United States Court of Appeals 

for the Federal Circuit 

__________________________ 

LINCOLN NATIONAL LIFE INSURANCE 

COMPANY, 

Plaintiff-Appellee, 

v. 

TRANSAMERICA LIFE INSURANCE COMPANY, 

WESTERN RESERVE LIFE ASSURANCE CO. OF 

OHIO, 

AND TRANSAMERICA FINANCIAL LIFE 

INSURANCE COMPANY, 

Defendants-Appellants. 

__________________________ 

2009-1403, -1491 

__________________________ 

Appeals from the United States District Court for the 

Northern District of Iowa in 06-CV-110, Judge Mark W. 

Bennett. 

___________________________ 

Decided: June 23, 2010 

___________________________ 

D. RANDALL BROWN, Barnes & Thornburg LLP, of Fort 

Wayne, Indiana, argued for plaintiff-appellee. With him 

on the brief was GARY C. FURST. 

STEVEN M. BAUER, Proskauer Rose LLP, of Boston, 

Massachusetts, argued for defendants-appellants. With 
LINCOLN NATL v. TRANSAMERICA LIFE 2

him on the brief were KIMBERLY A. MOTTLEY, SANDRA J.

BADIN; and CHARLES S. SIMS, of New York, New York. Of 

counsel on the brief were JAMES R. MYERS, Ropes & Gray 

LLP, of Washington, DC, and JOHN KENNETH FELTER, of 

Boston, Massachusetts. 

__________________________ 

Before, MAYER, CLEVENGER, and MOORE, Circuit Judges. 

Opinion for the court filed by Circuit Judge MOORE. 

Concurring opinion filed by Circuit Judge CLEVENGER. 

MOORE, Circuit Judge. 

Transamerica Life Insurance Company, Western Reserve Life Assurance Company of Ohio, and Transamerica 

Financial Life Insurance Company (collectively, Transamerica) appeal from a final decision of the district court 

denying Transamerica’s motion for judgment as a matter 

of law that it does not infringe claims 35-39 and 42 of U.S. 

Pat. No. 7,089,201 (the ’201 patent). Because the evidence of record does not support the jury’s verdict of 

infringement, we reverse and remand. 

I. BACKGROUND

Lincoln National Life Insurance Company (Lincoln) is 

the assignee of the ’201 patent, which is entitled “Method 

and Apparatus for Providing Retirement Income Benefits.” The ’201 patent relates to computerized methods for 

administering variable annuity plans. An annuity is a 

contract that guarantees the payment of money to an 

annuitant upon certain intervals. Annuities are typically 

used to provide individuals with long-term economic 

protection against the risk of outliving their assets. ’201 

patent col.1 ll.30-34. 

Although a number of different types of annuities exist, the annuities relevant to this case are variable de-
3 LINCOLN NATL v. TRANSAMERICA LIFE

ferred annuities. Administration of a deferred annuity 

begins with an “accumulation phase,” during which the 

annuity owner deposits money into an account controlled 

by the insurer. Id. col.1 ll.36-42. For variable annuities, 

the deposits are invested in one or more funds representing a particular asset class, such as U.S. corporate bonds 

or money market instruments. Id. col.2 ll.10-20. The 

overall account value varies according to the performance 

of the funds in which the deposits are invested. Id. col.2 

ll.22-26. The accumulation phase is followed by a “distribution phase,” during which the insurer uses the account 

to periodically make benefit payments to the annuitant. 

The dollar amount of each benefit payment depends on 

the current value of the account and, consequently, also 

varies according to the performance of the underlying 

funds. Id. col.3 ll.18-33. Thus, given sufficiently poor 

fund performance, the dollar amount of an annuitant’s 

benefit payments could theoretically decrease to zero 

under a variable annuity option. Id. col.3 ll.43-44. 

The uncertainty associated with these benefit payments may cause an annuitant to be apprehensive about 

choosing a variable benefit option, even if a variable 

option is in his long-term best interest. Id. col.3 ll.41-43. 

