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`UNITED STATES PATENT AND TRADEMARK OFFICE
`
`—————————————
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`—————————————
`
`LIBERTY MUTUAL INSURANCE CO.
`Petitioner
`
`v.
`
`PROGRESSIVE CASUALTY INSURANCE CO.
`Patent Owner
`
`—————————————
`
`Case CBM2012-00002
`Patent 6,064,970
`
`—————————————
`
`PATENT OWNER’S RESPONSE
`PURSUANT TO 37 C.F.R. § 42.220
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`CLI-2104802v4
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`
`
`
`
`TABLE OF CONTENTS
`
`Page
`
`
`
`PRELIMINARY STATEMENT .................................................................... 1
`I.
`THE ALLEGED GROUNDS FOR UNPATENTABILITY ......................... 2
`II.
`III. BACKGROUND REGARDING DETERMINATION OF AUTO
`INSURANCE PREMIUMS ........................................................................... 5
`A. General Considerations ........................................................................ 5
`B.
`Insurance Regulations .......................................................................... 6
`C. Actuarial Classes .................................................................................. 7
`IV. THE ’970 PATENT AND CLAIM CONSTRUCTION ISSUES .................. 8
`A.
`Background Of The Invention .............................................................. 8
`B.
`The Invention Of The ’970 Patent........................................................ 9
`C.
`Claim Terms ......................................................................................... 9
`1.
`Actuarial Classes ........................................................................ 9
`2.
`Initial Operator Profile ............................................................. 13
`3.
`Insured Profile .......................................................................... 14
`4.
`Base Cost/Cost Of Insurance ................................................... 14
`STATEMENTS OF REASONS WHY CLAIMS 1, 3-6 AND 9-18
`HAVE NOT BEEN PROVEN OBVIOUS................................................... 15
`A. Applicable Law .................................................................................. 15
`1.
`Liberty Bears The Burden Of Proof ........................................ 15
`2.
`The Law Of Obviousness ......................................................... 15
`The References At Issue ..................................................................... 17
`1.
`Kosaka ...................................................................................... 17
`2.
`Herrod ...................................................................................... 18
`3.
`Florida Guide ........................................................................... 20
`4.
`Black Magic ............................................................................. 20
`
`V.
`
`B.
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`Level Of Skill In The Art ................................................................... 20
`C.
`D. Alleged Ground C – Claims 6, 9-10, 13 And 18 ................................ 22
`1.
`Herrod Neither Discloses Nor Suggests Actuarial Classes ..... 23
`2.
`Kosaka and Herrod Are Not Combinable ................................ 30
`3.
`Kosaka Does Not Disclose The “Correlating” Step ................ 39
`Alleged Ground B – Claims 1, 3, 11-12, 14 And 15 .......................... 42
`1.
`The Actuarial Class Limitations .............................................. 42
`2.
`Black Magic Does Not Disclose Recording Time Or A
`Corresponding Log Of Vehicle Speed ..................................... 42
`Alleged Ground A – Claims 4, 5, 16 And 17 ..................................... 45
`1.
`Kosaka Does Not Disclose An Initial Operator Profile ........... 45
`2.
`Kosaka Does Not Disclose A Base Cost Of Insurance ............ 46
`VI. CONCLUSION ............................................................................................. 48
`
`E.
`
`F.
