Rob Raheja | June 26, 2013
Ultramercial, Inc. v. Hulu, LLC.
June 21, 2013
Panel: Rader, Lourie and O’Malley. Opinion by Rader. Concurrence by Lourie
Ultramercial, Inc. sued Hulu, LLC for infringement of U.S. Patent 7,346,545 (the ‘545 patent) directed to a method of monetizing and distributing copyrighted products over the Internet. The district court dismissed the patent suit by holding that the patent claims an abstract idea; therefore, it is not a process under 35 U.S.C. §101. In an earlier decision, the Federal Circuit reversed the district court’s holding and remanded. The Supreme Court of the United States vacated the earlier decision by the Federal Circuit. The Federal Circuit again holds that the patent does not claim an abstract idea because the claims are not drawn to a mathematical algorithm or a series of purely mental steps because the claims require, among other things, a particular method for collecting revenue from the distribution of media products over the Internet by way of controlled interaction with a consumer over an Internet website. Therefore, the Federal Circuit again reversed the district court’s holding and remanded for further proceeding.
The ’545 patent claims a method for distributing copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.
The representative claim 1 of the ‘545 patent reads as follows:
A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:
a first step of receiving, from a content provider, media products that are covered by intellectual property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;
a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;
a third step of providing the media product for sale at an Internet website;
a fourth step of restricting general public access to said media product;
a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;
a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;
a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;
an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;
a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;
a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and
an eleventh step of receiving payment from the sponsor of the sponsor message displayed.
Ultramercial, Inc. sued Hulu, LLC for infringement of ‘545 Patent directed to a method of monetizing and distributing copyrighted products over the Internet. The district court dismissed Ultramercial’s claims for failure to claim statutory subject matter without formally construing the claims. The district court held the asserted claim to be ineligible because it is abstract; therefore, it is not a process under 35 U.S.C. §101. In an earlier decision, the Federal Circuit reversed the district court’s holding and remanded. The Supreme Court of the United States vacated the earlier decision by the Federal Circuit.
For the purposes of this appeal, the Federal Circuit adopted a construction most favorable to patentee since the district court had not construed the claims.
At the outset, the Federal Circuit found that the claimed invention directed to a method of monetizing and distributing copyrighted products over the Internet easily satisfies 35 U.S.C. §100’s definition of “process” as the definition includes a new use of a known machine.
The Federal Circuit then framed the issue as “whether the claim is meaningfully limited to something less than an abstract idea that pre-empts use of an abstract concept” in view of the Supreme Court’s holding in Diehr that “[w]hile an abstract idea, law of nature, or mathematical formula could not be patented, an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.”
Applying law to facts of this case and construing claims most favorable to the patentee in light of the specification, the Federal circuit found that the ’545 patent does not simply claim the age-old idea that advertising can serve as currency; rather, the ’545 patent claims a practical application of this idea for the following reasons:
The claimed invention purports to improve existing technology in the marketplace. The ’545 patent seeks to remedy problems with prior art banner advertising over the Internet, such as declining click-through rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product (col. 2, lines 14-18).
The claimed steps require that the method be performed through computers, on the internet, and in a cyber-market environment. For example, the third step, “providing said media products for sale on an Internet website.”
Many of the claimed steps require complex computer programming. For example, the fourth step that requires complex computer programming to restrict the products that are offered for sale on the Internet.
Figure 1, alone, demonstrates that the claim is not to some disembodied abstract idea but is instead a specific application of a method implemented by several computer systems, operating in tandem, over a communications network:
The claim does not preempt. For example, the claim does not say “sell advertising using a computer.” That is, the claims do not preempt all forms of advertising including the advertising on the Internet.
Based on record, the Federal Circuit did not find that the recited steps were all token pre- or post-solution steps.
According to the Federal Circuit, the claim appears far from over generalized, with eleven separate and specific steps with many limitations and sub-steps in each category.
Finally, the ’545 patent does not claim a mathematical algorithm, a series of purely mental steps, or any similarly abstract concept because the claim “require, among other things, controlled interaction with a consumer over an Internet website, something far removed from purely mental steps.”
In concurring opinion, Judge Lourie agreed with the result reached by the majority, but disagreed with that part of the majority’s analysis where the majority focused on limitations that were not in the claim such as computer or complex computer programming. Following the Supreme Court’s guidance in Mayo Collaborative Services v. Prometheus Laboratories, Inc., Judge Lourie found that the claims in question recited additional limitations as to how the idea of monetizing and distributing copyrighted products over the Internet is implemented and “the added limitations in these claims represent[ed] significantly more than the underlying abstract idea of using advertising as an exchange or currency and, as a consequence, [the claims did not] preempt the use of that idea in all fields.”
The additional claim limitations reciting how the abstract idea is implemented may “narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.”