The U.S. Court of Appeals for the Federal Circuit held that a method for distributing online media to consumers by having the consumer first watch a paid advertisement constitutes patent-eligible subject matter under 35 U.S.C. § 101.  Ultramercial, LLC v. Hulu, LLC, Case No. 10-1544 (Fed. Cir., Sept. 15, 2011) (Rader, C.J.).

Ultramercial obtained a patent claiming a method of distributing copyrighted products (e.g., songs, movies and books) over the internet.  Under the patented method, the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.  After Ultramercial sued Hulu, YouTube and WildTangent for infringement of its patent, the district court, citing Bilski (see IP Update, Vol. 11, No. 11) granted WildTangent’s motion to dismiss on the basis that the patent did not claim patent-eligible subject matter but only an abstract idea.  Ultramercial appealed.

The Federal Circuit reversed, explaining that § 101 is a threshold check on patent eligibility and should be given wide scope to liberally encourage ingenuity.   As the Court explained the Supreme Court has over time created categories of ineligible subject matter, including abstract ideas and laws of nature.  However, the Federal Circuit has cautioned that to be patent ineligible, an abstract idea should exhibit itself so manifestly as to override the broad statutory categories of eligible subject matter and that even the application of an abstract idea may well be deserving of patent protection.

As to the specific case in issue, the Court found that although the mere idea that advertising can be used as a form of currency is not necessarily patentable subject matter, the patent discloses a practical application of this idea.   More specifically the patent overcomes the problem that viewers of copyrighted material could ignore banner ads or skip over advertising before accessing the copyrighted material, and the claimed method not only invokes computers and applications of computer technology but moreover claims a particular method for monetizing copyrighted products.  The Court noted that the application of the idea requires complex programming and that the claimed steps are applied to the internet and in a cyber-market environment involving an extensive computer interface.  Taking all of these factors into account, the Court concluded that the claims were patent-eligible.

Chief Judge Rader explained that improvements in computer technology through interchangeable software or hardware enhancements deserve patent protection because they drive innovation in every area of scientific and technical endeavor.  Finding that the claims were directed to a particular method for collecting revenue from the distribution of media products over the internet using controlled interaction with a consumer via an internet website, the Court concluded the invention, which required controlled interaction with a consumer via a website, was not directed to purely mental steps and at least passed the coarse filter of § 101.

Practice Note:   The decision does not explain the level of programming complexity needed to render a computer-implemented invention patent-eligible, nor does the decision stand for the proposition that a method requiring an interface with a website is per se patent eligible.