Ultramercial, Inc. v. Hulu, LLC
112 U.S.P.Q. 2d (BNA) 1750, 772 F.3d 709, 2014 U.S. App. LEXIS 21633 (2014)
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Rule of Law:
A patent claim for a method that implements an abstract idea on a generic computer is not patent-eligible subject matter under 35 U.S.C. § 101 unless it includes an 'inventive concept' sufficient to transform the abstract idea into something significantly more than the idea itself.
Facts:
- Ultramercial owns U.S. Patent 7,346,545 (the '545 patent).
- The patent describes a method for distributing copyrighted media products like text, music, or video over the Internet.
- Under the patented method, a consumer can access the copyrighted media at no cost.
- To gain access, the consumer must first view an advertisement from a sponsor.
- The sponsor, in turn, pays for the copyrighted content that the consumer receives.
- The patented method comprises eleven steps, including receiving media, selecting an ad, offering the media on a website, restricting public access, and updating an 'activity log' to track ad views.
- The process is facilitated over the Internet.
Procedural Posture:
- Ultramercial sued WildTangent and others in the U.S. District Court for the Central District of California for patent infringement.
- WildTangent filed a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6), arguing the patent did not claim eligible subject matter under 35 U.S.C. § 101.
- The district court (trial court) granted WildTangent's motion to dismiss.
- Ultramercial (appellant) appealed to the U.S. Court of Appeals for the Federal Circuit (intermediate appellate court), which reversed the dismissal.
- WildTangent (petitioner) appealed to the U.S. Supreme Court (highest court), which vacated the Federal Circuit's decision and remanded for reconsideration in light of Mayo v. Prometheus.
- On remand, the Federal Circuit again reversed the district court's dismissal.
- WildTangent again appealed to the U.S. Supreme Court, which vacated the second Federal Circuit decision and remanded for further consideration in light of Alice Corp. v. CLS Bank Int'l.
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Issue:
Does a patent for a method of distributing copyrighted media over the Internet, which requires a consumer to view an advertisement to gain access to the media, claim patent-eligible subject matter under 35 U.S.C. § 101?
Opinions:
Majority - Lourie, J.
No. The patent does not claim patent-eligible subject matter because it is directed to an abstract idea without an inventive concept sufficient to transform that idea into a patent-eligible application. Applying the two-step framework from Alice Corp. v. CLS Bank Int'l, the court first determined that the patent's claims are directed to the abstract idea of 'using advertising as an exchange or currency.' The eleven steps described in the patent merely recite this abstract concept. Second, the court found that the claims lack an 'inventive concept' because they do nothing more than instruct the practitioner to implement the abstract idea using routine, conventional activities on a generic computer over the Internet. Limitations like updating an activity log are insignificant data-gathering steps, and specifying implementation on the Internet is merely an attempt to limit the abstract idea to a particular technological environment, which is insufficient to confer patent eligibility.
Concurring - Mayer, J.
No. The claims are patent-ineligible. The concurrence emphasizes three points: 1) Patent eligibility under § 101 is a threshold question that should be decided at the outset of litigation to conserve judicial resources and curb vexatious lawsuits. 2) There should be no presumption of patent eligibility because the Patent Office has historically applied an insufficiently rigorous standard. 3) The Supreme Court's decision in Alice effectively established a 'technological arts test,' which Ultramercial's patent fails because its purported inventive concept is an entrepreneurial or business-related one, not a technological improvement to computer functioning or any other technical field.
Analysis:
This decision, applying the Supreme Court's Alice framework, significantly narrowed the scope of patent-eligible subject matter for software and business method patents. It solidified the principle that simply implementing a long-standing abstract idea (like ad-supported content) on a generic computer is insufficient for patentability. The ruling provides defendants with a powerful basis to seek early dismissal of patent infringement lawsuits on the pleadings, thereby impacting litigation strategy and the valuation of many existing software patents. It reinforces that an 'inventive concept' must be something more than the abstract idea itself applied with conventional technology.
