001) (rejecting the argument that sells and offers to sell language of section 271(a) does

not apply to method patents); In re Cygnus Telecomm. Tech., LLC Patent Litigation, 481 F.

Supp. 2d 1029, 1054, n. 17 (N.D. Cal. 2007) (denying summary judgment concerning sells or

offers to sell prongs of section 271(a) because defendants all located within United States,

creating question of fact).22

In analyzing whether RIM infringed under the sells or offers to sell prong of section

271(a), the Federal Circuit inNTP noted that

[t]he definition of sale is: 1. The transfer of property or title for a price.2. The agreement by which such a transfer takes place. The four elementsare (1) parties competent to contract, (2) mutual assent, (3) a thingcapable of being transferred, and (4) a price in money paid or promised.Black's Law Dictionary 1337 (7th ed.1999). Thus, the ordinary meaningof a sale includes the concept of a transfer of title or property. Thedefinition also requires as the third element a thing capable of beingtransferred. It is difficult to apply this concept to a method claimconsisting of a series of acts . . . . It is difficult to envision what propertyis transferred merely by one party performing the steps of a method claimin exchange for payment by another party. Moreover, performance of amethod does not necessarily require anything that is capable of beingtransferred.

418 F.3d at 1319. The facts of the instant case are different fromNTP. Unlike RIM's method,

Transamerica's sale of and offer to sell variable annuity riders satisfies all elements of a sale

within the meaning of section 271(a), and within the parameters set forth by the NTP Court.

There is no question that the first, second, and fourth elements of a sale are present.

22 An offer to sell a method more than one year before the filing date of the patent application would anticipate andinvalidate that patent application under 102(b). Scaltech, Inc. v. Retec/Tetra, L.L.C., 269 F. 3d 1321, 1328 (the onsale bar rule applies to the sale of an invention, and inventions encompass processes). Under well establishedlaw, that which would literally infringe if later in time anticipates if earlier than the date of invention. Ecolab, Inc.v. FMC Corp., 569 F.3d 1335, 1348 (Fed. Cir. 2009) (internal quotation omitted). Thus, just as the sale or offer tosell a method can anticipate a method claim, so to can the sale or offer to sell a method infringe a method claim.


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Transamerica and its customers (all of whom resided in the United States at the time of purchase)

are competent to contract, and mutually and voluntarily agree to enter such contracts for variable

annuities. Transamerica's customers pay money in exchange for Transamerica's promise to

provide specific distributions.

The third element is also present in this case. Transamerica enters into annuity contracts

with customers who pay for the administration of those contracts. Transamerica transfers a

contractual obligation for guaranteed distributions to the customer in exchange for the customer's

money. In other words, in addition to money being transferred as part of the administrative

process, Transamerica provides to customers a contractual obligation or guarantee to provide

distributions in accordance with the terms of the contract. As a result, the Federal Circuit's

concerns with defining what property is transferred, and what within a method claim requires

anything capable of being transferred, are met. Thus, even assuming Transamerica performs

steps (b) and (d) of claim 35 of the '201 Patent in Canada, Transamerica sells and offers to sell

the infringing method in the United States within the meaning of section 271(a).

In Ricoh, the Federal Circuit held that a party that sells or offers to sell software

containing instructions to perform a patented method does not infringe under section 271(a).

550 F.3d at 1335. As in NTP, the court refused to decide whether a method or process could

ever infringe under the sells or offers to sell prongs of section 271(a). Id. The court

distinguished the software containing instructions to perform the patented process from the

process itself. Id. The court noted that the actual carrying out of the instructions is that which

constitutes a process within the meaning of 271(a). Id.

Ricoh is distinguishable from the present case in that by selling its variable annuity riders,

Transamerica is contractually obligated to, and in fact does, carry out the steps of the patented


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method. UnlikeRicoh, where the software merely provided instructions capable of carrying out

the patented process, here Transamerica's sale of variable annuity riders and the contractual

obligations attached thereto constitute the performance of the process itself through the patented

method. Therefore, sale of the infringing variable annuity riders by Transamerica is a sale or

offer for sale within the meaning of section 271(a).