The ’201 patent discloses that insurers may therefore find 

it valuable to offer annuitants a minimum benefit feature 

that guarantees a minimum payment regardless of market activity. Id. col.3 ll.41-51. The asserted claims of the 

’201 patent are directed to computerized methods for 

administering a variable annuity plan that has such a 

guaranteed minimum payment feature. 

Transamerica sells and administers Guaranteed 

Minimum Withdrawal Benefit (GMWB) riders1 that 

 1 A rider is an attachment to a base annuity contract. 
LINCOLN NATL v. TRANSAMERICA LIFE 4

guarantee its policy owners the right to receive a minimum payment regardless of market performance. On 

August 8, 2006, Transamerica filed a complaint seeking 

declaratory judgment that its method of administering 

GMWB riders does not infringe any claim of the ’201 

patent. Transamerica also sought declaratory judgment 

that the ’201 patent was invalid under 35 U.S.C. § 102, § 

103, and § 112. Transamerica did not allege invalidity 

under 35 U.S.C. § 101. Lincoln filed a counterclaim for 

infringement, and the court issued an order realigning 

Lincoln and Transamerica as plaintiff and defendant, 

respectively, for trial. 

Claim 35, the only independent claim at issue, reads 

as follows: 

35. A computerized method for administering a 

variable annuity plan having a guaranteed minimum payment feature associated with a systematic withdrawal program, and for periodically 

determining an amount of a scheduled payment to 

be made to the owner under the plan, comprising 

the steps of: 

a) storing data relating to a variable annuity account, including data relating to at least one of an 

account value, a withdrawal rate, a scheduled 

payment, a payout term and a period of benefit 

payments; 

b) determining an initial scheduled payment; 

c) periodically determining the account value associated with the plan and making the scheduled 

payment by withdrawing that amount from the 

account value; 

d) monitoring for an unscheduled withdrawal 

made under the plan and adjusting the amount of 
5 LINCOLN NATL v. TRANSAMERICA LIFE

the scheduled payment in response to said unscheduled withdrawal; and 

e) periodically paying the scheduled payment to 

the owner for the period of benefit payments, even 

if the account value is exhausted before all payments have been made. 

’201 patent col.25 ll.12-33 (emphasis added). The applicants added the final “even if” clause during prosecution 

to overcome a rejection over the prior art. 

The district court construed the disputed claim terms 

in a March 2008 order. Transamerica Life Ins. Co. v. 

Lincoln Nat’l Life Ins. Co., 550 F. Supp. 2d 865 (N.D. Iowa 

2008) (Claim Construction Order). In construing step (e), 

the court relied on Figure 6 of the ’201 patent as “most 

clearly show[ing] how the payment guarantee [of step (e)] 

works, in relation to account value.” Id. at 965. Figure 6 

illustrates the operation of the claimed systematic withdrawal program: 

In the example of Figure 6, the guaranteed withdrawal amount is 7.5% of the highest value attained by 
LINCOLN NATL v. TRANSAMERICA LIFE 6

the account. ’201 patent col.11 ll.35-36. The account 

reaches its highest value, $115,164.66, in year 4. Pursuant to the guaranteed payment feature, the account 

owner is entitled to withdraw $8,637.35 (7.5% of 

$115,164.66) in years 5 through 15, regardless of the 

account’s actual value. Thus, the scheduled payment of 

$8,637.35 is still made in years 13 through 15 even 

though the account value is exhausted, i.e., less than the 

guaranteed withdrawal amount. Id. col.11 ll.29-34. 

The court explained that Figure 6 was “consistent 

with the court's suggested reading of [step (e)] as claiming, first and foremost, a guarantee that the scheduled 

payment will be made for the period of benefit payments 

in question.” Claim Construction Order at 966. The court 

construed step (e) to mean “[a]t the regular intervals 

required by the plan, paying the scheduled payment to 

the owner for the period of benefit payments, even if the 

account value is less than the scheduled payment amount 

or zero before the payments guaranteed under the plan 

have been made.” Id. at 967. Prior to trial, the court 

clarified that step (e) does not require actual exhaustion 

of the account value; as explained in its claim construction order, the “even if” clause simply recites one of the 

circumstances in which the guaranteed payment must 

still be made, “not a requirement that the account value 

be exhausted.” Transamerica Life Ins. Co. v. Lincoln 

Nat’l Life Ins. Co., 597 F. Supp. 2d 897, 912-13 (N.D. Iowa 

2009). 

