Breathing new life into the patentability of business methods that include steps for programming a computer, the Federal Circuit reversed a district court’s dismissal of a patent infringement action. In Ultramercial v. Hulu, et al., Ultramercial filed a patent infringement action against YouTube, Hulu and WildTangent for infringing a patent that claims a method for distributing copyrighted products, such as music, movies, books and television shows, over the Internet where the user receives the copyrighted content for free in exchange for viewing an advertisement. The advertiser then pays the copyright owner for the copyrighted content. WildTangent filed a motion to dismiss the complaint because the patent did not cover patentable subject matter under section 101 of the Patent Act, which the district court granted. Ultramercial appealed to the Federal Circuit.
The Federal Circuit began its analysis by noting that the district dismissed the claims without formally construing the claims. Although the Federal Circuit noted that claim construction may be appropriate prior to a determination of what is eligible subject matter for a patent, it agreed with the district court that in this case claim construction was not necessary. “On many occasions, however, a definition of the invention via claim construction can clarify the basic character of the subject matter of the invention. Thus, claim meaning may clarify the actual subject matter at stake in the invention and can enlighten or even answer, questions about subject matter abstractness. In this case, the subject matter at stake and its eligibility does not require claim construction.”
The Federal Circuit then analyzed 35 U.S.C. s 101 and the United States Supreme Court’s recent decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010). The Federal Circuit noted that Section 101 is broadly permissive and there are only three categories of subject matter outside the eligibility bounds of Section 101, laws of nature, physical phenomena and abstract ideas, which may not be patented. The Federal Circuit then discussed the concept of abstractness in detail noting that the Supreme Court rejected the machine-or-transformation test as the exclusive basis for determining the subject matter eligibility of processes, although the Supreme Court noted that such a test is still a useful and important clue and investigative tool for determining that some claimed inventions are processes under Section 101. Finally, the Federal Circuit noted that, “[a]lthough abstract principles are not eligible for patent protection, an application of an abstract idea may well be deserving of patent protection.”
The Federal Circuit then turned to analyzing the patent-in-suit, noting that the claimed invention is a method for monetizing and distributing copyrighted products over the Internet. The Federal Circuit stated that the subject matter of the patent, the mere idea that advertising can be used as a form of currency “is abstract, just as the vague, unapplied concept of hedging proved patent-ineligible in Bilski.” Nonetheless, the Federal Circuit found that the patent “does not simply claim the age-old idea that advertising can serve as currency. Instead the [patent-in-suit] discloses a practical application of this idea.” The Federal Circuit then recited the steps of the process and found that “these steps are likely to require intricate and complex computer programming.”
The Federal Circuit also found that the patent does not “claim a mathematical algorithm, a series of purely mental steps, or any similarly abstract concept. It claims a particular method for collecting revenue from the distribution of media products over the Internet.” The Federal Circuit found this significant because the steps required a controlled interaction with a consumer via an Internet website, “something far removed from purely mental steps.”
The Federal Circuit found that “as a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not ‘so manifestly abstract as to override the statutory language of section 101.’” Therefore, the Federal Circuit reversed the district court’s dismissal. The Federal Circuit also specifically noted that “[t]his decision does not opine at all on the patentability of the claimed invention under the substantive criteria set forth in 102, 103 and 112.”