C. Transamerica's Sister Companies are Contributory Infringers Under 35 U.S.C. 271(c).

As explained above, Transamerica continues to perform steps (b) and (d) in the United

States. Indeed, the physical steps of determining and adjusting are all initiated and executed in

the United States. The fact that Transamerica's sister companies, Money Services and

Transamerica Capital, import material into the United States for use in Transamerica's method in

the United States simply does not allow Transamerica to escape infringement liability. To the

contrary, the sister companies themselves are also now liable as contributory infringers under 35

U.S.C. 271 (c), which provides:

Whoever offers to sell or sells within the United States or imports into theUnited States . . . a material or apparatus for use in practicing a patentedprocess, constituting a material part of the invention, knowing the same tobe especially made or especially adapted for use in an infringement ofsuch patent, and not a staple article or commodity of commerce suitablefor substantial noninfringing use, shall be liable as a contributoryinfringer.

35 U.S.C. 271(c). As the Federal Circuit recently explained, [i]n order to succeed on a claim

of contributory infringement, in addition to proving an act of direct infringement, plaintiff must

show that defendant knew that the combination for which its components were especially made

was both patented and infringing and that defendant's components have 'no substantial non-

infringing uses. Lucent Tech., Inc., v. Gateway, Inc., 508 F.3d 1301, 1320 (Fed. Cir. 2009)

(internal quotations omitted).


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Transamerica claims that its MAWA and certain TWB equations are now performed by

Citigroup in Canada. It further expressly admits that the results of the equations are saved

electronically and then transmitted back to the United States for the specific purpose of

performing steps (b) and (d) of claim 35 of the '201 Patent. This electronic data is, by definition,

material for use in practicing Lincoln's patented method, which Transamerica Capital and

Money Services knowingly import into the United States and which is not suitable for any

noninfringing use, but instead is specifically designed to perform a claimed computerized

method. Lucent, 508 F.3d at 1320; Ricoh, 550 F. 3d at 1325 (Such a component, specially

adapted for use in the patented process and with no substantial noninfringing use, would plainly

be good for nothing else but infringement of the patented process.). In this case, the data

imported from Canada is specifically designed to perform the infringing method. Thus,

Transamerica's sister companies are liable under 35 U.S.C. 271(c) as contributory infringers.

The fact that the data imported is in the form of electronic data rather than a physical

object is irrelevant to the inquiry under section 271(c). SeeMicrosoft Corp. v. AT&T Corp., 550

U.S. 437, 452 (2007). In the context of analyzing whether exporting copies of software

constituted a component within the meaning of section 271(f), the Supreme Court noted that it

need not address whether software in the abstract, or any other intangible,can ever be a component under 271(f). If an intangible method orprocess, for instance, qualifies as a patented invention under 271(f) (aquestion as to which we express no opinion), the combinable componentsof that invention might be intangible as well.

Id. at n.13 (italics in original, underlining added).

In Cardiac Pacemakers, the Federal Circuit held that section 271(f) did not apply to

method claims because section 271(f) implies the transfer of a physical object and

[s]upplying an intangible step is thus a physical impossibility. 576 F.3d 1348, 1364 (Fed. Cir.

2009). Although Cardiac Pacemakers appears to be in tension with the Supreme Court in


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Microsoft regarding whether section 271(f) requires a component to be a tangible object, the

Federal Circuit noted

the contrasting treatment that Section 271 gives to tangible inventions and

method inventions and the meaning of the term component. Section271(c) contrasts a component of a patented machine, manufacture,combination, or composition with a material or apparatus for use inpracticing a patented process. 35 U.S.C. 271(c). Congress clearlybelieved that a component was separate and distinct from a material orapparatus for use in practicing a patented process. Thus, a material orapparatus for use in practicing a patented process is not a component ofthat process.