On October 30, 2008, Transamerica informed the 

court of the Federal Circuit’s en banc decision in In re 

Bilski, 545 F.3d 943 (Fed. Cir. 2008), which issued that 

day. The court asked the parties to file statements addressing the impact of Bilski on the case, if any, and both 

parties filed statements on November 18, 2008. On 

November 25, 2008, Transamerica filed a motion to 
7 LINCOLN NATL v. TRANSAMERICA LIFE

amend its complaint to assert a claim under 35 U.S.C. § 

101. The district court denied Transamerica’s motion, 

finding that Transamerica had not diligently pursued its 

claim under 35 U.S.C. § 101 and thus lacked good cause 

for untimely asserting the claim. 

The parties tried the case to a jury, which found that 

independent claim 35 and dependent claims 36-39 and 42 

of the ’201 patent were infringed and not invalid. The 

jury awarded Lincoln $13 million in damages. Transamerica filed motions for judgment as a matter of law 

(JMOL), asserting that the evidence was insufficient to 

support the jury’s finding of infringement and that the 

asserted claims were invalid under 35 U.S.C. § 103 and § 

112. The court denied Transamerica’s motions and entered a permanent injunction against Transamerica. 

Transamerica appeals. On appeal, Transamerica does 

not challenge the court’s claim constructions, jury instructions, or denial of JMOL as to invalidity. Instead, Transamerica asserts that it was entitled to JMOL of 

noninfringement of the asserted claims. Transamerica 

also asserts that the court abused its discretion in denying leave to amend its complaint to assert a claim under 

35 U.S.C. § 101. We have jurisdiction pursuant to 28 

U.S.C. § 1295(a)(1). 

II. DISCUSSION

A. Infringement 

We review a denial of JMOL according to the law of 

the regional circuit, here the Eighth Circuit. See Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1323-24 

(Fed. Cir. 2008). The Eighth Circuit “reviews de novo the 

district court’s decision to deny judgment as a matter of 

law.” Shaw Group, Inc. v. Marcum, 516 F.3d 1061, 1064 

(8th Cir. 2008). In making our determination, we consider “all the evidence in the record without weighing 
LINCOLN NATL v. TRANSAMERICA LIFE 8

credibility, while resolving conflicts and making all reasonable inferences in favor of the non-moving party.” Id.

at 1064-65. We may not set aside the jury’s verdict 

“unless there is a complete absence of probative facts to 

support the verdict and only speculation supports the 

verdict.” Id. at 1065 (citation omitted). 

The jury returned a verdict of infringement in favor of 

Lincoln, having been instructed that Lincoln could show 

infringement by proving “that Transamerica must necessarily perform or use each and every step of a claimed 

computerized method” in administering its variable 

annuity plans. J.A. 707. The district court then denied 

Transamerica’s motion for JMOL of noninfringement. In 

denying the motion, the court found that Transamerica 

“simply reasserts and repackages the same legal theories 

that the court has already rejected.” Transamerica Life 

Ins. Co. v. Lincoln Nat’l Life Ins. Co., 625 F. Supp. 2d 702, 

709 (N.D. Iowa 2009). Specifically, the court took issue 

with Transamerica’s assertion “that [performance of] step 

(e) of claim 35 requires that the account value be exhausted,” noting that it had “repeatedly construed the 

[step (e)] language at issue to identify only the most 

extreme circumstance in which the guaranteed minimum 

payment . . . would still be made.” Id. The court determined that the evidence permitted reasonable jurors to 

differ in their conclusions as to whether Transamerica 

performed all steps of the claimed method, thus rendering 

JMOL inappropriate. Id.

