Federal Circuit Confirms Expansive View of Patent Eligibility

In Ultramercial LLC v. Hulu LLC, 657 F.3d 1323 (Fed. Cir. 2011), Ultramercial LLC’s patent claims a method “for distribution of products over the Internet via a facilitator”. As part of the claim, the facilitating web server offers a “sponsor message” to a potential viewer, who, if he views the sponsor message, is then allowed access to a desired “media product”. The claim also recites limitations related to interactions with the sponsors both before and after delivery of the sponsor message.

WildTangent, Inc. provides access to a catalog of online games. Users can pay for access in several ways, including through the viewing of advertising.

Ultramercial sued multiple parties, including WildTangent, for patent infringement. WildTangent sought a 12(b)(6) dismissal on the grounds that Ultramercial’s patent was invalid, arguing that it did not claim eligible subject matter under 35 U.S.C. § 101. Judge Gary Klausner, of the U.S. District Court for the Central District of California, agreed that the claim was an abstract idea, dismissing without reaching the claim construction stage of the trial. A separate motion for dismissal by another defendant, Hulu.com, was denied as moot.

Ultramercial appealed to the Federal Circuit, where Chief Judge Rader, joined by Judges Lourie and O’Malley, reversed and remanded.  The court began by noting that, “[o]n many occasions,” a 12(b)(6) dismissal on § 101 grounds is premature because “a definition of the invention via claim construction can clarify the basic character of the subject matter of the invention.” However, it declined to require formal claim construction in all cases, including the instant case, though for the opposite reason of the district court: it felt able to rule that the subject matter was eligible without construing the claim.

Repeating principles previously set forth in Classen Immunotherapies and Research Corp., the panel emphasized the Patent Act’s wide boundaries. Quoting Research in particular, it once again declined to draw the borders of “abstract” “beyond the recognition that this disqualifying characteristic should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter”. And it not so subtly encouraged the defendant to try invalidation through the other validity requirements of the Patent Act, such as obviousness or insufficient disclosure, rather than focus on § 101’s “threshold check”.

Examining the Ultramercial patent in particular, the court recognized that it was based on “the age-old idea that advertising can serve as currency” but noted that it went further in claiming a “practical application”: a specific system for automated pay-by-advertising over the Internet. This was not an algorithm or “series of purely mental steps” but also required “controlled interaction with a consumer via an Internet website”. And although the patent did not disclose any particular software, the implementation would “likely [] require intricate and complex computer programming”; thus the “breadth and lack of specificity [did] not render the claimed subject matter impermissibly abstract.” The court did, however, once again strongly hint at a § 112 attack as a viable alternative.

Significance for Patent Owners

In holding an Internet content delivery system eligible under 35 U.S.C. § 101, the Federal Circuit reiterated its belief in a broad interpretation of the statute. The decision should be reassuring to software patent holders, made nervous by implications to the contrary in CyberSource Corp. v. Retail Decisions Inc. less than a month prior.  Moreover, on display a conflict within the Federal Circuit in its attempts to expand § 101 jurisprudence, if not quite as blatantly as in the“Additional Views” in Classen Immunotherapies two weeks prior. During oral arguments, WildTangent was repeatedly forced back to the questions of what a “general purpose computer” is, as opposed to the “particular machine” of the machine-or-transformation test, and whether the patent doesn’t also require additional and specialized software that makes the computer “particular.”  Although Bilski seems to have pushed the Circuit into this generous interpretation of patentability, it remains otherwise unhelpful as a guide. As such, the Federal Circuit’s own jurisprudence controls. Judging by this case as compared to CyberSource, factors which appear relevant to patentability of software of this type appear to be:

–         Can the same method be exercised completely in someone’s head or on pen and paper, or is it too complicated to do without software assistance?

–         Does the method necessarily require specialized software?

–         Is the computer or the Internet involved in the process merely as a data source?

Although stopping short of ruling that all methods using Internet websites are § 101 eligible, the opinion reinforces the general validity of software patents. Patent holders in the software industry may breathe a little easier on this front but should still ensure that they are fundamentally able to address the above factors when drafting their claims and applications.
 

Oral arguments may be heard at:

http://oralarguments.cafc.uscourts.gov/Audiomp3/2010-1544.mp3

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