United States: Post-Alice Federal Circuit Finds Internet Advertising Method To Not Be Patent Eligible

Citing the Supreme Court of the United States' Spring 2014 decision in Alice Corp. v. CLS Bank, the U.S. Court of Appeals for the Federal Circuit reversed itself and concluded that a claimed method for distributing online media to consumers by having the consumer first watch a paid advertisement is an abstract idea and not patent-eligible subject matter under 35 U.S.C. § 101.  Ultramercial, LLC v. Hulu, LLC, Case No. 10-1544 (Fed. Cir. June 21, 2013) (Lourie, J.) (Mayer, J., concurring).  This is the third time this case has been before the Federal Circuit.

Ultramercial obtained a patent claiming a method of distributing copyrighted products over the internet.  The patented method is directed to permit a consumer to receive a copyrighted product for free in exchange for viewing an advertisement, where 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, and the Federal Circuit reversed the district court, finding the claims were patent eligible.  (Ultramercial I; IP Update, Vol. 14, No. 10).  In response, WildTangent filed a petition for a writ of certiorari to the Supreme Court.  Soon after the Supreme Court issued its decision in Mayo Collaborative Services v. Prometheus Laboratories, ( IP Update, Vol. 15, No. 3) it vacated the Federal Circuit's decision in Ultramercial I and remanded the case to the Federal Circuit for further consideration in light of its Mayo Collaborative decision.

On remand, the Federal Circuit again found that the patent claimed patent-eligible subject matter.  Ultramercial II; IP Update, Vol. 16, No. 7.  In doing so the Federal Circuit explained that the asserted claims put meaningful limitations on the abstract idea of using advertising as a form of currency, specifically that the steps of the method require intricate and complex computer programming, and several steps require that the method be performed through computers, on the internet and in a cyber-market environment.  The court found that this application of the abstract idea overcomes the technical problem that viewers of copyrighted material could ignore banner ads or skip over advertising before accessing the copyrighted material.

In response, WildTangent filed another petition to the Supreme Court for a writ of certiorari.  Soon after the Supreme Court issued its decision in Alice Corp. v. CLS Bank International ( IP Update, Vol. 17, No. 7), it vacated the Federal Circuit in Ultramercial II and again remanded the case to the Federal Circuit for further consideration, this time in light of its decision in Alice Corp.

In Alice Corp. the Supreme Court explained that while computer-implemented inventions, such as computer software, may be eligible subject matter for patent protection, the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.  To be patent eligible, the claims must recite additional features or steps that are more than "well-understood, routine, conventional activities" to avoid the danger that a claim to a computer-implemented invention will effectively monopolize an abstract idea.  The Supreme Court explained that the framework provided in Mayo for distinguishing patents that claim laws of nature, natural phenomena and abstract ideas from those that claim patent-eligible applications of those concepts, apply as well to situations such as that presented in Alice Corp.  First, a court must determine whether the claims at issue are directed to one of those patent-ineligible concepts, and if so, the court next considers the elements of each claim, individually and as an ordered combination, to determine whether it recites additional elements that transform the nature of the claim into a patent-eligible application.

In Ultramercial III, the Federal Circuit reversed itself and found that under Alice Corp., the challenged claims were not directed to patent-eligible subject matter because they did not add anything inventive to the claimed abstract idea of using advertisement as an exchange or currency.

First, the court explained that the claims were directed to the abstract idea of using advertisement as an exchange or currency.  In doing so the court considered the claims and concluded they did not recite any concrete or tangible form or application to avoid the "abstract idea" characterization.  The court explained that although certain limitations, such as consulting an activity log, added a degree of particularity, the concept embodied by the majority of the limitations describes only the abstract idea of showing an advertisement before delivering free copyrighted content.  Notably, the Federal Circuit explicitly stated that it was not holding that all claims in software-based patents will necessarily be directed to an abstract idea, but that they were in this case.

Turning to the second step of the test, the Federal Circuit found that the claims did not contain an inventive concept that transformed the claimed abstract idea into patent-eligible subject matter.  Rather, the claims merely instructed the practitioner to implement the abstract idea using routine, conventional activity.  The court noted that the majority of the claimed steps were directed to the abstract idea itself, and that the few additional steps were routine, such as updating an activity log or requiring a request from the consumer to view an advertisement.  The court described the activity log step as an insignificant data-gathering step, thus adding nothing of practical significance to the underlying abstract idea.

Contrary to its Ultramercial II opinion ( IP Update, Vol. 16, No. 7), the Federal Circuit here found that the claims' invocation of the internet did not add an inventive concept.  Rather, the court explained that reciting the internet as the opening environment, to arguably limit the use of the abstract idea to a particular technological environment, was insufficient to save the claims.  The court also explained that the fact that some of the (11) claimed steps were not previously employed in this art, that fact—standing alone—was not enough to confer patent eligibility here.

The Federal Circuit also looked to the venerable machine or transformation test as a useful clue when evaluating the second step of the Alice/Mayo framework, noting that here the claims were not tied to any particular novel machine or apparatus, only a general purpose computer.  The court explained that simply adding a computer to otherwise conventional steps does not make an invention patent eligible.  Further, the court explained that the claims failed the transformation prong as no article is transformed into a different state or thing.

Concurrence

Judge Mayer, who replaced former Chief Judge Rader on the panel when he retired from the court in June 2014, issued a concurrence where he agreed with the judgment of the panel but wrote separately to emphasize three points.

First, Judge Mayer wrote that whether a claim meets the requirements of § 101 is a threshold question, one that must be addressed at the outset of litigation.  He reasoned that deciding patent eligibility at the beginning of the case is the most efficient for the parties and the courts.  This concurrence stands in apparent opposition to the panel decision in Ultramercial II, where the panel noted that finding a patent invalid under § 101 based on a Fed. R. Civ. P. 12(b)(6) motion to dismiss should be the exception, not the norm, reasoning that even though compliance with § 101 is a question of law, it is one that will often be intertwined with questions of fact.

Second (and also in apparent opposition to Ultramercial II), Judge Mayer wrote that there should be no presumption of eligibility with respect to the § 101 inquiry.  In Ultramercial II, the court found that there was a presumption that issued patents claim eligible subject matter, and that the accused infringer must provide clear and convincing evidence to prove the contrary.

Third, Judge Mayer wrote that Alice Corp., for all intents and purposes, set out a technological arts test for patent eligibility.  Judge Mayer suggested a rule that claims are impermissibly abstract if they are directed to an entrepreneurial objective, such as methods for increasing revenue, minimizing economic risk or structuring commercial transactions, rather than a technological one.  He suggested that to satisfy the technological arts test, claims must harness natural laws and scientific principles and use them to solve a technical problem.  They must moreover not only describe a technological objective, but also set out a precise set of instructions for achieving it.  Applying this test, he found that because the purported inventive concept in Ultramercial's asserted claims is an entrepreneurial rather than a technological one, they fall outside the purview of patent eligible subject matter under § 101.

Post-Alice Federal Circuit Finds Internet Advertising Method To Not Be Patent Eligible

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.