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Fresh From the Bench: Recent Patent Cases From the ‎Federal Circuit

Fresh From the Bench: Recent Patent Cases From the ‎Federal Circuit
November 17, 2014


Ultramercial. – After two prior reversals of a district court's ruling that the claims do not recite patentable subject matter, the Circuit finally agrees with the district, citing Alice and striking down the patent because the claims simply instruct the practitioner to implement the ‎abstract idea with routine, conventional activity. ‎

Ultramercial, Inc. v. Hulu, LLC, and WildTangent, Inc.,
Fed. Cir. Case 2010-1544 (November 14, 2014)

This case returns to the Circuit after an up and down journey to and from the Supreme Court. The Circuit originally reversed the district court's granting of a motion to dismiss based upon the patent not setting forth patentable subject matter. WildTangent then filed a ‎petition for a writ of certiorari, and the Supreme Court vacated the Circuit's decision, remanding the case for further consideration in light of its decision in ‎ Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). ‎‎On remand, the Circuit again reversed, and the saga continued with WildTangent filing another petition for certiorari. While WildTangent's petition was pending, the Supreme Court issued its decision in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014). In that case, the Court ruled that method and system claims directed to a computer-implemented scheme for mitigating settlement risk by using a third party intermediary were not patent-eligible because the claims "add nothing of substance to the underlying abstract idea." The Court in Alice made clear that a claim that is directed to an abstract idea does not move into § 101 eligibility territory by merely requiring generic computer implementation. The Supreme Court then granted WildTangent's writ, vacated the Circuit's decision, and ‎remanded the case for further consideration in light of Alice.

The patent claims a method of distributing copyrighted materials over the Internet in which the purchaser watches an advertisement instead of paying for the materials.

The panel concludes that the claims do not transform the abstract idea into patent-eligible subject matter because the claims simply instruct the practitioner to implement the abstract idea with routine, conventional activity. None of the claimed eleven steps, viewed both individually and as an ordered combination, transform the nature of the claim into patent-eligible subject matter. Alice, quoting Mayo. The majority of those steps comprise the abstract concept of offering media content in exchange for viewing an advertisement. Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter. Instead, the claimed sequence of steps comprises only "conventional steps, specified at a high level of generality," which is insufficient to supply an "inventive concept." Alice, again quoting Mayo. Indeed, the claimed steps of consulting and updating an activity log represent insignificant data-gathering steps, CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011), and thus add nothing of practical significance to the underlying abstract idea. Further, that the system is active, rather than passive, and restricts public access also represents only insignificant pre-solution activity, which is also not sufficient to transform an otherwise patent-ineligible abstract idea into patent-eligible subject matter. Mayo.

The panel also holds that the claims' invocation of the Internet adds no inventive concept. As the Circuit has held, the use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101. See CyberSource (reasoning that the use of the Internet to verify credit card transaction does not meaningfully add to the abstract idea of verifying the transaction). Narrowing the abstract idea of using advertising as a currency to the Internet is an attempt to limit the use of the abstract idea to a particular technological environment, which is insufficient to save a claim. Alice, citing Bilski v. Kappos, 561 U.S. 593 (2010). Implementation of an abstract idea on the Internet in this case is not sufficient to provide any practical assurance that the process is more than a drafting effort designed to monopolize the abstract idea itself. Mayo. In sum, each of those eleven steps merely instructs the practitioner to implement the abstract idea with routine, conventional activities, which is insufficient to transform the patent-ineligible abstract idea into patent eligible subject matter. That some of the eleven steps were not previously employed in this art is not enough—standing alone—to confer patent eligibility upon the claims at issue.

While the Supreme Court has held that the machine-or-transformation test is not the sole test governing § 101 analyses, Bilski, that test can provide a useful clue in the second step of the Alice framework, see Bancorp Servs., L.L.C., v. Sun Life Assurance Co. of Can., 687 F.3d 1266 (Fed. Cir. 2012). A claimed process can be patent-eligible under § 101 if: "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008) (en banc), affd on other grounds, Bilski, 561 U.S. 593.

The claims of the '545 patent, however, are not tied to any particular novel machine or apparatus, only a general purpose computer. The Internet is not sufficient to save the patent under the machine prong of the machine-or-transformation test. CyberSource. It is a ubiquitous information-transmitting medium, not a novel machine. And adding a computer to otherwise conventional steps does not make an invention patent-eligible. Alice. Any transformation from the use of computers or the transfer of content between computers is merely what computers do and does not change the analysis.

The claims of the '545 patent also fail to satisfy the transformation prong of the machine-or-transformation test. The method as claimed refers to a transaction involving the grant of permission and viewing of an advertisement by the consumer, the grant of access by the content provider, and the exchange of money between the sponsor and the content provider. These manipulations of "public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances." Bilski, 545 F.3d at 963. We therefore hold that the claims of the '545 patent do not transform any article to a different state or thing. While this test is not conclusive, it is a further reason why claim 1 of the '545 patent does not contain anything more than conventional steps relating to using advertising as a currency.

Judge Mayer agrees that the claims are patent-ineligible, but writes separately to emphasize three points. First, whether claims meet the demands of 35 U.S.C. § 101 is a threshold question, one that must be addressed at the outset of litigation. Second, no presumption of eligibility attends the ‎§‎ 101 inquiry. Third, Alice, for all intents and purposes, sets 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 ‎§‎ 101.

Comment: Since Alice was decided, the Circuit has now evaluated ‎§‎ 101 eligibility in four different cases and in every instance has found the claims invalid.(In addition to Ultramercial, see Buysafe, Inc. v. Google, Inc., 765 F.3d 1350 (Fed.Cir. 2014), Planet Bingo, LLC v. VKGS, LLC, 2014 U.S.App. LEXIS 16412 (Aug. 26, 2014)(non-precedential), and Digitech Image Technologies, LLC v. Electronics for Imaging, 758 F.3d 1344 (Fed.Cir. 2014). But Ultramercial is even more significant than the other cases because not only does the panel finally find the claims at issue patent-ineligible, but it does so relying heavily upon Mayo and Bilski, even though Bilski was decided prior to both of its earlier reversals, and both Mayo and Bilski were decided before the second of the reversals. It shows that the Circuit is finally taking to heart the Supreme Court's high bar in decided ‎§ 101 issues as to ‎software patents. In addition to the repeated admonitions by the Supreme Court, it may also be a factor that former Chief Judge Rader, who was outspokenly in favor of § 101 being a coarse filter‎, is no longer on the bench.

The opinion notes that it "does 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." However, it will be a challenge for software engineers and their patent attorneys to develop software, and claim that software, in a way that will get past what has to be described as an increasingly fine § 101 filter at the Federal Circuit.