Transamerica argues that the district court erred in 

denying its motion for JMOL of noninfringement because 

Lincoln failed to introduce substantial evidence that 

Transamerica has practiced steps (b), (c), or (e) of claim 

35. Transamerica argues that it does not perform step (e), 

in particular, for two reasons. First, Transamerica asserts that none of its policy owners has ever had an ex-
9 LINCOLN NATL v. TRANSAMERICA LIFE

hausted account and, therefore, that it has never made 

payments after an “account value is exhausted.” Second, 

Transamerica asserts that it has not yet implemented a 

computer system that will make a payment in the event 

an account becomes exhausted. 

Lincoln responds that Transamerica’s first argument 

is impermissible in view of the court’s claim construction. 

With respect to Transamerica’s second argument, Lincoln 

asserts that the evidence is sufficient to support the jury’s 

verdict, arguing alternatively that Transamerica uses 

multiple computer systems to make a payment that 

reduces an account’s value to zero (i.e., that exhausts an 

account); that the terms of the GMWB riders obligate 

Transamerica to practice the claimed method; and that 

the “even if” clause of step (e) is a contingent limitation 

that need not be performed unless actual exhaustion 

occurs. 

We agree with Lincoln that Transamerica’s first argument is directly contrary to the district court’s construction of step (e). The court explained that step (e) 

does not require actual exhaustion; rather, step (e) recites 

making a guaranteed payment regardless of the account 

value. Under the court’s construction, Lincoln was not 

required to prove actual exhaustion to establish infringement. Instead, Lincoln was required to prove that Transamerica’s computerized method of administering GMWB 

riders must necessarily make a scheduled payment in the 

event of an exhausted account. If Transamerica’s computerized system makes a payment regardless of account 

value—i.e., if the system will make a payment to the 

owner of an exhausted account, should that circumstance 

arise—Transamerica performs step (e). Conversely, if the 

computerized system is configured such that it does not

make a payment if an account is exhausted, Transamerica 

does not perform step (e). Because actual exhaustion is 
LINCOLN NATL v. TRANSAMERICA LIFE 10

not required to infringe claim 35, Transamerica’s first 

argument does not provide any basis for reversing the 

district court’s denial of JMOL. 

Transamerica’s second argument is that it does not 

perform step (e) because its computerized system will not 

make payments if account value is exhausted. Transamerica administers its GMWB riders using a computerized variable annuity administration system called 

“Vantage.” Transamerica has customized Vantage to 

automate various features of the riders. For example, 

Vantage tracks annuity account values, calculates an 

annual withdrawal amount for each policy owner, and 

makes scheduled payments to policy owners. 

The operational details of Vantage are undisputed, 

and both parties rely on Transamerica’s Vantage functional specification as depicting system operation. The 

functional specification shows that when a policy owner’s 

account value drops to less than the scheduled withdrawal amount—that is, when the account value becomes 

exhausted—Vantage stops making payments to the policy 

owner. J.A. 21934. Transamerica’s Distribution Services 

department produces a manual check for the withdrawal 

amount and sends the check to the policy owner. Id. 

Vantage generates a letter informing the policy owner 

that his policy was terminated due to lack of account 

value and that future scheduled payments will be made 

using a Repetitive Payment System (RPS). Id. 21934-35. 

The underlying account file is then terminated in Vantage 

and transferred to RPS. Id. 21917, 21934. 

We agree with Transamerica that the undisputed evidence shows that Vantage stops making scheduled payments when an account becomes exhausted. Indeed, 

Lincoln does not appear to dispute this point. Lincoln 

argues instead that Transamerica uses “multiple com-
11 LINCOLN NATL v. TRANSAMERICA LIFE

puter systems” in connection with Vantage to make a 

final payment reducing the account value to zero. The 

evidence does not support this argument. Although 

Lincoln is correct that Vantage interacts with various 

other programs to administer the GMWB riders—for 

example, Vantage uses a program called Infopac to generate the policy termination letter—nothing in the record 

indicates that Transamerica uses a computer system to 

make a scheduled payment to the owner of an exhausted 

account. To the contrary, the functional specification 

expressly states that if there is insufficient policy value to 

process a withdrawal, “[a] manual check will be produced 

by [Transamerica’s] Distribution Services.” J.A. 21934 

(emphasis added). Lincoln points to no evidence, and we 

are aware of none, showing that Transamerica uses a 

computerized method to make the “scheduled payment to 

the owner . . . if the account value is exhausted before all 

payments have been made,” as recited by claim 35. Given 

that Transamerica’s computerized system is specifically 

configured such that it does not make a payment if an 

account is exhausted, we agree with Transamerica that it 

does not perform step (e). 

