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`UTILITY
`Attome Docket No. 85160.924
`PATENT APPLICATION
`David CHAO
`TRANSMITTAL
`Method and System for Managing Distributor Information
`
`a. D Computer Readable Form (CRF)
`
`b. Specification Sequence Listing on:
`i. 0 CD-ROM or CD-R (2 copies); or
`i i. 0
`paper
`Statements verifying identity of above copies
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`.-I
`......
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`~==~==============================~==~============~~==;=~~==;=~==~~--~
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`...
`- '
`.-1
`Assistant Commissioner for Patents
`....... __ _
`.....
`APPLICATION ELEMENTS
`ADDRESS TO:
`Ulc:::::J -
`Box Patent Application
`......
`1~~~~~~~~~~~~~~~~~~~~~~~~L--=== __________ ~~~~~~22~~ ______ ~'~ 'n
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`..
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`rg:tl4
`See 37 CFR 1.27.
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`[Total Pages ~ I
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`- Cross Reference to Relate(! Applications
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`• Background of the Invention
`• Brief Summary of the Invention
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`·Claim(s)
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`of prtor appltcabon No.:
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`Box 5b, is considered a part of the disclosure of the accompanying continuation or divisional application and Is hereby Incorporated by reference.
`The
`be relied
`when a
`has been
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`or D
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`Correspondence address below
`
`Name
`
`California
`(310)286-0377
`
`No.
`
`Time will vary depending upon the needs of the individual case. Any comments on
`Statement:
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`form should be sent to the Chief Information Officer. U.S. Patent and Trademark Office, Washington, DC
`the amount of time you are required
`20231. DO NOT SEND FEES OR !";UIMI"L.I=.I t:u FORMS TO THIS ADDRI:SS. SEND TO: Assistant Commissioner for Patents, Box Patent Application,
`Washington, DC 20231.
`
`Ex. 1002 001/597
`
`

`

`UNITED STATES PATENT APPLICATION
`
`FOR
`
`METHOD AND SYSTEM FOR
`MANAGING DISTRIBUTOR
`INFORMATION
`
`INVENTORS:
`
`DAVID CHAO
`BRIAN BLOUNT
`CHARLES ERICKSON
`SHARIGHARAVY
`CHENGZHOU
`JOSHUATOUB
`
`PREPARED BY:
`
`THE HECKER LAW GROUP
`1925 Century Park East
`Suite 2300
`Los Angeles, CA 90067
`
`(310) 286-0377
`
`85160.924
`
`Express Mail # EL705171068US
`
`Ex. 1002 002/597
`
`

`

`FIELD OF THE INVENTION
`
`This invention relates to the field of computer technology. More
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`specifically, the invention relates to a method and system for managing
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`distributor information.
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`5
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`Portions of the disclosure of this patent document contain material that is
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`subject to copyright protection. The copyright owner has no objection to the
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`facsimile reproduction by anyone of the patent document or the patent
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`disclosure as it appears in the Patent and Trademark Office file or records, but
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`otherwise reserves all copyrights whatsoever.
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`, 10
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`BACKGROUND
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`Managing sales and distribution channels has become a difficult task in
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`today's business environment where it is necessary to quickly and fairly
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`administer incentives for salespeople and distribution channel partners while
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`coping with regulatory issues. To keep revenues growing and keep up with
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`15
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`customer demands, financial services providers have to move quickly even when
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`regulation, competition and new sales distribution channels inhibit growth.
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`Management is expected to provide new opportunities for improved revenues
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`and margins, while providing customers with better, faster information and
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`services.
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`The distribution channel model within the financial services industry is
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`very complex. Products are sold across multiple distribution channels and the
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`workforce is very fluid, with individual distributors working for multiple
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`companies and engaging in multiple agreements with service providers. There
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`5
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`are regulatory constraints on the sales force in that all distributors who sell
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`products must be licensed and appointed, or authorized, to sell those products.
