When Dublin-based software company FMS looked at the vast US market for its life insurance evaluation software two-and-a-half years ago, it figured it had a good product backed by detailed industry knowledge, and everything to play for in the newly-deregulated insurance sector.

Now, FMS is facing a costly "David and Goliath" lawsuit in the complex and controversial area of business process patents, filed by Lincoln National Corp. With revenues of close to $7 billion (€7.95 billion), the Fort Wayne, Indiana, company is one of the largest US insurance firms - and a company FMS originally had hoped to have as a friendly partner.

"I'm sure they have their own good reasons for doing this, but ultimately it's a David and Goliath case," says FMS chief executive officer Mr Jim Maher.

He believes the smaller company has a superior product and was taking business away from larger competitors such as Lincoln. Both companies compete to offer software that automates the lengthy process of evaluating a person for a life insurance policy. In the past, weighing up all the variables required filling out forms, using complicated actuarial tables and calculating risk - a process that typically took up to eight weeks. Mr Maher says FMS's software can do the same task in 12-and-a-half minutes.

Lawsuits brought on the basis of patent infringement, particularly patents issued for the "business method" of using technologies in a particular way, are currently the subject of heated debate in the US.

Critics say such patents throttle new markets by giving a formidable "first-mover" advantage to the company that files first for a patent on general processes - an idea about how something might be done, rather than a concrete invention like a machine. Proponents say that, in the digital age, ideas and knowledge, not inventions, should be patentable property.

The debate has created tense arguments between leading technologists and tech industry business names after a number of technology giants - most notably, Amazon.com and Priceline.com - applied for and received business process patents, then threatened competitors with lawsuits. This week, two US congressional representatives introduced a federal Bill to limit the issuing of such patents.

Lincoln is arguing that it holds a 10-year-old patent for the process of automating insurance assessment. "Lincoln was granted this patent because we were the first to recognise the power of technology in delivering mortality risk management knowledge and tools to our customers. Our ability to do this through software, using our own intellectual property, is key to our success," said Mr Lawrence T. Rowland, president and chief executive officer of Lincoln, in a statement issued last March on the lawsuit.

But FMS, a 13-year-old company that operates in the US under the name AllFinanz, believes if it had been less successful, it wouldn't be facing a lawsuit. "In some ways, we're the victim of our own success," says Mr Maher, pointing to three recent deals with top American insurance corporations such as Travellers Insurance. "If we were somewhat on the periphery, not closing deals, we would never have been touched."

Mr Maher says FMS had been talking for over a year to Lincoln about a potential business partnership. The first it heard of the lawsuit was when another partner company sent on a Lincoln press release about the case, which the Indiana company sent out two days before St Patrick's Day.

"The rules in the US very much support the holders of the patent," acknowledges Mr Maher. But he notes the shift in sentiment occurring at the moment in the US and points to a recent Wall Street Journal article in which an officer in the US patent office admitted many patents had been issued erroneously, due to time pressures and a lack of people who adequately understand the technology sector.

Now, the office says it has a new system to evaluate patent applications. "Would Lincoln have got that patent in the new regime? I think not," says Mr Maher.

FMS also feels it can win the case, both because it says its software doesn't violate the patent, and because it believes the patent itself is invalid because "prior art" exists - another party had documented the same process before Lincoln's 1990 patent was filed for. "We are simply not infringing," says Mr Maher. "We believe we have a very strong case to suggest the patent is invalid." He says FMS continues to close deals and hasn't lost a client yet, even with the case in the background. The case itself "is absolute proof there is everything to play for", he says.

However, FMS still faces a multi-million dollar suit and its attorneys at Boston-based law firm Mintz Levin, which has a Dublin office, have counter-filed a suit against Lincoln, all of which is a serious drain on finances for a small company. "It is frighteningly expensive and it's something you don't budget for," he says, noting that the costs of such a case could destroy a business. "Certainly one thing I'd advise any technology company from Ireland entering the US market - you must have a war chest to fight these things."

FMS gained a small victory this week when a US judge agreed the lawsuit should be heard in Massachusetts, where FMS has an American office, not in Indiana, where Lincoln is a dominant presence and a huge employer. Mintz Levin attorney Mr Howard Susser says this will level the playing field for the trial and Mr Maher feels more comfortable having the case heard in a state with strong Irish roots.

But Mr Maher's hope is that the companies can settle out of court, before a drawn-out trial. "I think it makes no sense for either business to engage in high-profile, very expensive, resource-consuming litigation and therefore, if it's possible to resolve this commercially and legally, the chief executives of both businesses have an obligation to their boards and shareholders to sit down and resolve this."

Legal representatives for Lincoln were contacted, but did not comment.