Lincoln argues alternatively that Transamerica is 

contractually obligated to practice the claimed method 

through its sale of the GMWB riders. The court instructed the jury that rider sales are “evidence of infringement to the extent that the sale of the riders or 

annuities necessarily requires or obligates Transamerica 

to practice each and every step of the claimed invention.” 

J.A. 707. Relying on this instruction, Lincoln asserts that 

the GMWB riders require Transamerica to continue 

making payments to policy owners even in the event of 

account exhaustion. Although it is true (and undisputed) 

that the GMWB riders require Transamerica to make 

payments after an account is exhausted, the fact that 
LINCOLN NATL v. TRANSAMERICA LIFE 12

such payment is required does not mean that it must be 

made by a computerized method. Claim 35 is not directed 

to the concept of guaranteed minimum payment variable 

annuities, but to a computerized method of administering 

the same. 

More fundamentally, even if the GMWB riders did obligate Transamerica to perform the claimed method, this 

would not be sufficient to establish infringement. “The 

law of this circuit is axiomatic that a method claim is 

directly infringed only if each step of the claimed method 

is performed.” Muniauction, 532 F.3d at 1328 (emphasis 

added). A contractual obligation to perform an act is not 

performance; indeed, a party could avoid infringement 

simply by breaching its contract. To the extent the court’s 

instruction to the jury implied that Lincoln could establish direct infringement by relying on the terms of the 

GMWB riders rather than on Transamerica’s actual 

performance of the claimed steps, this instruction was 

erroneous. 

Lincoln also argues that the district court construed 

the “even if” clause of step (e) to be a contingent limitation 

that need not be performed unless the condition for performance (the occurrence of an exhausted account) is 

satisfied. In other words, Lincoln argues that Transamerica’s computerized system infringes, even though the 

computerized system would not make payments to exhausted accounts, because the “even if” clause need not be 

performed unless account exhaustion occurs. This is 

simply the converse of Transamerica’s contention that 

actual exhaustion is required to prove infringement, and 

it fails for the same reasons. As the court explained, step 

(e) recites making a guaranteed payment regardless of the 

account value. Under the court’s construction, Lincoln 

was required to prove that Transamerica’s computerized 

system is configured to make payments regardless of 
13 LINCOLN NATL v. TRANSAMERICA LIFE

account value, “even if the account value is exhausted 

before all payments have been made.” ’201 patent col.25 

ll.31-33. Because Transamerica’s computerized system 

does not make a payment if an account is exhausted, the 

system does not make a guaranteed payment regardless 

of the account value. Therefore, Lincoln failed to prove 

that Transamerica performs step (e). 

The undisputed evidence of record shows that Transamerica’s computerized system for administering its 

GMWB riders does not make a scheduled payment if an 

account is exhausted. Rather, Transamerica’s computerized system stops making payments when an account 

becomes exhausted and its Distribution Services department provides a manual check to the policy owner. Because the record does not contain any evidence showing 

that Transamerica performed step (e) of claim 35, the 

“evidence adduced at trial is entirely insufficient to support the verdict [of infringement].” Shaw Group, 516 F.3d 

at 1064. The court therefore erred in denying Transamerica’s motion for JMOL of noninfringement. We need 

not reach Transamerica’s alternative arguments that it 

does not perform steps (b) or (c) of claim 35. 

B. Denial of Leave to Amend Complaint 

Transamerica also argues that the district court 

abused its discretion in denying Transamerica leave to 

amend its complaint to assert a claim for invalidity under 

35 U.S.C. § 101. In light of our determination that the 

evidence at trial does not support the jury’s verdict of 

infringement, there is no longer any case or controversy 

between these parties. Therefore, we need not reach this 

issue. 

