Seattle Patent Attorney | Seattle Trademark Lawyer

Ruttler Mills PLLC

Seattle Patent Attorneys and Trademark Lawyers

206-838-6400 Complimentary 15 Minute Consultation

Federal Circuit Comments on Patent Eligibility of Abstract Ideas Within Business Methods For Internet Commerce

Posted Monday, October 24, 2011 by Mike Gibbons

September 15, 2011: Today, the Court of Appeals for the Federal Circuit (CAFC) reversed a lower court decision in Ultramercial v. Hulu. The case will return to the District Court for the Central District of California for further consideration.

In Ultramercial, the Court considered the question of whether the patent being litigated was directed to subject matter contained within the limits of 35 U.S.C. §101. In other words, did the patent relate to subject matter on which one can even receive a patent? Or, was the patent was invalid because it was issued for something “non-statutory” – an abstract idea, a physical phenomenon, or something of the sort? The Court has issued rulings in similar cases a half-dozen times since the Supreme Court’s 2010 ruling on “business methods” in Bilski v. Kappos, the CAFC speaking to the topic most recently this past August in CyberSource v. Retail Decisions.

Here, Ultramercial had patented a process for permitting a viewer to watch videos and other copyrighted content over the Internet once the viewer had watched an advertisement. Ultramercial then sued three companies – Hulu, YouTube and WildTangent – for infringing the Ultramercial patent. Hulu and YouTube were subsequently dismissed from the case, possibly owing to a confidential settlement.

That left WildTangent as the sole defendant. At the District Court, WildTangent asserted in a motion to dismiss that the patent was invalid for being directed to non-statutory subject matter. The District Court agreed, and the case was dismissed. Ultramercial appealed to the CAFC, the court to which Congress has granted exclusive jurisdiction to hear any appellate case related to a patent.

In granting Ultramercial’s appeal and remanding the case to the District Court for further consideration, the CAFC noted the wide scope of the patent laws. 35 U.S.C. §101, the portion of U.S. patent law which addresses subject matter which is patent-eligible, lists “…any new and useful process, machine, manufacture, or composition of matter…,” and the Court noted use of the word “any” implies a very permissive scope of what is patent-eligible should be applied. The Court further noted the statute does not actually state what is ineligible, leaving this decision to the Federal judiciary.

The courts have historically ruled three categories of subject matter to be ineligible: laws of nature, physical phenomena and abstract ideas. It seems clear that one should not receive a patent for either of the first two. If a concept merely reflects a law of nature or a naturally-occurring physical phenomenon, then the person applying for the patent for the concept didn’t invent it since it already existed. What constitutes an abstract idea that is ineligible for a patent, however, is a trickier question. WildTangent’s contention was that the Ultramercial patent merely disclosed such an abstract idea and was therefore invalid.

The CAFC noted that defining an “abstract idea” is a more difficult challenge in our modern technological age. But the Court relied on prior opinions to arrive at its decision remanding this case. In a landmark 1972 patent case, Gottschalk v. Benson, the Supreme Court held that “the application of an abstract idea to a ‘new and useful end’ is the type of invention that the Supreme Court has described as deserving of patent protection. And in 2010, the CAFC found in Research Corp. Technologies v. Microsoft that “[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Therefore, even if a process could be considered an abstract idea, if there is a practical technological application, the process is likely statutory subject matter.

Noting that while the idea of a person receiving something in exchange for consuming an advertisement is abstract, the decision holds that the Ultramercial patent applies the idea in a practical way, and further, in a way that likely requires “intricate and complex computer programming,” as well as a “specific application to the Internet and a cyber-market environment.” These factors partially explain the Court’s reasoning that the content of the Ultramercial disclosure was patent-eligible.

Whether the Ultramercial disclosure was patentable – a different inquiry relating to whether the invention is useful, novel, nonobvious and adequately disclosed – was not discussed by this CAFC. But in this decision the Court found that the patent discloses subject matter that is patent-eligible. Now that the case has been remanded, patentability may be considered at the lower court, provided the case doesn’t settle first.

Ruttler Mills PLLC
One Union Square, 1730, 600 University Street, Seattle, Washington 98101 US
47.6097570-122.3321200
Phone: (206) 838-6400

News and Announcements

Tuesday, January 24, 2017
More Rumors and No Answers Regarding Director Lee learn more +
Thursday, January 19, 2017
Michelle Lee Rumored to Be Staying as PTO Director learn more +
Tuesday, August 30, 2016
U.S. Patent Office: China Is Working Toward Strong Patent System learn more +
Tuesday, June 14, 2016
Supreme Court in Halo: Treble Damages are Back learn more +