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`Financial services companies must track all of this information about their sales
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`force, maintain a history of all of this information, provide incentive based
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`compensation to their sales force, and calculate their compensation based upon
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`numerous variables. Consequently, any plan for distribution channel
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`management must consider the number of channels, the number of distributors,
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`compensation complexity, regulatory and licensing requirements and the
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`number and types of products that will be sold.
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`Financial service companies are being driven by increased competition to
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`consider the use of independent agents in place of captive sales staff. Firms may
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`wish to enhance and reward cross distribution channel interactions. They must
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`be able to enhance distributor reporting and communication and effectively
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`manage independent brokers and captive sales staff. They must reduce the time
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`required to market new products and implement new compensation plans and
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`differentiate themselves based on services offered to customers. In addition, they
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`must be able to rapidly integrate new distribution channel acquisitions and grow
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`distribution capabilities, while reducing administration costs.
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`Cost avoidance is essential as mergers and acquisitions have led to many
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`disparate systems, some of which are antiquated. Firms must reduce
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`implementation time for new products and compensation plans on these
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`antiquated systems and reduce the potential for overpayment. The goal must be
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`a reduction in the overall cost of administration. Accordingly, these companies
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`must interact with the producers (of sales) using preferred methods and quickly
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`10 model new and creative compensation plans, while consolidating compensation
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`administration systems.
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`In order to provide sales representatives with an incentive to sell as much
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`as possible, or to sell more of a desired product or products at certain prices,
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`sales organizations create incentive plans where commissions are provided or
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`offered to the sales representatives when specific sales goals or targets are
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`achieved during particular period of time. In addition, an incentive plan may
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`apportion credit to everyone on a sales representative's sales team, to the
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`representative's manager, or someone other than the sales representative himself.
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`Sales representatives typically receive compensation based on a salary, the hours
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`worked, and/ or on the goods or services sold. When basing compensation on
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`transactions, specifically on the goods or services sold, sales representatives
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`receive a commission that can be based on profits, net sales, the number of
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`products sold, or some other variable. Other primary compensation includes
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`gross dealer concessions. Secondary compensation includes expense allowances,
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`persistency bonuses and overrides that can be allocated among sales teams and
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`accumulated over time if desired.
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`Sales compensation for direct and indirect channels can be one of the most
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`effective levers for aligning sales performance with business goals.
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`Unfortunately, designing and administering effective incentive programs is a
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`10
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`difficult management challenge. The management of a business can spend a
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`great deal of time and money in developing incentive plans. In the prior art, the
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`creation and distribution of incentive plans is a slow process that is prone to
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`error. It can take months to implement a new compensation plan, and
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`dependencies on computer software can frustrate sales managers who want to
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`15 make even simple changes. Moreover, a lack of measurement tools can make it
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`impossible to develop a "closed loop", continuous improvement process.
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`Businesses must be able to design, process, and communicate sophisticated
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`incentive programs that drive revenue growth across all sales channels.
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`Businesses need to streamline the administration of quotas, territories, and
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`commissions, and also require tools to measure and improve the effectiveness of
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`incentive programs. This would greatly simplify the management challenge of
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`aligning tactical business performance with strategic objectives, making it
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`possible to react more quickly and effectively to changes in market and
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`competitive conditions.
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`Quotas are a necessary component of most sales compensation plans, yet
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`they are notoriously difficult to administer, especially when they involve
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`multiple hierarchies. Not only is it easy to introduce problems like double
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`counting and under- or over-payment, but also changes typically require long
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`turnaround times while they are implemented by changes in computer software.
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`The management of sales quotas is difficult and there is a need to be able to
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`10 manage them easily and accurately, allowing business users to assign quotas by
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`territory or position and across multiple hierarchies. Managers also require a
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`capability to accurately track sales results and forecast future performance.
