By Michael Borella --
The Ultramercial story is not over. In the latest step of a controversial case involving 35 U.S.C. § 101 that has been ongoing since 2009, patentee Ultramercial has petitioned the Supreme Court for a writ of certiorari. The parties' first two attempts to obtain high court review of currently-invalidated U.S. Patent No. 7,346,545 were granted, vacated, and remanded to the Federal Circuit. But, as the cliché goes, perhaps the third time will be the charm.
In its petition, Ultramercial focuses on the Federal Circuit's interpretation of the Alice Corp. v. CLS Bank decision, argues that the appeals court is suffering from an intra-circuit split over § 101, and points out the importance of software patents to the economy as a whole.
But let's start at the beginning. Ultramercial sued Hulu, YouTube, and WildTangent for infringement of the '545 patent. Hulu and YouTube were eventually dismissed from the case. On a 12(b)(6) motion, and without construing the claims, the District Court applied the "machine or transformation" test from Bilski v. Kappos, and held that the '545 patent does not claim patent-eligible subject matter under 35 U.S.C. § 101. On appeal, the Federal Circuit reversed and remanded.
WildTangent petitioned for Supreme Court review. The Court, however, granted, vacated, and remanded the case for consideration in light of its intervening decision in Mayo Collaborative Servs. v. Prometheus Labs, Inc. Back in the Federal Circuit again, a unanimous panel of Chief Judge Rader, Judge O'Malley, and Judge Lourie once again reversed the District Court, finding that the claims did indeed address patent-eligible subject matter.
WildTangent again sought review from the Supreme Court. In June 2014, the Court once more granted, vacated, and remanded the case back to the Federal Circuit for further consideration in view of its Alice Corp. v. CLS Bank decision. In November 2014, the Federal Circuit reversed course from its two previous decisions regarding the '545 patent, and found the claims invalid after applying the Alice test.
Ultramercial yet again seeks the Court's assessment of the patent.
Claim 1 of the '545 patent recites:
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.
The invention has been characterized by the Federal Circuit as "a method for distributing copyrighted 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." In plain English, this is what happens when you go to one of many online video streaming sites, YouTube for example. Prior to watching the video that you seek, you must first watch about 15 or 30 seconds of an advertisement. Ultimately, the Federal Circuit affirmed that the claims were directed nothing more than the abstract idea of using advertising as currency.
Ultramercial begins its petition by contending that the Federal Circuit's invalidation of the '545 patent expands the abstract idea exception to § 101 beyond what the Court had set forth in Alice. The latter case introduced a two-prong subject-matter eligibility test. The first prong is to determine whether the claims are directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea. If so, the second prong is to determine whether any additional claim elements transform the claim into a patent-eligible application that amounts to significantly more than the ineligible concept itself.
Ultramercial views Alice and Bilski as having a key characteristic in common. That is, "the claim elements (alone or in combination) covered performing, on a computer, well-known, conventional rules or fundamental, routine economic practices, and lacked any innovation beyond applying those known ideas to a stand-alone or networked computer." But, as Ultramercial points out, the claims of the '545 patent were found twice by the Federal Circuit to recite more than just advertising as currency, and the invention therein "sharply departed from conventional advertising in the brick-and-mortar context," because it "offered a solution unique to the technological environment of networked computers."
Ultramercial's position is that the claimed invention was a dramatic improvement over the prior art, and cannot be categorized as well-understood, routine, or conventional. As a consequence, the '545 patent is clearly distinguishable from those of Alice and Bilski.
In its November 2014 decision, The Federal Circuit wrote that even though some steps of the claim "were not previously employed in this art [that] is not enough -- standing alone -- to confer patent eligibility upon the claims at issue." As a result, patentees and applicants found themselves in an odd position -- their claims can be deemed abstract if the claims incorporate fundamental, long-standing procedures. But, they are not able to rebut this notion by attempting to establish that some of these procedures (or the claim as a whole) was novel at the time of the invention. If successful, Ultramercial will provide a way to fight back against contentions that one's claims are abstract due to their being directed to known prior art (e.g., a mere automation of previously-known manual processes).
Ultramercial argues further that the Federal Circuit is irreconcilably split over § 101 given its decision to invalidate Ultramercial's claims, but find validity in those from DDR Holdings, LLC v. Hotels.com, L.P. Ultramercial writes that "[c]omparing Ultramercial's claims to DDR Holding's claims reveals no articulable basis for finding one claim patent-eligible and the other abstract." Particularly, "[b]oth recite a method requiring the use of a web server connected to the Internet . . . contain steps for accessing web-based content," and "[b]oth transmit and display content upon user-activation of web-based commands."
Ultramercial also takes issue with how the two decisions differ in their view of computer programming. "[T]he Ultramercial decision found no patentable substance in the patent's programming-centric third and fourth steps…as insignificant pre-solution activity," while "DDR Holdings cited programming-based steps as specifying how interactions with the Internet are manipulated to yield a desired result -- a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink."
Without Supreme Court review, purports Ultramercial, these two decisions will "continue generating confusion for both lower courts and the public." Notably, Ultramercial does not attempt to rebut the DDR panel's lengthy synthesis of that case and Ultramercial, nor the simple notion that while Ultramercial merely added use of the Internet to an otherwise disembodied transaction, while DDR fundamentally changed how an aspect of the Internet operates.
Finally, Ultramercial plies a policy argument, stating that there is need for clear rules governing the patent-eligibility of software inventions, and that the Alice decision left us with an unworkable standard for the determination thereof. Quoting an article from the Techcrunch website, Ultramercial points out that "Uber, the world's largest taxi company, owns no vehicles. Facebook, the world's most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world's largest accommodation provider, owns no real estate." The value of these companies is not in tangible products, but in software that allows users to interact with a virtual marketplace on the Internet, and patent protection should be available for their innovations.
Additionally, Ultramercial takes the position that software is concrete and not abstract. Indeed, "[t]he act of programming is translating real-world tasks into computer-executable form," the difficult part of which is the "mapping of real-world tasks onto computer-executable models [by way of] programming languages and tools." Without appreciation for these physical aspects of software, innovation in computing, as well as new business models will suffer. Ultramercial points to the "75% of all computer-implemented and software-based patents challenged under § 101" being invalidated by district courts and the Federal Circuit.
This dispute is batting zero so far at the Supreme Court, and it is questionable whether the Court will take it up on the third opportunity to do so. Ultramercial's two main arguments -- that the abstract idea exception is limited to well-known, fundamental, or routine concepts, and that the DDR case has created a Federal Circuit split -- could both be easily dismissed. And while the Court's rulings that address the nexus of § 101 and software have created confusion and are erecting barriers to innovation, the current set of nine justices seems fine with that outcome.
In this light, it is likely that the Court will deny certiorari. On the other hand, if the Court does review this case, software patentees may become uneasy. For instance, the Court might decide that the claims of Ultramercial and DDR rise or fall together. As DDR is the only post-Alice § 101 case reviewed by the Federal Circuit that has found claims to be patent-eligible, it is a valuable data point for applicants and patentees. Losing this data point would deepen the mystery of what claims incorporating an abstract idea need to recite in order to be patentable.