OAI: Progressive Lawsuits Mark Start of Fight Over Auto Insurance Patents

    RANCHO CUCAMONGA, CA, May 09, 2012 /24-7PressRelease/ -- Progressive filed two lawsuits last week against The Hartford and State Farm over claims of patent infringement, which may be the start of a battle in which Progressive will try to use its long-running hold on pay-as-you-drive (PAYD) patents to remain the dominant player in the PAYD niche, according to Online Auto Insurance.

In the lawsuit, Progressive claims that three patents behind its usage-based Snapshot program, including a recording device that logs driving data, were violated by The Hartford and State Farm in their respective usage-based programs, TrueLane and Drive Safe & Save.

Progressive says getting inexpensive vehicle insurance is more in policyholders' control with usage-based programs, which allow drivers to observe their own driving data through a Web-based display of discounts that they may be eligible for because of roadway habits like softer braking and driving less.

"The infringement has caused and will continue to cause damage and irreparable harm to Progressive," the insurer claimed in its initial filings, which did not mention the amount of financial damages that the insurer was seeking.

A 2008 Brookings Institution report on PAYD described Progressive's long-running pursuit of patents:

"[F]or the past decade Progressive has aggres­sively sought patents around innovations in tele­matic auto insurance," the report's authors stated, adding that the insurer's ownership of the "Pay-As-You-Drive" title barred Unigard's use of it for a similar per-mile program.

Over the past two decades, an abrupt spike in the number of patents granted and sometimes broad nature of some of those patents have led to higher litigation costs, according to the report, an unsavory prospect that had kept insurers from approaching the PAYD market.

"Any insurance firm interested in offering per-mile insurance pricing understandably might be con­cerned that doing so would open it up to a possible patent infringement suit," the report's authors stated, foreshadowing last week's events. "Even if the firm believed it had developed a method of per-mile insurance pric­ing that did not violate the patent or that the patent was invalid, it might be deterred by the mere threat of a lawsuit from Progressive."

But that same report also laid out a framework of vulnerabilities within Progressive's patents, saying that the foremost challenge to them "could be brought in theory on 'obvious­ness' grounds" that require patents to be inventions that are not obvious to a person trained in the field related to the patent.

That approach may not seal a lawsuit's outcome but exposes an opening that other insurers may chance with their own usage-based programs, the report's authors stated in 2008.

"[A] rival firm wishing to offer a PAYD product may still be able to do so despite existing patents," the report stated.

Source: http://www.brookings.edu/~/media/Files/rc/papers/2008/07_payd_bordoffnoel/07_payd_bordoffnoel.pdf

Snapshot is currently available in 41 states in the U.S., most recently granting West Virginia policyholders access late last month.

TrueLane is available in five states and offers "auto policyholders the opportunity to reduce premiums by demonstrating safe driving habits through the installation of a telematics device in their vehicle."

"The Hartford denies Progressive's allegations and intends to defend the lawsuit," spokesman Thomas Hambrick said in an email.

According to State Farm's website, Drive Safe & Save is available in 13 states and uses "statistics from your car to earn real savings."

"We have just learned of this complaint," spokesman Dick Luedke said Tuesday in an email. "We will look into the issue and provide our response to the court."

State Farm "developed the optional Drive Safe & Save program to provide the opportunity for additional discounts to our customers and reinforce and reward their safe driving habits," Luedke said.

The lawsuits were filed with the U.S. District Court for the Northern District of Ohio on April 30 and are referenced within the court's system as 12cv1070 for Progressive's lawsuit against The Hartford and 12cv1068 for Progressive's lawsuit against State Farm.

For more on this and related insurance issues, head to http://www.onlineautoinsurance.com/affordable/ for access to an easy-to-use quote-comparison generator and informative resource pages.

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