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`Needed elements include the ability to tie quotas between positions and sales
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`teams or positions and territories, make sales projections, a provision for quick
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`and easy quota setting and editing, and a simple interface for use from the field.
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`Managing sales territories involves analyzing past results, assigning
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`territories, and forecasting future sales performance. For most organizations, it is
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`a difficult and time-consuming process with the result that it is commonly only
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`undertaken once a year. Unfortunately, market conditions change continuously,
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`making it practically impossible to keep sales territories aligned with business
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`needs for more than a short period of time. A more automated process for
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`territory management is needed to allow large sales organizations to keep up
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`with the market.
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`Another need of firms in financial services is an ability to manage sales
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`producer payment accounts by defining multiple accounts per representative,
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`setting up payment rules for each account and procedures for adjustments. Loan
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`issuance against customer accounts must also be managed. Loan and repayment
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`schedules, and appropriate records, must be maintained. As a part of this
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`activity, it is necessary to track eligible compensation against parameters
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`established for the loan and to be able to track collection of the loan and initiate
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`charge-back and from the producer if appropriate.
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`In the area of distributor administration, firms also would like to manage
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`a shared repository for all producer information, including personal information,
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`professional information and preferences. There is a need to provide a view of
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`the roles played by individuals with an organization, and active selling
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`agreements and reporting relationships. Firms would like a centralized
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`distributor repository in order to be able to view, report and compensate
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`producer relationships individually and holistically. In addition, they must
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`reduce errors or miscalculations leading to overpayment. At the same time,
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`these firms must assist new agent distribution channels in learning how to sell
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`new types of products and create new distribution capabilities for existing
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`products.
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`Credential management is a critical issue for many firms. They must track
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`5
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`professional accreditation including licenses, appointments, National Association
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`of Securities Dealers (NASD) registration and continuing education requirements
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`for the maintenance of these professional accreditations to ensure that they are
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`represented by appropriately credentialed representatives. This need is made
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`more acute by constantly changing government rules and regulations, as well as
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`by different regulations imposed by the different jurisdictions in which a firm
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`operates. Firms must determine when renewal processing is required and
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`manage new and renewal application processes to ensure regulatory compliance
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`in every jurisdiction. A further problem is presented by representatives who
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`may move from jurisdiction to jurisdiction in the course of their representation of
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`a firm. Further, there is substantial turnover in representation resulting in a
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`continuing need to ascertain the credentials of new representatives as well as to
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`maintain contact with former representatives in the event that issues arise from
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`their former representation.
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`In order to appropriately manage their representatives, firms must also be
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`able to create customized contracts and selling agreements by combining
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`reusable compensation components and personalizing agreement templates to fit
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`individual producers. A selling contract defines a hierarchy of sales people that
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`can sell products under that contract and it defines what products can be sold
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`under that agreement. The selling contract also specifies commission schedules
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`and identifies which sales people participate under a particular commission
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`schedule. As multiple versions of such agreements may come into use over time,
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`a procedure is needed to allow multiple users to maintain agreements through
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`versioning, or version control, and a method must be provided to manage the
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`approval process for agreement components and templates.
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`Any distribution management channel solution, in order to be useful,
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`must have a capability for error correction, including manually inputting and
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`adjusting all transaction information, making retroactive adjustments and
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`viewing and managing ledger items. Other features that are desirable include
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`the ability to cancel and rerun transactions.
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`Many financial services firms would like to be able to communicate
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`distribution channel management information over the Internet so that
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`producers can view the state of their relationship with a firm, including profile
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`information, licenses, appointments, product information, contract and
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`compensation information. Firms would also like to be able to perform
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`modeling and "what if" analysis and have the ability to capture historical data to
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`make strategic decisions about the effectiveness of future plans. A set of Web-
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`based incentive management products that can be deployed to practically any
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`sales or distribution channel would be useful. Such tools could greatly simplify
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`the burden of designing, forecasting, launching, measuring, and refining
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`incentives programs.