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`
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`CASES
`
`
`TABLE OF AUTHORITIES
`
`Page
`
`Ex parte Acharya,
`App. No. 2010-3919 at 6 (BPAI June 19, 2012) ................................................ 37
`Amgen Inc. v. Hoffmann- La Roche Ltd.,
`580 F.3d 1340, 1363 (Fed. Cir. 2009) ................................................................ 16
`C.W. Zumbiel Co., Inc. v. Kappos,
`702 F.3d 1371, 1384-85 (Fed. Cir. 2012) ........................................................... 17
`Graham v. John Deere Co. of Kan. City,
`383 U.S. 1, 17-18 (1966) .................................................................................... 16
`In re Gardner,
`449 F. App’x 914, 916 (Fed. Cir. 2011) ............................................................. 17
`In re Ratti,
`270 F.2d 810 (C.C.P.A. 1959) ............................................................................ 17
`KSR Int’l Co. v. Teleflex Inc.,
`550 U.S. 398, 406 (2007) .................................................................................... 16
`Standard Oil Co. v. American Cyanamid Co.,
`714 F.2d 448, 454 (Fed. Cir. 1983) .................................................................... 36
`U.S. v. Adams,
`383 U.S. 39 (1966) .............................................................................................. 17
`STATUTES
`
`Section 18(a)(1)(E) of the AIA, 125 Stat. 330 (2011) ............................................... 3
`
`35 U.S.C. § 103(a) ............................................................................................passim
`OTHER AUTHORITIES
`
`37 C.F.R. § 42.220(c) ........................................................................................... 1, 15
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`Case CBM2012-00002
`Patent 6,064,970
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`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
`
`
`Pursuant to the Board’s Decision – Institution of Covered Business Method
`
`Review (Paper 10) (“Institution Decision”), entered January 25, 2013, and 37
`
`C.F.R. § 42.220(c), Patent Owner Progressive Casualty Insurance Co.
`
`(“Progressive” or “Patent Owner”) submits this Response in opposition to the
`
`Petition for Covered Business Method Patent Review of United States Patent No.
`
`6,064,970 (the “’970 patent”) filed by Liberty Mutual Insurance Co. (“Liberty” or
`
`“Petitioner”).
`
`I.
`
`PRELIMINARY STATEMENT
`
`The Board should issue judgment that claims 1, 3-6 and 9-18 of the ’970
`
`patent are patentable over Kosaka, Herrod, the Florida Guide and Black Magic.
`
`The evidence shows that the combinations of these references identified by the
`
`Board as grounds for unpatentability do not render any of the claims of the ’970
`
`patent obvious. The combinations cited by the Board rely on hindsight analysis to
`
`fill gaps that the ordinary skilled artisan in 1996 would not have filled and would
`
`not have found obvious. Each of the claims, considered as a whole, is nonobvious
`
`over the combination of references cited in the grounds for unpatentability in the
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`Institution Decision. Not only are the combinations nonobvious, but, even if made,
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`the combinations would not result in the claimed invention. Accordingly,
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`Case CBM2012-00002
`Patent 6,064,970
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`judgment should be entered in favor of Progressive.
`
`II. THE ALLEGED GROUNDS FOR UNPATENTABILITY
`
`The Institution Decision sets forth the following alleged grounds for
`
`unpatentability in this trial:
`
`A.
`
`Claims 4, 5, 16 and 17 are unpatentable under 35 U.S.C. § 103(a) over
`
`Kosaka and Florida Guide;
`
`B.
`
`Claims 1, 3, 11-12, 14 and 15 are unpatentable under 35 U.S.C.
`
`§ 103(a) over Kosaka, Black Magic and Herrod; and
`
`C.
`
`Claims 6, 9-10, 13 and 18 are unpatentable under 35 U.S.C. § 103(a)
`
`over Kosaka and Herrod.
`
`(Institution Decision at 34.) No other grounds were authorized for review. In fact,
`
`all other grounds were denied, and the Board provided: “Progressive is not
`
`required to address the denied grounds, and should not do so.” (Id.)
`
`In the Institution Decision, the Board addressed aspects of the alleged
`
`grounds for unpatentability for which review was instituted.1 With respect to
`
`
`1 The Board instituted covered business method review of all but claims 7
`and 8 of the ’970 in this proceeding patent after concluding that just one of those
`claims (claim 4) was directed to a covered business method. (Institution Decision
`at 6-8.) The Patent Owner objects to this conclusion as to claim 4 but also to the
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`claims 1 and 3, the Board discussed Kosaka, Herrod and Black Magic in the
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`context of claim 1, which the Board stated was representative. (Institution
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`Decision at 21-28.) The Board preliminarily found that Herrod describes that
`
`actuarial classes are generated from actual monitored driving characteristics. (Id.
