Ultramercial Patent Appeal Keeps Door Open For Future Software Patents

Mark Bowman is a JD candidate at Osgoode Hall Law School

The United States Court of Appeals for the Federal Circuit has ruled in Ultramercial v Hulu that a process displaying copyright media to a user in exchange for displaying an advertisement for a product over the internet is not too abstract to be patented.

Patent No. 7,346,545, a software process for distributing intellectual-property protected text, music, or video to a user in exchange for viewing and interacting with an advertisement for a product purchasable on the Internet, was granted to Ultramercial Inc. in 2008. Ultramercial subsequently brought suit against Hulu, Wildtangent, and Youtube (who were removed from the suit by trial) for patent infringement in front of the United States District Court for the Central District of California, where the court used the newly minted decision of Bilski v. Kappos to rule that the patent was invalid.

In the Bilski decision, the Supreme Court of the United States concluded that existing precedent defined three exceptions, “laws of nature, physical phenomena, and abstract ideas”, to the definition of patent eligibility in Title 35 of the United States Code (35 U.S.C. § 101) and that the process patent eligibility test of either needing to implement the process on a non-trivial purpose-built machine or to transform an article between two states (the machine-or-transformation test) was not the only test for determining eligibility (although it “…may be a useful and important clue or investigative tool…”). The District Court for the Central District of California held that the Ultramercial patent failed the machine-or-transformation test and claimed an abstract idea, and therefore a motion by Wildtangent to dismiss the patent claims against them should be granted.

On Ultramercial’s appeal to the United States Court of Appeals, the Federal Circuit reviewed and rejected the patent as abstract, and rejected the District Courts previous dismissal of Ultramercial’s patent claims (although the ruling did not go so far as to validate the patent against other eligibility criteria, namely 35 U.S.C. § 102, 35 U.S.C. § 103, and 35 U.S.C. § 112). The Federal Circuit analysed and reviewed the concept of an abstract idea and how the applied version of the idea can be presented in a manner that is eligible for a patent, finding this specific patent describes a practical application to the abstract idea that “advertising can be used as a form of currency”.

As a result, this case potentially opens up software patentability by allowing a route around the ‘abstract idea’ roadblock from software patents. The courts language in the ruling also speaks to encourage software patent applications, under the process definition of patents, by offering an implied defence against the machine-or-transformation test in that as a computer’s hardware functionality blurs with the software functionality installed upon it the “particular machine” requirement of the test can be met through the sum of functionality of the machine as a whole and not just the hardware elements.

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  1. Update: On May 21, 2012 the United States Supreme Court ordered this judgement vacated and the case remanded to the United States Court of Appeals for the Federal Circuit. Due to the recent decision of Mayo Collaborative Services v. Prometheus Laboratories, where the court ruled a diagnostic process was not patentable because it is a law of nature, the Supreme Court wants the Federal Circuit to review the ‘abstract’ nature of the Ultramercial patent. http://www.supremecourt.gov/orders/courtorders/052112zor.pdf

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