Ultramercial Finally Strikes Out at the Federal Circuit

In its most recent decision in Ultramercial, Inc. v. Hulu, the Federal Circuit finally concluded that the claims-at-issue do not cover patent-eligible subject matter under 35 U.S.C. § 101. This comes after two prior decisions by the Federal Circuit reaching the opposite conclusion, and two orders from the U.S. Supreme Court instructing the Federal Circuit to reconsider those two decisions.

Ultramercial involves one patent-in-suit – U.S. Patent No. 7,346,545 (“’545 Patent”). The ’545 Patent generally 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. Claim 1 of the ’545 Patent includes eleven steps for implementing the claimed invention.

At the outset of the case, Defendant WildTangent moved to dismiss for failure to state a claim, arguing that the ’545 Patent did not claim patent-eligible subject matter under § 101. The district court granted the motion to dismiss under 12(b)(6). On appeal, the Federal Circuit reversed, concluding that the claims of the ’545 Patent were patent-eligible. In response to a petition for a writ of certiorari filed by WildTangent, the Supreme Court vacated the Federal Circuit’s decision, and remanded the case for further consideration in light of its decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc. On remand, the Federal Circuit reached the same conclusion as before. WildTangent again filed a petition for a writ of certiorari, and the Supreme Court again vacated Federal Circuit’s decision, and remanded the case for further consideration, this time in light of its decision in Alice Corp. v. CLS Bank International.

Based on Alice, the Federal Circuit reversed course, and concluded that the claims of the ’545 Patent are not directed to patent-eligible subject matter. Specifically, the Federal Circuit found that the claims of the ’545 Patent are merely directed to the “abstract idea of showing an advertisement before delivering free content,” and the claims do not contain any “inventive concept” that would otherwise “transform” the claimed abstract idea into patent-eligible subject matter. The decision made it clear that the use of a general purpose computer, or the Internet, is not sufficient to save otherwise abstract claims from ineligibility under § 101.

The Ultramercial decision also includes an interesting concurring opinion where Judge Meyer argues three points. First, whether claims meet the demands of § 101 is a threshold question that must be addressed at the outset of the litigation. Second, no presumption of eligibility attends to the § 101 inquiry. Third, Alice, for all intents and purposes, set out a technological arts test for patent eligibility. Because the purported inventive concept in Ultramercial’s asserted claims is an entrepreneurial rather than a technical one, they fall outside the scope of § 101.