Ultramercial v. Hulu

By Michael T. Ghobrial // September 29th, 2011

In Ultramercial, the CAFC held that a method claim for distributing copyrighted products over the Internet was patentable subject matter under 35 USC 101 due to the programing complexity required to carry out the claimed elements. Although the CAFC mentioned the “machine or transformation test,” the CAFC eschewed the “machine or transformation test” and focused instead on the programming complexity required to carry out the claimed elements.

This is probably as close as we are going to get as an apology for Bilski and Cybersource.

At the district court level, defendant filed a motion to dismiss on the grounds that U.S. Patent No. 7,346,545, the patent in suit, did not claim patentable subject matter. The ‘545 patent claims a method for distributing copy-righted 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. Slip Op. at 2-4. The method claim does not mention a device such as a computer or processor. Consequently, the district court granted the motion to dismiss. Id.

On appeal, the CAFC reversed. The CAFC first explained that 35 USC 101 has a broadly permissive nature and that ‘545 method claim was directed towards a process. Slip Op. at 5-6. The CAFC then noted that while “the machine or transformation test” is a useful tool for determining patentability, it is not the only test. Slip Op. at 7-8. The CAFC then focused on the programming complexity required to carry out the claimed elements. Slip Op. at 8-11. The court explained that although the level of programming complexity required before a computer-implemented method can be patent-eligible could not be defined, patent-eligibility could be determined in part because programming complexity. Id.

The court then found that the ‘545 method claim constituted a patentable application of an idea rather than an unpatentable abstract idea. As the court explained, “the mere idea that advertising can be used as a form of currency is abstract, just as the vague, unapplied concept of hedging proved patent-ineligible in Bilski,…the ‘545 patent does not simply claim the age-old idea that advertising can serve as a currency. Instead, the ‘545 patent discloses a practical application of this idea.” Slip Op. at 10. This statement was then followed by the identification of several claim elements that were likely to require “intricate and complex computer programming.” Slip Op. at 11. In addition, the court found that certain of these steps clearly require specific application to the Internet. For example, the third step provided media products for sale on an Internet website. Even though the court acknowledged that the ‘545 claim did not specify a particular mechanism for delivering media content to the user, the court still found that the ‘545 method claim was directed towards patentable subject matter under 35 USC 101 because the method claim involved complex computer programming. Slip Op. at 12, 14.

A copy of the CAFC opinion may be found here.

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