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`5
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`Computer software is necessary to implement the solution to these
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`problems and fulfill the perceived needs just described. Such software
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`commonly utilizes multiple related functions and data structures. To
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`encapsulate these related functions and data structures, the software often
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`utilizes a standard object oriented programming (OOP) language approach.
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`In conclusion, there is a need for a solution, implemented on a computer
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`in an object oriented programming environment, that manages the contracts
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`between the manufacturers of a product, which may include financial services,
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`15
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`and the distributors of their product in an industry where there is multiple
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`channel selling, a fluid workforce, and regulatory constraints. This solution
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`should track information, such as contact points, payment methods, and the
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`organizational hierarchies, on all parties in the system. It must manage
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`regulatory information and ensure that distributors are licensed and appointed
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`20
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`to sell the products manufactured, or distributed, by the provider. In addition,
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`the solution must allow for compensation configuration and provide financial
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`services companies with a toolkit for creating and modeling their complex
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`commission schedules used to compensate their sales forces. This should include
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`a provision for charge-back of commissions if appropriate. Also, the solution
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`must model contracts between the financial services company, or provider, and
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`the distributors who sell the products. The solution must calculate compensation
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`for all distributors and should allow for access through the Internet.
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`SUMMARY OF THE INVENTION
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`The invention provides a method and system for managing contracts
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`between manufactures of a product and the distributors of their product in an
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`industry comprising multiple channel selling, a fluid workforce, and regulatory
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`5
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`constraints. An embodiment of the invention provides a system that enables
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`financial services companies to track information about their sales force,
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`maintain a history of all of the information, provide incentive based
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`compensation to their sales force, and calculate their compensation based upon
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`numerous variables. The system referred to hereinafter as Distributor
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`10 Management System Suite (DMSS) comprises a suite of applications that provide
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`tracking information, such as contact points, payment methods, and
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`organizational hierarchies on all parties in the system, managing regulatory
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`information and ensuring that distributors are licensed and appointed to sell the
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`products manufactured by the provider. The DMSS provides financial services
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`15
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`institutions with the means to maintain distributor records, contracts, and
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`commissions. The DMSS includes components for managing information related
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`to distributors, validating and tracking licenses, creating customized contracts,
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`and maintaining compensation structures. The information stored in the DMSS
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`database includes contract components and rules, distributor financial
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`information, bonus schedules, and license and appointment data.
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`In an embodiment of the invention, the DMSS allows for configuring
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`compensations, providing financial services companies a toolkit for creating and
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`modeling their complex commission schedules used to compensate their sales
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`force. The DMSS provides modeling capabilities for agreements and contracts
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`5
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`between a financial services company or provider and the distributors who sell
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`products. In an embodiment of the invention, the DMSS calculates
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`compensations for all distributors, processes payment and manages dept.
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`In an embodiment of the invention, the DMSS comprises several
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`components comprising management modules, a backbone, one or more data
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`10
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`processing engines, databases, and storage management components. The
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`backbone allows for data exchange between components of the DMSS
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`comprising module-to-engine and engine-to-database data exchange.
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`In an embodiment of the invention, the DMSS comprises data processing
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`engines. These system components are designed to draw information from the
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`15 DMSS databases, process the information, and store the result in a database for
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`further use by the DMSS modules and engines.
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`In an embodiment of the invention, the DMSS is composed of several
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`modules comprising a distributor administration module, a license and
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`appointment module, a selling agreements module, a debt management module,
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`20
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`and a payment module. These modules interact with the backbone and engines
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`to maintain relationships between financial services institutions and their
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`distributors.
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`DESCRIPTION OF THE DRAWINGS
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`Figure 1 shows a block diagram representing an embodiment of a system
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`that utilizes the Distributor Management System Suite (DMSS).