`
`at 23.) The Board also stated that Herrod’s “behavioral groups” constituted “a
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`combination/group/groupings related to loss/risk/safety which are determined from
`
`classifications/characteristics representative of motor vehicle operational
`
`
`(continued…)
`
`
`determination that the Board may review the other ’970 claims based on the
`conclusion that claim 4 is a covered business method. Progressive submits that
`this determination is contrary to the statute. Section 18(a)(1)(E) of the AIA, 125
`Stat. 330 (2011), limits the authority of the Director to institute review “only for a
`patent that is a covered business method patent.” The statute and legislative
`history is also clear that not all business method patents are subject to review under
`the procedure of Section 18. These provisions restrict the PTO’s authority to
`review under Section 18 of the AIA only those patented inventions which have
`been found to meet the statutory criteria of covered business method patents. An
`analysis of one claim in a patent sheds no light on whether any other claim in the
`patent is directed to a covered business method. The Patent Owner requests
`dismissal of the proceedings as to all ’970 claims in dispute other than claim 4,
`since it exceeds the Board’s statutory authority to institute review of any patent
`claim which the Board has not determined to be directed to a covered business
`method.
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`characteristics and driver behavior for which data is gathered,” which was the
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`Board’s initial construction of “actuarial class.” (Id. at 24.) As to other limitations
`
`in claim 1 and 3, the Board relied on Liberty’s claim charts, stating that Liberty’s
`
`explanations as to how each element of those claims is met by the cited prior art
`
`references appeared to have merit and were otherwise unrebutted. (Id. at 28.)
`
`With respect to claims 4, 5, 16 and 17, the Board discussed Kosaka and
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`Florida Guide in the context of claim 4, which the Board stated was representative
`
`of this group of claims. (Id. at 17.) The Board discussed conventional insurance
`
`cost determination techniques that the ordinary skilled artisan would have been
`
`aware of. (Id. at 20.) According to the Institution Decision, the person of ordinary
`
`skill in the art would have understood that insurance companies would want to
`
`make the “prepayment amount” disclosed in Kosaka equal to the “base cost of
`
`insurance” when utilizing Kosaka’s insurance premium determination device. (Id.)
`
`As to other specific limitations in claims 4, 5, 16 and 17, the Board again
`
`referenced Liberty’s explanations as to how such limitations are met. (Id. at 21.)
`
`Finally, the Board analyzed claim 6 as representative of claims 6-15 and 18.
`
`Concluding that the combination of Kosaka and Herrod did not disclose the
`
`limitation of claims 7 and 8 of transmitting a signal to a receiving system, the
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`Board declined to institute review with respect to those claims. However, the
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`Board instituted review with respect to the remaining claims 6, 9-10, 13 and 18
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`based on Liberty’s arguments and its finding that the evidence of record did not
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`support Progressive’s arguments.
`
`III. BACKGROUND REGARDING DETERMINATION OF AUTO
`INSURANCE PREMIUMS
`A. General Considerations
`
`Insurance is often described as the transfer of risk of financial loss arising
`
`from accidental events addressed in an insurance policy. In the case of auto
`
`insurance, the risk transferred to the insurer is the risk of a financial loss arising
`
`from the ownership and operation of the insured vehicle. The premium is
`
`calculated to reflect the total risk associated with the operation of a vehicle that
`
`potentially has multiple operators. (Ex. 2010, Miller Decl. at ¶ 23; see also Ex.
`
`1009, O’Neil Decl. at ¶ 19.)
`
`The insurance premium is determined so as to reasonably reflect both the
`
`degree of risk being transferred and the operational expenses associated with the
`
`insurance mechanism. Generally speaking, the greater the risk being transferred,
`
`the higher the premium. An insurance premium, however, reflects more than the
`
`degree of risk (or expected losses) being transferred. In addition to provisions for
`
`expected future claim costs and claim settlement expenses, an insurance premium
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`also includes provisions for expected operational and administrative expenses, and
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`the insurer’s cost of capital. (Ex. 2010, Miller Decl. at ¶ ¶ 25-26.)
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`B.
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`Insurance Regulations
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`Auto insurance rates and premiums are regulated in the United States on a
`
`state-by-state basis. While the rate regulatory laws vary from state to state, there is
`
`much in common. Nearly all states require auto insurance rates to be adequate, not
`
`excessive, and not unfairly discriminatory. These three rate standards are applied
`
`to the total premium for each auto insurance coverage and are not applied
`
`separately to each component of the premium. (Ex. 2010, Miller Decl. at ¶ 27; see
`
`also Ex. 1009, O’Neil Decl. at ¶ 20.)
