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Ultramercial v. Hulu: Federal Circuit provides shields "technical" software inventions from Bilski

Last fall, I reported that the District Court for the Central District of California had used the Bilski abstract idea subject matter exclusion to invalidate the claims of Ultramercial’s U.S. Patent No. 7,346,545.  At that time I wasn’t 100% confident that the Federal Circuit wouldn’t agree.  Fortunately for holders of Internet-based inventions, Chief Judge Rader, joined by Lourie and O’Malley, in a well reasoned and common sense opinion, reversed and remanded in Ultramercial v. Hulu – Case No. 2010-1544.

As described in the decision, the claimed invention of the ‘545 patent is a “method for monetizing and distributing copyrighted products over the Internet.”  The court further observed that the ’545 patent seeks to remedy problems with prior art banner advertising, such as declining click-through rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product.  ’545 patent col. 2 ll. 14-18.

The court found that the claimed invention was “a practical application of the general concept of advertising as currency and an improvement to prior art technology.”  The court concluded that the claimed invention is not “so manifestly abstract as to override the statutory language of section 101.”

In its discussion, the Federal Circuit reinforced the notion that 35 U.S.C. Section 101 at least includes technical inventions:  “Moreover, title 35 does not list a single ineligible category, suggesting that any new, non-obvious, and fully disclosed technical advance is eligible for protection, subject to the following limited judicially created exceptions.”  The court also pointed out the claimed invention involved technical advances:  “[v]iewing the subject matter as a whole, the invention involves an extensive computer interface,” and that, “[b]y its terms, the claimed invention invokes computers and applications of computer technology.”  The notion that technical inventions in the software area fall within Section 101 was also put forth last year in Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859 (Fed. Cir. 2010).  In that case, the court noted that “inventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.”

The court also takes time to dismiss the contention that the software programming necessary to facilitate the invention deserves no patent protection or amounts to abstract subject matter or, in the confusing terminology of machines and physical transformations, fails to satisfy the “particular machine” requirement.  In doing so, the court reaches back nearly 20 years to its discussion in In re Allapat, Fed. Cir. 1994, where it observed that “programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”

The court notes that, in other words, a programmed computer contains circuitry unique to that computer.  That “new machine” could be claimed in terms of a complex array of hardware circuits, or more efficiently, in terms of the programming that facilitates a unique function.  The digital computer may be considered by some the greatest invention of the twentieth century, and both this court and the Patent Office have long acknowledged that “improvements thereof” through inter-changeable software or hardware enhancements deserve patent protection.  Far from abstract, advances in computer technology—both hardware and software—drive innovation in every area of scientific and technical endeavor.

This notion, that a programmed computer is in itself a “particular machine”, refutes and rejects the notion that a claim to software in combination with a computer requires the computer itself to be “partricular” and not just a general purpose machine, in order to satisfy the “particular machine” requirement of the machine or transformation test.  Clearly this is good news for software patent claims.

On the other hand, the decision makes clear that claims reciting only a mathematical algorithm or steps that can be performed by the human mind are more likely to be abstract.  The court distinguished the claims of Cybersource from the Ultramercial claims: “Unlike the claims in CyberSource, the claims here require, among other things, controlled interaction with a consumer via an Internet website, something far removed from purely mental steps.”

While the Ultramercial case advances the principle that complex software programs with technical features (as carried out on a computing infrastructure) are in the statutory bucket, it  does not address what is to done with non-technical software inventions, indeed if there is anything such as that, that apply or implement abstract ideas.  To be on the safe side in drafting claims, it would be advisable to focus on describing and claiming the technical aspects of any invention involving a financial or otherwise suspect abstract concept.

Those holding or seeking software patents should be encouraged by this sensible decision, and I am encouraged the opinion continues to bring a solid common sense approach back to analyzing the patentability of software inventions.  While the “abstract idea” exception is far from dead, it at least appears that software inventions that are arguably “technical” in nature will survive a challenge from Bilski, at least as far as the Federal Circuit is concerned.

For your reference, the ’545 patent claims:

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 pre-sented is less than the number of transac-tion 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 con-sumer 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 con-sumer 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.

Principal & Chief Innovation Officer

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