Canada: U.S. Supreme Court Orders Federal Circuit To Reconsider Online Advertising Patent Decision

In several recent cases involving subject matter as diverse as genes, medical diagnosis, and online advertising, the U.S. Supreme Court appears to be trying to narrow the boundaries of patent-eligible subject matter defined by the Federal Circuit. In Ultramercial LLC v. Hulu LLC and Wildtangent, Inc. (Ultramercial), the Federal Circuit held that a method of distributing copyrighted products over the Internet, where a consumer receives a free copyrighted product for viewing an advertisement, was patent-eligible subject matter. On May 21, 2012, the U.S. Supreme Court ordered the Federal Circuit to reconsider this decision in light of another recent U.S. Supreme Court decision, Mayo Collaborative Services v. Prometheus Laboratories, Inc. (Prometheus). In Prometheus, the Supreme Court overturned the Federal Circuit's finding of patent-eligible subject matter.  

Laws of nature, physical phenomena, and abstract ideas are long standing judicial exclusions to patent-eligible subject matter. In Prometheus, the Supreme Court ruled that a relationship between concentrations of certain metabolites in the blood and the likelihood that a dosage of a drug would be ineffective or toxic, was a law of nature, and hence ineligible for patent protection. Steps involving doctors measuring patients' metabolite levels and considering those results to make treatment decisions for autoimmune diseases were not themselves laws of nature but were well-understood, routine, conventional activity previously engaged in by scientists in the field. The Supreme Court explained that purely "conventional or obvious" activity would not normally suffice to transform a patent-ineligible law of nature into a patent-eligible application of such a law. Simply appending conventional steps, specified at a high level of generality, to laws of nature, natural phenomena, and abstract ideas cannot make those laws, phenomena, and ideas patent eligible. The Federal Circuit must now reconsider its decision Ultramercial in view of these principles. 

In Ultramercial, the Federal Circuit explained that the claimed online advertising method aims to solve problems with prior banner advertising methods, such as declining click through rates, by forcing consumers to view and possibly interact with an advertisement before permitting access to the desired media product. By its terms, the claimed invention invokes computers and applications of computer technology. The patent does not claim the age-old idea that advertising can serve as currency, and instead discloses a practical application of this idea, and a particular method of monetizing copyrighted products. The court explained that many of the steps of the claimed method are likely to require intricate and complex computer programming and specific application to the Internet and a cyber-market environment. The invention involves an extensive computer interface. There is no defined level of programming required before a computer implemented method can be patent eligible. However, the court cautioned that use of an Internet website to practice such a method is neither necessary nor sufficient in every case. In sum, the court held 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 and is patent eligible. Of course the subject matter claimed still needs to be novel, non-obvious, and sufficiently described and enabled.  

A number of technology companies disagreed with the Federal Court Ultramercial decision. At the U.S. Supreme Court, Google, Inc. and Verizon Communications Inc. filed an amicus brief arguing that a patent-ineligible abstract idea, such as the method of advertising, cannot become patent eligible by simply implementing it over the Internet. The Electronic Software Foundation, Red Hat, and an association of major technology companies including Microsoft Corp. and Facebook Inc. filed a similar amicus brief asking the court to more clearly define the boundaries of patent-eligible subject matter, and to find that the Ultramercial invention falls outside those boundaries and is thus invalid.  

By remanding the case back to the Federal Circuit for further consideration in light of Prometheus, the U.S. Supreme Court may be signalling disagreement with the Ultramercial decision, and the tests applied by the Federal Circuit to hold that the method of advertising was patent-eligible subject matter. It remains to be seen whether the Federal Circuit will reaffirm its earlier conclusion, or modify its conclusion in view of Prometheus. In the end, the Supreme Court may still eventually weigh in on whether an abstract idea is transformed into patentable subject matter when one or more method steps generally involve the Internet and an Internet website, or whether more specific technical implementation details are required in a claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Ian C. McMillan
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