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.


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.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions