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Alice Does a Hulu Dance

Alice Does a Hulu Dance

This post is about the recent [3rd] CAFC decision in Ultramercial, Inc. v. Hulu , LLC. For those of you 35 U.S.C. § 101 patent subject matter eligibility geeks out there, Hulu has been dismissed from this case but their name remains. The actual [remaining] appellant here is Wildtangent Inc.

If you thought that the future of software patents in the US does not look grim, this case should make it clear that your optimism is misplaced.

The following claim is representative:

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.

More succinctly stated the method provides a consumer with copyrighted content online for free in return for being exposed to an advertisement, and bills a sponsor for each time the consumer is exposed to the advertisement .

This case started in the US district court for the Central district court of California which found the asserted patent claims ineligible in a pretrial proceeding (without claim construction or expert testimony).

Ultramercial appealed to the CAFC and a first panel (Chief Judge Rader and Judges Lourie and O’Malley) reversed and remanded to the district court on September 15, 2011. The panel indicated that the patent at issue was a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.”

Wildtangent applied for a grant of certiorari. On May 21, 2012 the Supreme Court granted, vacated the (first) CAFC panel decision and remanded to the CAFC for consideration in light of the decision in Mayo V Prometheus.

A second panel (again Chief Judge Rader and Judges Lourie and O’Malley) reversed and remanded to the district court on June 21, 2013. The panel interpreted the Prometheus decision as follows:

In this regard, the Supreme Court’s reference to “inventiveness” in Prometheus can be read as shorthand for its inquiry into whether implementing the abstract idea in the context of the claimed invention inherently requires the recited steps. Thus, in Prometheus, the Supreme Court recognized that the additional steps were those that anyone wanting to use the natural law would necessarily use. See Prometheus, 132 S. Ct. at 1298. If, to implement the abstract concept, one must perform the additional step, or the step is a routine and conventional aspect of the abstract idea, then the step merely separately restates an element of the abstract idea, and thus does not further limit the abstract concept to a practical application.

The second panel restated a paragraph from their first decision:

“…the inventor can describe the invention in terms of a dedicated circuit or a process that emulates that circuit. Indeed, the line of demarcation between a dedicated circuit and a computer algorithm accomplishing the identical task is frequently blurred and is becoming increasingly so as the technology develops. In this field, a software process is often interchangeable with a hardware circuit.”

 Based upon this interpretation, the second Panel found the patent at issue was a practical application of the general concept of advertising as currency and an improvement to prior art technology, the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.”

Wildtangent again applied for a grant of certiorari. On June 30, 2014 the Supreme Court granted, vacated the (second) CAFC panel decision and remanded to the CAFC for consideration in light of the decision in Alice Corp. v CLS Bank.

A third panel delivered their decision on November 14, 2014. Chief Judge Rader has retired. Judges Lourie and O’Malley remained. Judge Mayer took the place vacated by Judge Rader and wrote a concurring opinion. The third panel affirmed the district court’s decision that the claims recite patent ineligible subject matter and indicated the “claims are directed to no more than a patent ineligible abstract idea”.

 The panel decision itself is no surprise after two remands from the Supreme Court. However, here are a few interesting things in the panel decision.

One thing is the CAFC’s fascination with “rules”. The panel describes the claims at issue as “an abstract idea, devoid of a concrete or tangible application” which calls to mind the “useful, concrete and tangible result” rule of the State street Bank case (although no reference is made to that case).

A second thing is an apparent dichotomy:The decision indicates:

We … 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.”

yet also indicates that

The claims … are not tied to any particular novel machine or apparatus, only a general purpose computer.”

This second statement is made in the context of a “machine or transformation” analysis according to Bilski. The notable development here is use of the word “novel” to qualify machine. If the two statements are considered together, one might infer that software remains eligible for patentability under §101 so long as the software operates on a “particular novel machine or apparatus”.

The concurring opinion by Judge Mayer may foreshadow the future of software patents in the US. According to Judge Mayer:

In effect, Alice articulated a technological arts test for patent eligibility, concluding that the asserted method and system claims were patent ineligible because they did not “improve the functioning of the computer itself” or “effect an improvement in any other technology or technical field.”

Judge Mayer continues:

To satisfy the technological arts test, claims must harness natural laws and scientific principles—those “truth[s] about the natural world that ha[ve] always existed,” Alice, 134 S. Ct. at 2356 (citations and internal quotation marks omitted)—and use them to solve seemingly intractable problems. They must, moreover, not only describe a technological objective, but set out a precise set of instructions for achieving it.

The proposed “technological arts test” of Judge Mayer is, of course currently relegated to an ancillary opinion. However, if it finds its way into future panel decisions and becomes settled law, it has the potential to make high-tech patents nearly impossible to enforce.

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