`
`Insurance rates and premiums are generally considered to be fairly
`
`discriminatory if, allowing for practical limitations, any premium differences
`
`reasonably reflect differences in expected losses and expenses. The burden is
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`typically on the insurer to be able to demonstrate to the regulator that its insurance
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`rates are fairly discriminatory, and neither excessive nor inadequate. (Ex. 2010,
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`Miller Decl. at ¶ 28; see also Ex. 1009, O’Neil Decl. at ¶ 20.)
`
`Compliance with statutory rate standards typically involves consideration of
`
`a) past and prospective loss experience of the insurer, b) the experience of other
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`rate filers, c) business judgment, and d) all other relevant information and data
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`within and outside the state. Any claims data gathered by the insurer via its risk
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`classification plan, when combined with the insurer’s expense data, can be
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`important in convincing the insurance regulator that the insurance premiums in
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`question are fairly discriminatory. However, there are instances when the
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`premiums must be justified on some basis other than risk classification data
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`because credible claims data by actuarial class are either not available, or an
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`alternative approach is preferable. (Ex. 2010, Miller Decl. at ¶ 29.)
`
`C. Actuarial Classes
`In the case of auto insurance, it typically is not an insured person that is
`
`being “assigned” to an actuarial class of similar risks. Rather, the premium
`
`charged, and any future claim losses associated with the insured car, are coded to
`
`an actuarial class for each of the risk characteristics used in determining the
`
`premium for the insured car. (Ex. 2010, Miller Decl. at ¶ 30.)
`
`The premium and loss data from each actuarial class are the basis for
`
`determining risk factors (and rate factors). The risk factors derived from the
`
`actuarial class data, in conjunction with an insurer’s operating expenses, become
`
`the basis for determining rate factors that are associated with each risk
`
`characteristic. An insurer’s base rate or base premium, after adjustment using all
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`the rate factors applicable to a specific insured, results in the actual premium for
`
`each auto insurance coverage, for each specific insured auto. (Ex. 2010, Miller
`
`Decl., ¶ 32.)
`
`When selecting risk characteristics to use in a risk classification system, and
`
`generating and applying actuarial classes, actuaries consider certain actuarial
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`standards. These standards include statistical considerations such as homogeneity,
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`credibility and predictive reliability of the data. There are also some operational
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`standards for actuarial classes including: practicality, objectivity, and the inability
`
`of the insured to manipulate or misrepresent the risk characteristics. A copy of
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`standards in effect as of 1996 is attached as Exhibit 2012. (Ex. 2010, Miller Decl.
`
`at ¶ 34.)
`
`IV. THE ’970 PATENT AND CLAIM CONSTRUCTION ISSUES
`A. Background Of The Invention
`
`The ’970 patent describes information regarding “conventional methods” of
`
`determining the cost of motor vehicle insurance. (Ex. 1001 at, e.g., col. 1:9 – col.
`
`2:37.) Various traditional types of actuarial classes, based on examples of
`
`traditional risk classifications, are noted. (Id. at, e.g., col. 1:28-52.) The
`
`specification also notes that traditional risk classifications,
`
`such as age, are further broken into actuarial classes, such
`as 21 to 24, to develop a unique vehicle insurance cost
`based upon the specific combination of actuarial classes
`for a specific risk. For example, the following
`information would produce a unique insurance cost.
`[List of actuarial classes.] A change to any of this
`information would result in a different premium being
`charged, if the change resulted in a different actuarial
`class for that variable.
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`(Id. at col. 1:53 – col. 2:16.) This describes traditional “insurance rating
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`system[s]” (id. at col. 2, l. 22.), which are designed to determine “a fair cost of
`
`insurance.” (Id. at col. 2:49-50.)
`
`B.
`
`The Invention Of The ’970 Patent
`
`The invention described in the ’970 patent involves using a telematics
`
`system to gather data for use in rating insurance. (Id. at, e.g., col. 3:61 – col. 4:26.)
`
`The patent explains that new actuarial classes may be developed from the vehicle
`
`provided data, and examples are listed. (Id. at col. 4:27-51.) The new actuarial
`
`classes are “considered to be better predictors of loss.” (Id. at col. 4:52-53.) The
`
`patent teaches that data must be gathered and analyzed to determine particular
`
`actuarial classes that one may consider. (Id. at col. 5:8-11.)