Id. at 1363-64 (emphasis added) citing Davis v. Mich. Dept. of Treasury, 489 U.S. 803, 809

(1989). Thus, the Federal Circuit has recognized that a material or apparatus under section

271(c) is different than a component under section 271(f). Therefore, there is no requirement

that a material or apparatus under section 271(c) be a tangible object. SeeLucent, 580 F.3d at

1321(software tool included in larger program was material or apparatus within the meaning of

35 U.S.C. 271(c)).23

Further, nothing inNTP precludes the application of section 271(c) to method claims. In

fact, section 271(c) specifically prohibits the importation of material for use in the patented

process. 35 U.S.C. 271(c). In NTP, as with the sells and offers to sell prongs, the

Federal Circuit did not decide whether a method claim could be infringed by importation. 418

F.3d at 1320-21. The court merely held under the unique facts of that case that RIM could not

infringe the method claims for the same reason that it could not infringe under the sells and

offers to sell prongs. Thus, nothing precludes application of section 271(c) to method claims.

23 In Lucent, the Federal Circuit also noted that the Supreme Court in Microsoftdid not address themeaning of 'material or apparatus' in 271(c). 580 F.3d at 1321.


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D. Lincoln is Entitled to an Accounting and Royalty Payments for the Period ofInfringement After September 21, 2009.

Pursuant to the Permanent Injunction, [i]f Transamerica fails to show to Lincoln's

reasonable satisfaction that it has ceased and desisted using a claimed computerized method or a

computerized method that is not colorably distinct from a claimed computerized method to

administer variable annuities, then Lincoln may move the court for a further accounting and

royalty payment at the rate of 0.44% for the period of further infringement. (Perm. Inj.: 4).

For the reasons discussed above, Lincoln is entitled to an accounting and royalty payment for

Transamerica's further infringement. Notwithstanding that Transamerica has provided Lincoln

with insufficient evidence of its purported noninfringing design-around, even if Transamerica

moved certain operations outside the United States, Transamerica nevertheless would still be

liable for selling and offering to sell the infringing method and for contributory infringement, as

discussed above. Therefore, Lincoln requests the Court to order Transamerica to provide a

monthly accounting and royalty payments for the period of further infringement after September

21, 2009.

V. CONCLUSIONBased on the foregoing, Lincoln requests that its motion be granted and that the Court

order Transamerica to provide monthly accounting and royalty payments at the rate of .44%, and


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for all other just and proper relief.

November 4, 2009 Respectfully submitted,

s/D. Randall Brown

D. Randall Brown (IN #15127-49)([email protected])Gary C. Furst (IN #19349-64)([email protected])BARNES & THORNBURG LLP600 One Summit SquareFort Wayne, IN 46802Telephone: (260) 423-9440Facsimile: (260) 424-8316PRO HAC VICE

Denny M. DennisTodd A. StrotherBRADSHAW, FOWLER, PROCTOR &FAIRGRAVE, P.C.

Suite 3700801 Grand AvenueDes Moines, Iowa 50309-8004

ATTORNEYS FOR LINCOLNNATIONAL LIFE INSURANCECOMPANY


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CERTIFICATE OF SERVICE

The undersigned hereby certifies that a copy of the above and foregoing document has

been served this 4th day of November, 2009, via the Court's ECF system to the following

counsel of record:

Steven M. Bauer, EsquireKimberly Mottley, EsquireJeremy Oczek, EsquireProskauer Rose LLPOne International PlaceBoston, MA 02110-2602Pro Hac Vice

James R. Myers, EsquireROPES & GRAY LLP700 12th Street NW, Suite 900Washington, DC 20005Pro Hac Vice

John Kenneth Felter, EsquireROPES & GRAY LLPOne International PlaceBoston, MA 02110-2624Pro Hac Vice

s/D. Randall Brown

CHDS01 JWF 569836v1

brief re modification of injunction for method patent

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