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`Figure 2 comprises a flowchart showing the process of communicating
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`5
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`between modules, the data processing engine, the DMSS backbone and the
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`databases in an embodiment of the invention.
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`Figure 3 show a block diagram representing an example of interactions
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`occurring within DMSS modules and engines in an embodiment of the invention.
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`Figure 4 shows a hardware environment for executing one or more
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`aspects of the invention.
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`DETAILED DESCRIPTION
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`The invention provides a method and system for managing distributor
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`5
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`information. In the following description, numerous specific details are set forth
`
`in order to provide a more thorough understanding of the invention. It will be
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`apparent, however, to one skilled in the art, that the invention may be practiced
`
`without these specific details. In other instances, well-known features have not
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`been described in detail in order to avoid unnecessarily obscuring the invention.
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`System Overview:
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`An embodiment of the invention comprises an extensible method for
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`managing relationships between institutions (e.g., suppliers/ manufacturers) of a
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`product or service and the distributors of their product. Aspects of the invention
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`are targeted at industries where there is multiple channel selling, a fluid
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`15 workforce, and regulatory constraints upon products sales. For example, systems
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`embodying the invention provide a way to manage the agreements that financial
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`services companies have with the distributors who sell their products. Thus,
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`organizations such as life insurances companies may utilize embodiments of the
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`invention to manage the sale and distribution of life insurance plans in a way
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`20
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`that coincides with the regulatory constraints of government organizations.
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`Such companies can utilize embodiments of the invention to track
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`information about the company's sales force, maintain a transaction history of
`
`the information associated with multiple products, provide incentive based
`
`compensation to the company's sales force, and calculate sales force
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`5
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`compensation based upon numerous variables. For example, the system referred
`
`to hereinafter as Distributor Management System Suite (DMSS) comprises a suite
`
`of applications that provide tracking information, such as contact points,
`
`payment methods, and organizational hierarchies on all parties in the system,
`
`managing regulatory information and ensuring that distributors are licensed and
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`10
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`appointed to sell the products manufactured by the provider.
`
`In one embodiment of the invention, DMSS comprises a suite of multiple
`
`engines and modules each configured to provide functionality that helps manage
`
`the flow of information between distributors and suppliers. Generally, DMSS
`
`provides users with a mechanism for managing information related to
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`15
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`distributors, validating and tracking licenses, creating customized contracts, and
`
`maintaining compensation structures. To perform such functions the system
`
`configured in accordance with one embodiment of the invention stores
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`information such as contract components and rules, distributor financial
`
`information, bonus schedules, and license and appointment data. The engines
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`20
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`and modules of DMSS may, for example, be configured to perform at least the
`
`following functions:
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`1)
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`Provide financial services institutions with the means to
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`maintain organization hierarchies associated with parties on
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`the system (e.g., distributor records), track information such
`
`as contracts, and payment methods (e.g. how a distributor is
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`5
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`paid).
`
`2)
`
`Manage regulatory information and ensures that distributors
`
`are licensed and appointed to sell the products
`
`manufactured by the provider.
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`3)
`
`Perform compensation configuration. It provides financial
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`services companies a toolkit for creating and modeling their
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`complex commission schedules used to compensate their
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`sales force. For example, the system may calculate
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`compensation for all distributors by building on top of a
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`commission engine and using the engine, the commission
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`models, and the agreement models to calculate the
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`compensation for all of its sales force.
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`4)
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`Models agreements or contracts between the financial
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`services company or provider and the distributors who sell
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`the products. These agreements are termed 'Selling
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`Agreements'. A selling agreement defines a hierarchy of
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`sales people that can sell products under that contract, it
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`defines what products can be sold in that agreement, it
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`defines what commission schedules can be used in that
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`agreement, and it defines which sales people participate in
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`which commission schedule. The DMSS may utilize the
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`terms defined in selling agreements to calculate
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`compensations for all distributors.
