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Advertising as Currency Falls Under the Scope of § 101

September 15, 2011

Decision icon Decision

Last Month at the Federal Circuit - October 2011

Judges: Rader (author), Lourie, O’Malley

[Appealed from: C.D. Cal., Judge Klausner]

In Ultramercial, LLC v. Hulu, LLC, No. 10-1544 (Fed. Cir. Sept. 15, 2011), the Federal Circuit reversed and remanded the district court’s finding under 35 U.S.C. § 101 that Ultramercial, LLC’s (“Ultramercial”) patent claims failed to cover patent-eligible subject matter.

Ultramercial filed suit against Hulu, LLC (“Hulu”), YouTube, LLC (“YouTube”), and WildTangent, Inc. (“WildTangent”) for the infringement of U.S. Patent No. 7,346,545 (“the ’545 patent”). The ’545 patent claims a method for distributing copyrighted materials over the Internet where the consumer receives the material for free in exchange for viewing an advertisement. The advertiser then pays for the copyrighted material. Hulu, YouTube, and WildTangent are all providers of copyrighted content. After Hulu and YouTube were dismissed from the case, the district court granted WildTangent’s motion to dismiss for failure to state a claim, arguing that the ’545 patent did not claim patent-eligible subject matter.

On appeal, the Federal Circuit reversed and remanded the district court’s decision. The Court first determined that the claims-at-issue did not need to be construed in order to determine patent eligibility under 35 U.S.C. § 101. Subject matter eligibility is a “coarse” matter and, therefore, claim construction is not always necessary for § 101 analysis. Next, the Court noted that “any new, non-obvious, and fully disclosed technical advance” is eligible for § 101 protection. Slip op. at 6. There are only three categories that have been determined to be outside of eligibility: (1) nature, (2) physical phenomena, and (3) abstract ideas.

The Court stated that the ’545 patent needed careful consideration with respect to the latter restriction of abstract ideas. This limitation deserves significant thought because “technology is ever-changing and evolves in unforeseeable ways . . . .” Slip op. at 8. Furthermore, the application of an abstract idea to a new and useful end is deserving of patent protection.

After the Court determined that the ’545 patent falls under the definition of a “process” and is therefore patent-eligible subject matter, it need only consider abstractness. Even though the idea of advertising being used as a form of currency is abstract, the ’545 patent “discloses a practical application” of the idea. Many of the steps described in the first claim will require complex programming and an extensive computer interface. The Court found that these factors, considered in total, are enough to place the claims-at-issue within the realm of § 101 subject matter.

Moreover, although the ’545 patent does not specify a “particular mechanism” for sharing copyrighted material with end consumers (i.e., FTP downloads, streaming), the claimed invention is not “impermissibly abstract.” Id. at 12. The Court found that the ’545 patent provided sufficient disclosure to enable a person of ordinary skill in the art to practice the invention.

Finally, the Court differentiated the ’545 patent from abstract concepts such as mathematical algorithms. Instead, the ’545 patent claims a specific method for sharing media with consumers over the Internet by collecting revenue from advertisers. Because the claims require “controlled interaction with a consumer via an Internet website,” the Court found the claimed invention to not be so abstract as to override § 101. Id. at 13-14.

Accordingly, the Court reversed and remanded this case for further proceedings consistent with its opinion.

Summary authored by Huzefa Kapadia, Esq.