Ultramercial Patent Found Invalid on Third Try in Federal Circuit

On November 14, 2014, the Court of Appeals for the Federal Circuit (CAFC) released its decision in Ultramercial Inc et al v WildTangent et al, No. 2010-1544 (Fed. Cir. 2014) (Ultramercial III), the CAFC’s third judgment in the patent infringement saga between plaintiffs Ultramercial Inc and Ultramercial LLC (together, Ultramercial) and defendant WildTangent Inc (WildTangent). This time, the CAFC departs from its two prior rulings and finds that the computer-implemented business method claimed in Ultramercial US Patent No. 7,346,545 (the 545 Patent) is invalid under 35 USC 101 for being directed towards an abstract idea. Ultramercial first brought suit in District Court in 2009 alleging infringement of the 545 Patent against WildTangent, YouTube, and Hulu. Hulu and YouTube were ultimately dismissed from the case. The District Court dismissed the Ultramercial claim on motion by WildTangent, finding the 545 Patent claimed an abstract idea, which is not patent-eligible subject matter under 35 USC 101. The Federal Circuit overturned the District Court decision, finding the claims patent-eligible. This Federal Circuit decision was vacated by the US Supreme Court (USSC) in light of the USSC decision in Mayo Collaborative Services v Prometheus Labs Inc (Mayo; previously reported on by E-TIPS® here) and remanded to the Federal Circuit for reconsideration, where the Federal Circuit again held that the 545 Patent was not invalid under 35 USC 101. The USSC would again vacate the decision and remand to the Federal Circuit for reconsideration; this time, in light of the USSC decision in Alice Corporation v CLS Bank International (Alice; previously reported on by E-TIPS® here). In Alice, the USSC elaborated on the two-part test for what constitutes ineligible subject matter under 35 USC 101 originating in Mayo. Patent ineligible subject matter:

• Is directed to a patent ineligible category of subject matter (laws of nature, physical phenomena, abstract ideas); and
• Is not transformed to patent eligible subject matter by additional elements in the claim.

The 545 Patent covers a method of distributing copyrighted products over the internet where the consumer watches a paid advertisement instead of paying for the product. In Ultramercial III, the CAFC concluded that an abstract idea lay at the heart of the 545 Patent - the use of advertisements as an exchange or currency. The limitations in the 545 Patent claims were found to simply instruct on the implementation of this abstract idea through routine, conventional activities, rather than transform the abstract idea into a tangible, patentable form. The CAFC cautiously acknowledged that not all claims in software-based patents will necessarily be directed to an abstract idea, and future cases may turn out differently. If nothing else, the circuitous journey of this case through the US court system may serve to document the changing perspective on patent eligible subject matter over the last 5 years. Summary by: Sumaiya Sharmeen