`
`C. Claim Terms
`1.
`Actuarial Classes
`
`Claims 1, 6 and 18 use the term “actuarial class[es].” In each case, the claim
`
`refers to an “actuarial class of insurance.” The actuarial classes form the basis for
`
`determining an insurance rating (claims 6 and 18) or an insurance cost (claim 1).
`
`The claims specify that the actuarial classes group vehicles having a similar “risk
`
`characteristic.”
`
`The specification of the ’970 patent also emphasizes that the “new and more
`
`precise actuarial classes are considered to be better predictors of loss because they
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`are based on actual use of the vehicle and the behaviors demonstrated by the
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`driver.” (Col. 4:52-54.) This underscores that “actuarial classes,” as used in the
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`’970 patent, are based on and predict expected claims losses.
`
`This usage of the term “actuarial class” in the ’970 patent is consistent with
`
`the understanding and ordinary usage of the term by a POSITA. As stated by Mr.
`
`Michael Miller (an expert retained by Progressive):
`
`In the field of motor vehicle insurance as of 1996, a
`16.
`person of ordinary skill in the art would have understood that
`“actuarial class” had the same meaning as risk class. An
`actuarial class, or risk class, is a grouping of risks (i.e.,
`insureds) with similar risk characteristics and expected
`insurance claims loss (or insurance costs). A person of ordinary
`skill in the art would have applied actuarial standards in
`creating and evaluating a risk characteristic’s eligibility to be
`the basis for the establishment of an actuarial class. Actuarial
`class claims data is used to determine expected insurance
`claims loss. This definition is consistent with the definition in
`the Risk Classification Statement of Principles of the American
`Academy of Actuaries. A person of ordinary skill in the art in
`1996 would have adhered to this Statement of Principles.
`
`17. A risk characteristic is a measurable or observable factor
`or characteristic that has been found to be predictive of future
`insurance losses.
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`(Ex. 2010, Miller Decl. at ¶¶ 16-17.) Liberty’s expert provides similar testimony:
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`Q. Well, I’m just trying to determine what – what
`circumstances have to exist for a given group to be deemed
`properly an actuarial class?
`
`MR. MEYERS: Objection, 611-A and 403.
`
`A. Again, in order – we could start with the entire body of
`insureds divided into two groups sharing similar risk
`characteristics. Then we will do an analysis of the expected
`pure premium to determine if there are statistically significant
`differences between the two groups before we would determine
`whether or not these are appropriate actuarial classes. Other –
`other considerations would include looking at the risk
`characteristic to determine if it’s appropriate as well.
`
`Q. How do you – what analysis do you do to determine
`whether there are statistically significant risk differences?
`
`A. As I mentioned earlier, you might do a multi-variate
`regression analysis.
`
`(Ex. 2013, O’Neil depo. at 93:22-94:23.)2 Elsewhere, Ms. O’Neil stated: “An
`
`actuarial class, as I mentioned it here, is grouping – sharing similar risk
`
`
`2 In this answer, Ms. O’Neil referred to “pure premium,” which has the same
`meaning as expected losses. See, e.g., Ex. 1003 at 268, Reexamination Office
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`characteristics and presumably with differentiated loss costs.” (Ex. 2013, O’Neil
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`depo. at 91:7-11.)
`
`In view of the foregoing, “actuarial class” should be construed as follows:
`
`An “actuarial class” is a grouping of risks (i.e., insureds) with
`similar risk characteristics and expected insurance claims loss
`(or insurance costs).
`
`This construction is consistent with the specification and claims of the ’970 patent,
`
`as well as the understanding of persons of skill in the art. Further, as noted above,
`
`a person of ordinary skill in the art would require actuarial classes to meet actuarial
`
`standards.
`
`In the Institution Decision, the Board accepted Liberty’s proposed
`
`construction of actuarial class: “A combination/group/groupings related to
`
`loss/risk/safety which are determined from classifications/characteristics
`
`representative of motor vehicle operational characteristics and driver behavior for
`
`which data is gathered.” Portions of this definition seem to be drawn from
`
`language in the claims in addition to “actuarial class,” and there certainly are
`
`interrelationships between “actuarial class” and other terms in the respective
`
`
`(continued…)
`
`
`Action of June 14, 2011, at 9 (definition of pure premium); see also Ex. 2010,
`Miller Decl. at ¶ 19.
