Digest of Ultramercial, Inc. v. Hulu, LLC No. 2010-1544 (Fed. Cir. Nov. 14, 2014) (precedential). On remand from the Supreme Court; appeal originated from C.D. Cal. Before Lourie, Mayer, and O’Malley.

Procedural Posture: Plaintiffs-Appellants Ultramercial, Inc. appealed the district court decision that U.S. Patent 7,346,545 did not claim patent-eligible subject matter under 35 U.S.C. § 101 and the dismissal of the patent infringement complaint under Fed. R. Civ. P. 12(b)(6). On appeal, the Federal Circuit reversed and remanded the district court decision. However, the Supreme Court granted certiorari, then vacated the Federal Circuit’s decision and remanded in light of Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. __, 132 S. Ct. 1289 (2012). On remand, the Federal Circuit again reversed the district court’s decision. The Supreme Court again granted certiorari, then vacated the Federal Circuit’s decision and remanded the case in light of Alice Corp. v. CLS Bank Int’l, 573 U.S. __, 134 S. Ct. 2347 (2014). On remand, the Federal Circuit found that the patent in suit did not claim patent-eligible subject matter and affirmed the district court’s decision.

  • Patent-Eligible Subject Matter: The patent in suit was directed to a method for distributing copyrighted media products over the Internet where the consumer receives content at no cost, in exchange for viewing an advertisement. Following the two-step framework in Alice, the Federal Circuit first found that the claims of the patent in suit concerned an abstract idea (using “advertisement as an exchange or currency”), and second, that the claims did not do “significantly more than simply describe the abstract method.” In this regard, the Federal Circuit disagreed with Ultramercial that the “addition of merely novel or non-routine components to the claimed idea necessarily turns an abstraction into something concrete.” Instead, the Federal Circuit found that the claims do not transform the abstract idea into patent-eligible subject matter because the recited steps only instruct the user to implement the abstract idea with “routine, conventional activity.” Further, the Federal Circuit noted that the machine-or-transformation test can provide a “useful clue” with respect to the second step of the Alice framework, and reached the same conclusion, noting that the claims “do not transform any article to a different state or thing.” The inclusion of the Internet in the claims did not add any inventive concept.

Mayer (concurring):

  • The alleged inventive concept of the asserted claims are entrepreneurial rather than technological and therefore the claims are ineligible for patent protection under 35 U.S.C. § 101. Judge Mayer wrote separately to emphasize that 35 U.S.C. § 101 is a threshold question that must be addressed at the outset of litigation, that no presumption of eligibility applies to the § 101 inquiry, and that Alice sets a technological arts test for patent eligibility.