After twice finding the claims patent-eligible, the Federal Circuit has now found the claims in US Patent 7,346,545 to be ineligible in its third decision in the case. This is a result of the Supreme Court’s Alice v CLS Bank decision released on June 19.
The patent is directed to a method for distributing copyrighted media products over the internet where the consumer receives a copyright media product at no cost in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content. Ultramercial had sued Hulu, YouTube and WildTangent alleging infringement of the patent, although Hulu and YouTube were later dismissed from the case.
In its new decision, Federal Circuit agreed with WildTangent’s argument that the claims at issue “are directed to the abstract idea of offering free media in exchange for watching advertisements and that the mere implementation of that idea on a computer does not change the fact”.
Ultramercial had argued that the claims are not directed to the type of abstract idea that was at issue in Alice, and are directed to a specific method of advertising and content distribution that was previously unknown and never before employed on the internet.
A long journey
The case has gone back and forth between The Federal Circuit and the Supreme Court for years. The Federal Circuit had originally reversed a district court holding that granted WildTangent’s motion to dismiss Ultramercial’s patent infringement claim. The district court had held that the patent does not claim patent-eligible subject matter under Section 101. The Federal Circuit concluded that the district court erred in granting the motion to dismiss for failing to claim statutory subject matter. WildTangent requested review by the Supreme Court, which vacated the Federal Circuit’s decision and remanded the case for further considered in light of its Mayo v Prometheus decision in 2012. The Federal Circuit again reversed, and WildTangent again requested review by the Supreme Court. While its petition was pending the Supreme Court issued its Alice v CLS Bank decision on June 19. The Supreme Court granted the petition for a writ of certiorari, vacated the Federal Circuit’s decision and remanded the case for further consideration in light of Alice.
In its new decision, the Federal Circuit followed the framework set out in Alice of, first, determining whether the claims are directed to a patent-ineligible concept and, second, whether the claims do significantly more than simply describe an abstract method.
The Federal Circuit concluded that the claims are not directed to a patent-eligible concept but was careful to note that not all software-related patents are at risk because of Alice. The Supreme Court in Alice noted that all inventions “embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas”.
The Federal Circuit said: “We acknowledge this reality, and we do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.”
It continued: “But here, the ’545 claims are indeed directed to an abstract idea, which is, as the district court found, a method of using advertising as an exchange or currency. We do not agree with Ultramercial that the addition of merely novel or non-routine components to the claimed idea necessarily turns an abstraction into something concrete. In any event, any novelty in implementation of the idea is a factor to be considered only in the second step of the Alice analysis.”
The Federal Circuit also applied the machine or transformation test – which the Supreme Court noted in Alice was a “useful clue” in applying the second step of its new framework – and found the claims in the patent are not tied to any particular novel machine or apparatus.
The Federal Circuit concluded: “Because the ’545 patent claims are directed to no more than a patent-ineligible abstract idea, we conclude that the district court did not err in holding that the ’545 patent does not claim patent-eligible subject matter. Accordingly, the decision of the district court granting WildTangent’s motion to dismiss is affirmed.”
The case was before Judges Alan Lourie, Haldine Mayer and Kathleen O’Malley. Judge Mayer, who was designated to replace former Chief Judge Randall Rader, wrote a concurring opinion to emphasise three points.
“First, whether claims meet the demands of 35 USC § 101 is a threshold question, one that must be addressed at the outset of litigation. Second, no presumption of eligibility attends the section 101 inquiry. Third, Alice Corporation v. CLS Bank International…for all intents and purposes, set out a technological arts test for patent eligibility. Because the purported inventive concept in Ultramercial’s asserted claims is an entrepreneurial rather than a technological one, they fall outside section 101,” he wrote.
A strong signal
Dennis Crouch, professor at the University of Missouri School of Law, believes the decision gives a clue to future decisions.
“This decision offers a strong signal from the Federal Circuit that the court is now understanding what the Supreme Court meant in its recent quartet of Bilski, Mayo,Myriad, and Alice and that the court will support the 101 eligibility decisions being laid-down by the lower courts and the Patent Office,” Crouch wrote in a post on the Patently-O blog.
The Electronic Frontier Foundation – which filed one of the four amicus briefs received by the court, all of which were in favour of WildTangent – welcomed the decision, claiming it as a big victory for common sense and innovation.
“The ruling is also significant because the Federal Circuit upheld the district court’s decision to dispose of the case on a motion to dismiss (although the appeal dragged on for years, the trial court did a good job and threw out the case quickly),” wrote the EFF’s Daniel Nazer in a blog post. “This gives defendants a tool to dispose of cases early and makes it harder for patent trolls to use the cost of defense to extort settlements.”
Kenneth Parker and David O’Brien of Haynes and Boone noted some takeaways from the Ultramercial decision and other recent 101 decisions. One of these was: “Although the Supreme Court in Alice Corp did not quibble with the Federal Circuit’s previous holding that patents challenged under section 101 have a presumption of validity and that the challenger must prove ineligible subject matter by clear and convincing evidence, this presumption appears to be under attack by one or more Federal Circuit judges; moreover, the practical value of the presumption remains unclear given that whether a patent covers patent-eligible subject matter under section 101 is an issue of law.”