The Supreme Court’s decision in Cardinal Chemical 

Co. v. Morton International, Inc., 508 U.S. 83 (1993) is not 

to the contrary. In Cardinal, the Court rejected our 
LINCOLN NATL v. TRANSAMERICA LIFE 14

practice of routinely vacating district court judgments of 

invalidity after determining on appeal that the asserted 

claims were not infringed. The Court explained that this 

practice created the “potential for relitigation [of the 

validity issues] and impose[d] ongoing burdens on competitors who are convinced that a patent has correctly 

been found invalid.” Id. at 101. Here, however, the 

district court never entered judgment on Transamerica’s § 

101 invalidity claim. Indeed, the court did not even reach 

the merits of the claim. Although Transamerica would 

like us to decide this validity issue in the first instance, 

we decline to do so where it was not considered by the 

district court. 

Because we conclude that Transamerica does not infringe, we need not reach the argument that the district 

court abused its discretion by refusing to grant Transamerica leave to amend its complaint to assert a claim for 

invalidity under 35 U.S.C. § 101. 

III. CONCLUSION

Because we conclude that the evidence of record does 

not support the jury’s verdict of infringement, we reverse 

the district court’s denial of JMOL of noninfringement 

and vacate the permanent injunction entered against 

Transamerica. We remand the case to the district court 

for entry of judgment of noninfringement in favor of 

Transamerica. 

REVERSED and REMANDED 
United States Court of Appeals 

for the Federal Circuit 

__________________________ 

LINCOLN NATIONAL LIFE INSURANCE 

COMPANY, 

Plaintiff-Appellee, 

v. 

TRANSAMERICA LIFE INSURANCE COMPANY, 

WESTERN RESERVE LIFE ASSURANCE CO. OF 

OHIO, 

AND TRANSAMERICA FINANCIAL LIFE 

INSURANCE COMPANY, 

Defendants-Appellants. 

__________________________ 

2009-1403, -1491 

__________________________ 

Appeals from the United States District Court for the 

Northern District of Iowa in 06-CV-110, Judge Mark W. 

Bennett. 

__________________________ 

CLEVENGER, Circuit Judge, concurring. 

I join the majority in all respects but one, which is the 

question of whether the district court erred in denying 

Transamerica’s motion for leave to amend its complaint to 

add an invalidity claim under 35 U.S.C. § 101 for claiming 

ineligible subject matter. Because the motion was offered 

well after the cut-off date for amended pleadings, and the 

circumstances of the case showed beyond any doubt that 
LINCOLN NATL v. TRANSAMERICA LIFE 2

the claim could have been raised before the deadline for 

amendments, Lincoln opposed the motion. 

On appeal, Transamerica complains about the denial 

of its untimely attempt to amend its complaint. The 

district court’s opinion denying the section 101 amendment describes in detail the reasons why Transamerica 

easily could have raised this defense in a timely fashion. 

Rather than decide whether the district court erred in 

denying Transamerica’s motion for leave to amend the 

complaint, the majority ducks the issue by saying we are 

not required to decide the question of invalidity. Whether 

or not we are compelled to adjudicate invalidity, I think 

we should review the denial of the motion to amend, and 

to that limited extent, I disagree with the majority. 

We review an order granting or denying leave to 

amend under the pertinent regional circuit law. See

Innova/Pure Water, Inc. v. Safari Water Filtration Sys., 

Inc., 381 F.3d 1111, 1124 (Fed. Cir. 2004). In the Eighth 

Circuit, denying the amendment of a complaint is reviewed for abuse of discretion. See Alternate Fuels, Inc. v. 

Cabanas, 538 F.3d 969, 974 (8th Cir. 2008). 

By no stretch of anyone’s imagination could it be said 

that the district court abused its discretion by denying 

Transamerica’s motion for leave to add a section 101 

claim. Transamerica clearly knew of the import of the 

issue to its case well before the deadline for amendments 

passed, yet waited to file its motion too late in the game.