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`claims. In the context of other limitations in the claims, it is unclear whether the
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`definition of “actuarial class” in the Institution Decision differs from the definition
`
`set forth in this Response, but, in any event, Progressive proposes the definition set
`
`forth herein.
`
`2.
`
`Initial Operator Profile
`
`The Institution Decision adopts the following construction of “initial
`
`operator profile” in claim 4: “Initial files or information with respect to the
`
`operator or the insuring thereof.” (Institution Decision at 17.) The Board applies
`
`an identical construction to “initial insured profile.” (Id.)
`
`Progressive proposes that “initial operator profile” be construed to mean: an
`
`initial collection of actual driving data associated with a driver that distinguishes
`
`that driver from other drivers and is related to insurance. This construction is
`
`consistent with the specification of the ‘970 patent, which explains that the
`
`invention
`
`generate[s] actuarial classes and operator profiles relative
`thereto based upon actual driving characteristics of the
`vehicle and driver, as represented by the monitored and
`recorded data elements for providing a more
`knowledgeable enhanced insurance rating precision.
`
`(Ex. 1001, col. 5:27-32.) The Board’s construction in the Institution Decision is
`
`overly broad and fails to give meaning to the word “profile.” The mere name of a
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`driver might constitute an “initial operator profile” under the Board’s initial
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`construction.
`
`3.
`
`Insured Profile
`
`As noted above, the Institution Decision gives the same definition for “initial
`
`operator profile” and “initial insured profile.” A proper construction of “insured
`
`profile” is: basic insurance information pertaining to the insured from which an
`
`initial insurance cost is determined. Both claims 4 and 5 (where the term is used)
`
`describe that the insured profile is generated prior to monitoring the vehicle. The
`
`insured profile is “for determining a base cost of insurance.” The Board’s
`
`construction seemingly would encompass any information at all about an operator
`
`of a vehicle, and might not encompass information about the insured vehicle. It is
`
`both overly broad and overly narrow.
`
`4.
`
`Base Cost/Cost Of Insurance
`
`The Board construes “cost of insurance” to mean: “A/one or more or all
`
`cost(s) associated with insurance of the vehicle, including, but not limited to, a cost
`
`to the insured and/or insurer/underwriter associated with the insurance.” Base cost
`
`is construed similarly: “A/one or more or all cost(s), e.g., not all costs or the final
`
`or total cost or gross premium, associated with insurance of the vehicle, e.g., a cost
`
`to the insured and/or insurer/underwriter associated with the insurance.”
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`(Institution Decision at 18.) Elsewhere the Board noted that the base cost is a
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`“unique vehicle insurance cost.” (Id. at 20.) The uniqueness of the base cost stems
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`from being based on an insured profile. In the context of claims 1, 4 and 5,
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`however, the unique “cost” is referring to the insured’s cost (i.e., the premium).
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`This is the cost, for example, to which a surcharge or discount is applied (see, e.g.,
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`claim 5). A surcharge or discount would not apply to an insurer’s costs. Further,
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`the Board’s construction seemingly might encompass any cost that the insurer
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`incurs in running its business.
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`V.
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`STATEMENTS OF REASONS WHY CLAIMS 1, 3-6 AND 9-18 HAVE
`NOT BEEN PROVEN OBVIOUS
`A. Applicable Law
`1.
`Liberty Bears The Burden Of Proof
`
`The Petitioner has the burden of proof to establish that it is entitled to its
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`requested relief. 37 C.F.R. § 42.220(c). Here, Liberty must prove in the trial
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`phase that it is more likely than not that claims 1, 3-6 and 9-18 would have been
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`obvious in view of the combinations cited in the Institution Decision’s alleged
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`grounds for unpatentability.
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`2.