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`5)
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`Managing information related to distributors, validating and
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`tracking licenses, creating customized contracts, and
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`maintaining compensation structures. The information
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`stored in the DMSS database comprises information such as
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`contract components and rules, distributor financial
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`information, bonus schedules, and license and appointment
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`data.
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`6)
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`Manages payment and debt to distributors / sales
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`representatives (e.g., net-pay and debt management).
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`In accordance with one embodiment of the invention DMSS is built on top
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`of a commission engine configured to model and calculate commission for the
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`sales force. A commission engine takes two inputs, a commission model and a
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`set of transactions, and generates ledger items (that correspond to payments) as
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`output. Each transaction represents a physical sales transaction, such as
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`distributor selling a life insurance policy. The commission model represents two
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`critical pieces of data: the sales team hierarchy and the commission schedules.
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`The sales team hierarchy comprises a hierarchy of all sales people that will be
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`responsible for a transaction. The commission schedules define formula for
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`translating transactions into ledger items. Commission schedules may be
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`5 modeled through quota, bonus, and plan objects. The commission model
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`utilized in one or more embodiments of the invention is described in further
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`detail in pending patent application serial number 09/081857, entitled "Method
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`and Apparatus For Determining Commission", which in incorporated herein by
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`reference.
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`DMSS complements the commission engine in that it provides a
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`mechanism for modeling selling agreements with commission models. In
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`accordance with one embodiment of the invention, at least one commission
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`model exists for each selling agreement in DMSS. Agreement hierarchies are
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`modeled within the sales team hierarchy. The agreement commission schedules
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`are stored in accordance with one embodiment of the invention in the
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`commission model's quota, bonus, and plan objects.
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`The commission schedules used in an agreement are often the same or
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`similar across agreements. Therefore, the agreements are put together from
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`contract kits. A contract kit contains a set of commission schedules (also referred
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`to as compensation components) that can be used within an agreement. Each
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`compensation component and contract kit is versioned, and the compensation
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`component contains the commission schedule information needed to generate a
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`complete commission schedule in the commission model. Each agreement is
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`then created from one contract kit, and when the agreement is created a user can
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`selected which components from the kit to include in the agreement. When a
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`new version of a component or kit is created, a user can select to cascade the new
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`version to all the agreements that use it, or to leave the agreement using the old
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`version.
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`DMS provides additional functionality by allowing dependencies between
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`models through linked hierarchies and pooling agreements. It is often common
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`for one party to receive credit or rollup from somebody's work in a different
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`agreement. This is accomplished through linked hierarchies. A distributor (Ted)
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`in one agreement (AG1) make be linked to another distributor (Fred) in another
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`agreement (AG2). This allows transactions for Fred and all of his descendants to
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`also be credited to Ted.
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`It is also common for multiple parties to want to share work across
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`agreements. For example, one may wish to use one quota to calculate
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`qualification on a quota level, and another quota to calculate payout. In this
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`example, one would want several parties performance to contribute to the
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`qualification quota, even parties in different agreements. Pooling agreements
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`provide this functionality, by pooling work from different agreement
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`participants from potentially different agreements into one quota. An extensible
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`object model in accordance with one embodiment of the invention provides a
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`framework for representing such agreements.
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`System Components:
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`Figure 1 shows a block diagram representing an embodiment of a system
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`5
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`that utilizes the Distributor Management System Suite (DMSS) 105. As shown in
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`Figure 1, the DMSS comprises management modules 110, a backbone 120
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`allowing data exchange between applications and databases, and between
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`applications, a commission engine 125, a number of additional data processing
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`engines 140, and data storage and storage management components 130. The
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`10 DMSS is also configured to allow for the addition of more applications and
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`plugins 110 to provide additional services.
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`In an embodiment of the invention, the DMS comprises several modules
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`and applications. In this example, the system is used by financial organizations
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`to manage sales agreements, distributor credentials, and sales compensation.
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`15 However, the reader should note that the system embodying the invention