United States: Section 101 And Software Patents: Abstract Or Not?

Three recent cases remind the patent trial bar that, although software patents can be subject to challenge under Section 101 of the Patent Act, they are not automatically invalid. In Ultramercial, Inc. et al. v. Wildtangent, Inc., et al., Appeal No. 2010-1544, 2014 WL 5904902 (Nov. 14, 2014), the Federal Circuit affirmed Ultramercial's video advertising patent was invalid under Section 101. Two district court decisions earlier in the month, however, rejected Section 101 challenges to software patent claims. These three cases provide guidance as to how to frame (or resist) Section 101 challenges.

Under Section 101 of the Patent Act, a patent can be had on "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof[.]" 35 U.S.C. § 101. The Supreme Court, however, has reaffirmed that Section 101 contains an important, implicit limitation. "Laws of nature, natural phenomenon, and abstract ideas are not patentable," Alice Corporation Pty. Ltd. v. CLS Bank Int'l, et al., __ U.S. __, 134 S.Ct. 2347, 2354 (2014) (citations omitted).

Under Alice, a two-step test applies for determining whether a patent claim is invalid because it claims a law of nature, natural phenomenon, or abstract idea1. First, the court must determine whether the patent claims are directed to one of these patent-ineligible subject matters. Second, if the patent claims are directed to a patent-ineligible subject matter, the court must determine whether the claims nonetheless contain "an element or combination of elements that is 'sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself,'" Id. at 2355 (citation omitted).

The Federal Circuit applied this two-step test to the video advertising patent at issue in Ultramercial. The Federal Circuit held that Ultramercial's patent was both directed to an abstract idea and did not have additional elements sufficient to sustain its validity.

Ultramercial's patent generally concerned a system and method for offering media (e.g., a video) on the Internet in exchange for the customer watching an advertisement. In step one of the Alice test, the Federal Circuit found that "[t]he process of receiving copyrighted media, selecting an ad, offering the media in exchange for watching the selected ad, displaying the ad, allowing the consumer access to the media, and receiving payment from the sponsor of the ad all describe an abstract idea, devoid of a concrete or tangible application," 2014 WL 5904902, at *4. The Federal Circuit rejected Ultramercial's argument that the claims had novel or non-routine components that made them concrete. Id. The Federal Circuit also found that Ultramercial's arguments concerning the alleged novelty or non-routineness of certain claim elements was not part of the step one analysis—is the claim abstract?—but should be addressed in the second step of the analysis.

In step two, the Federal Circuit rejected Ultramercial's arguments that the claims contained sufficiently new or non-conventional elements to save their validity under Section 101. The Federal Circuit concluded that the claim additions to their abstract idea were essentially the instruction to use a computer and to provide the ads over the Internet. The Federal Circuit affirmed that issuing instructions to use a computer and/or the Internet was not sufficient to save the validity of the Ultramercial patent claims.

In reaching its decision in Ultramercial, however, the Federal Circuit was careful to state that "we do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea," 2014 WL 5904902, at *4. Two district court decisions from the Central District of California that came out a few days before the Ultramercial decision, in fact, reaffirm the principle that software is not ipso facto invalid.

In a concurring opinion, Judge Mayer argued for resolving Section 101 challenges earlier—even on the pleadings, if possible—rather than waiting for the case to develop, 2014 WL 5904902, at *7, et seq. Other Federal Circuit cases, however, have indicated that the Section 101 analysis can be fact-intensive and may always not be suitable for resolution at an early stage.

Two recent district court cases, however, rejected Section 101 challenges to software patent claims. In Ameranth, Inc. v. Genesis Gaming Solutions, Inc., et al., Case No. SACV 11-00189 (AG) (RNBx) (C.D. Cal. Nov. 12, 2014) (no Westlaw cite presently available), Judge Guilford rejected a challenge to a patent on a system and method for integrating new players into a poker room where several different types of poker games are being played (e.g., Texas Hold 'Em, Five Card Stud, Razz, etc.). The defendants primarily argued that the patents improperly claimed the abstract idea of a customer loyalty program. Judge Guilford rejected the challenge because he found that a "customer loyalty program" was not a requirement of the claims. He also found defendants' alternative invalidity arguments were not sufficiently developed or supported. Holding that "[i]t is not the Court's role to develop winning theories for the parties," Judge Guilford rejected defendants' challenge under step one of the Alice test. Slip Op. at 8. He did not need to reach step two (2).

In California Institute of Technology v. Hughes Communications Inc., et al., Case No. 2:13-cv-07245-MRP-JEM, 2014 WL 5661290 (C.D. Nov. 3, 2014), Judge Pfaelzer found that a Caltech patent directed to error correction in a computer system claimed an abstract idea, but nonetheless contained sufficient additional elements to satisfy the second step of the Alice test and was thus patentable. Judge Pfaelzer conducted a lengthy analysis of prior Federal Circuit and Supreme Court case law under Section 101, as well the text and legislative history of the America Invents Act, and concluded that software could be patentable. Turning to the claims of the Caltech patent, he found that the subject matter of error correction in a computer system was abstract. The court held, however, that the specific algorithms and formulas used by the Caltech patent's data-correction system were sufficiently inventive to the defendants' Section 101 challenge. In so finding, the court found that the possibility that a person might be able to do the same math using pen and paper was not a good test of whether a computer program was inventive because a human could not duplicate the performance of a machine, 2014 WL 5661290, *16.

Ultramercial, Ameranth, and Caltech serve as useful guideposts for the patent litigator as to what types of invalidity arguments are more likely to succeed under Section 101. Ultramercial re-affirms that software patents may be vulnerable to Section 101 challenges. Ameranth reminds parties that their Section 101 arguments need to be concretely tied to the claims of the asserted patents. Caltech indicates that in certain circumstances an algorithm may be sufficiently inventive to escape a Section 101 challenge. All three cases also serve as important reminders that how a party frames and supports its Section 101 arguments can have an important impact on their success.


(1) The two-step test was previously applied in other cases, including Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. --, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012). Alice confirms that the two-step test should also be applied to software patents. (2) Judge Guilford also rejected several of the defendants' evidentiary submissions, including on the ground that they were inadmissible hearsay. Slip Op. at 11-14.

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.

In association with
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
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 you may opt out by clicking here

    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.


    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.


    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.

    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.


    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.


    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.


    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.


    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 .


    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.

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