The US Court of Appeals for the Federal Circuit Ruled that a Software Patent Does Not Claim Patent-Eligible Subject Matter

Background

The case of Ultramercial Inc. v. Hulu LLC and WildTangent, Inc. has a convoluted history, with two trips up to the US Supreme Court and then back to the Federal Circuit. Ultramercial owns a patent (the ‘545 patent) for a method for distributing media products over the Internet, “where the consumer receives a copyrighted media product at no cost in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.” Ultramercial sued Hulu, YouTube, and WildTangent for patent infringement.  (The first two defendants were dismissed from the case.)

WildTangent moved to have the case dismissed, on the grounds that the patent did not claim patent-eligible subject matter.  A federal district court agreed and Ultramercial appealed. The Federal Circuit initially reversed, and WildTangent appealed to the Supreme Court.  The Supreme Court vacated the Federal Circuit’s decision and remanded the case for further consideration in light of the Supreme Court’s 2012 patent law decision, Mayo Collaborative Services v. Prometheus Laboratories, Inc. Not taking the hint, the Federal Circuit again reversed the district court’s decision. WildTangent again appealed to the Supreme Court, and the Supreme Court again vacated the Federal Circuit’s decision and remanded the case for reconsideration. Finally, the Federal Circuit gave in to the Supreme Court.

Analysis

Under US patent law, an invention must fit within one of four categories of patent-eligible subject matter:

  • processes
  • machines
  • manufactures
  • compositions of matter

As the Supreme Court noted in its recent Alice decision, “laws of nature, natural phenomena, and abstract ideas are not patentable.”

Ultramercial argued that “abstract ideas remain patent-eligible … as long as they are new ideas, not previously well known, and not routine activity.”

WildTangent responded that the ‘545 patent’s claims were directed to the abstract idea of offering free media in exchange for watching ads, and that the mere implementation of that idea on a computer did not make the idea non-abstract.

The Federal Circuit  finally agreed with WildTangent and with the district court, finding that the abstract idea at the heart of the patent was “that one can use [an] advertisement as an exchange or currency.” The Federal Circuit reviewed the eleven steps of claim one of the patent and found that they all boiled down to “only the abstract idea of showing an advertisement before delivering free content.”

The court also concluded that the limitations of the ‘545 patent did not transform the abstract idea into patent-eligible subject matter because they simply instruct the practitioner to implement the idea with “routine, conventional activity.” Simply invoking the Internet, said the court, added no inventive concept.

Software Patents Survive

The court noted that it was not invalidating all software patents:

[W]e do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.

Takeaway

This case illustrates the importance of drafting strong software patent applications that say more than just “use computer to do X.”

Questions?

If you have questions about patents or have a concept that you think could lead to a software patent, please contact our office at 626-796-4000 or toll-free at 855-UR-IDEAS (855-874-3327) for a free initial consultation with one of our intellectual property attorneys. Please also visit our website at http://leechtishman.com/practices/intellectual-property/ for more information about us.

Photo Attribution: Public Domain.

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