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`The Law Of Obviousness
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`A patent is obvious “if the differences between the subject matter sought to
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`be patented and the prior art are such that the subject matter as a whole would have
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`been obvious at the time the invention was made to a person having ordinary skill
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`in the art to which said subject matter pertains.” 35 U.S.C. § 103(a). An obvious
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`determination must be based on four subsidiary factual inquiries: (1) the scope and
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`content of the prior art; (2) the differences between the claims and the prior art; (3)
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`the level of ordinary skill in the art; and (4) objective indicia of nonobviousness.
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`KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 406 (2007) (citing Graham v. John
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`Deere Co. of Kan. City, 383 U.S. 1, 17-18 (1966)).
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`A determination of obviousness must be based on evidence available at the
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`time of invention – not hindsight. KSR, 550 U.S. at 421 (“A factfinder should be
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`aware, of course, of the distortion caused by hindsight bias and must be cautious of
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`arguments reliant upon ex post reasoning.”) (citing Graham, 383 U.S. at 36); see
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`also Amgen Inc. v. Hoffmann- La Roche Ltd., 580 F.3d 1340, 1363 (Fed. Cir. 2009)
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`(affirming determination of non-obviousness based on testimony based on
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`“hindsight, not of reasonable expectation of success at the time of the invention.”).
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`A proposed combination of prior art elements is not obvious where the
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`combination is beyond the skill of a person or ordinary skill in the art. See KSR,
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`550 U.S. at 417 (“[I]f a technique has been used to improve one device, and a
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`person of ordinary skill in the art would recognize that it would improve similar
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`devices in the same way, using the technique is obvious unless its actual
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`application is beyond his or her skill.”) (emphasis added). That is, where the
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`combination requires “more than the predictable use of prior art elements
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`according to their established functions[,]” the combination is nonobvious. Id. at
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`416 (citing U.S. v. Adams, 383 U.S. 39 (1966)); see also C.W. Zumbiel Co., Inc. v.
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`Kappos, 702 F.3d 1371, 1384-85 (Fed. Cir. 2012) (finding claim nonobvious
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`where cited prior art did not teach combination and in fact taught away from such
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`combination); accord In re Gardner, 449 F. App’x 914, 916 (Fed. Cir. 2011)
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`(nonprecedential) (“Our predecessor court held that if a proposed modification or
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`combination of the prior art would change the principle of operation of the prior art
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`invention being modified, then the teachings of the references are not sufficient to
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`render the claims prima facie obvious.”) (citing In re Ratti, 270 F.2d 810 (C.C.P.A.
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`1959)).
`
`B.
`
`The References At Issue
`1. Kosaka
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`Kosaka (Ex. 1004) is a Japanese Unexamined Patent Application Publication
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`(No. H4-182868), published June 30, 1992. The named inventor is Kosaka, and
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`the named assignee is Omron Corp., a Japanese manufacturer of automotive
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`electronic components.
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`Kosaka provides a very vague and incomplete disclosure of a risk evaluation
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`device and an insurance premium charge determination device. According to
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`Kosaka, conventional insurance premium determination arrangements do not
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`consider the role of the policyholder’s “environment and movements in governing
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`risk levels,” but “simply calculate a non-related insurance premium based on states
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`that will arise subsequent to the insurance agreement.” (Ex. 1004 at 000018.)
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`Kosaka attempts to address this problem through: (1) his risk evaluation device,
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`which evaluates risk based on the speed relative to that of a preceding moving
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`body, and (2) his insurance premium determination device which determines the
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`change in insurance premium for the insured based on the output from the risk
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`evaluation device. (Ex. 1004 at 000019.) He also discloses a means for settlement
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`of the premium change, for example, through the use of a prepayment amount,
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`such as a prepaid card which could be debited, or the use of a credit settlement
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`using a credit card charge. (Id. at 000019-000020.)
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`Kosaka’s risk evaluation device employs fuzzy logic, and his disclosure in
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`that regard is incomplete and defective. (Ex. 2016, Ehsani Decl. at ¶ 30-32.)
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`Kosaka states that his fuzzy logic device permits more accurate risk evaluation that
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`allows insurance premiums to change over time as the degree of risk to which the
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`insured is exposed varies. (Ex. 1004 at 000025.)
`
`2. Herrod
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`Herrod (Ex. 1007) is a published U.K. patent application filed by Solvit
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`Scientific Engineers Ltd. Like Kosaka, no evidence indicates that Solvit Scientific
`