Web Advertising Technique Found Patent-Eligible

June 21, 2013

Andrew (A.J.) Tibbetts

What This Means To You

  • For software or business method patents, claims that include more detail on the exact steps carried out in the methods may be more likely to be found patent-eligible.
  • Business methods may be patent-eligible when the method is intrinsically tied to computers, such as methods for business exclusively conducted over the Internet.
  • Emphasizing the complexity of software that implements a product, even if just in the specification and not in the claims, may assist with demonstrating patent-eligibility.

Overview

The recent decision by the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) in Ultramercial v. Hulu provides another signpost for what types of software are eligible for patenting and what types are not. The guidelines for patentability of software have been muddled lately as the courts try to find a rule defining what software is patent-eligible. Unfortunately, the ultimate question of what this rule is or will be still remains unanswered following this decision.

Case Background

This new Federal Circuit decision follows a 2012 order from the U.S. Supreme Court to reconsider, using a different test for patent-eligibility, the Federal Circuit’s 2011 decision in this same case. “Patent eligibility” refers to a threshold test for patentability of an invention that relates not to whether the invention is novel or nonobvious, but instead to whether the invention is of a type that can be protected with a patent.

The case involves Ultramercial’s web advertising technique and its claim for a method of distributing copyrighted material over the web. Using Ultramercial’s technique, the consumer is required to view an advertisement, paid for by an advertiser, before being granted access to the copyrighted material. The asserted independent claim includes a lengthy recitation of the steps involved in distributing the advertisement and the copyrighted material.

In the district court, Hulu challenged the technology as ineligible for patenting based on the outdated “machine or transformation test” that courts were applying at that time. The district court agreed the technology was neither tied to a “particular machine” nor recited a “transformation” of material and was therefore ineligible for patenting under this test.

After the Supreme Court’s Bilski decision in 2010 struck down the “machine or transformation test” as the exclusive test for patent-eligibility, the Federal Circuit considered Ultramercial’s technology under new standards. In its 2011 decision, the Federal Circuit reversed the district court’s holding, applying a loosely-defined standard that found the technology patent-eligible because the technology was tied to computers and the Internet and because the technology would require complex software to implement.

Following an appeal by Hulu, the Supreme Court overturned the Federal Circuit’s 2011 decision and instructed it to reconsider the issue using a different test, though the Court did not identify what test should be applied.

Decision Analysis

The new Ultramercial decision provides the first ruling on the issue of patent-eligibility of software since the Federal Circuit’s split decision in CLS Bank v. Alice Corporation in May of this year. As such, the Ultramercial decision provides important guidance on this issue.

The CLS decision was expected to provide much-needed clarity regarding which technologies are eligible for patenting after several years of fractured opinions and reasoning from different Federal Circuit judges. However, the Federal Circuit judges remained evenly split on the patent-eligibility of system claims. The Court therefore issued two decisions in CLS that laid out two competing tests for patent-eligibility, neither of which was binding.

The new Ultramercial decision is copied in large part from one of the two CLS decisions and thereby makes the test laid out by that decision binding on other judges. The Ultramercial test requires that all of a language included in a claim be considered when determining patent-eligibility and that none be filtered out from the claim during the analysis—the main point of departure with the other CLS decision.

The current decision requires that two factors be evaluated, using all of the language of the claim. The first step of the Ultramercial test is determining the abstract idea embodied by the claimed technology. In this case, the Court found that the abstract idea is using advertising as currency for providing access to web content.

The second step is determining whether the claim covers all possible applications of that abstract idea or is limited to only some of the practical applications. This determination is made by analyzing all of the language of the claim to determine whether the claim includes any steps or elements not inherent in all practical applications of that abstract idea, in which case, it can be concluded that the claim is limited to only some practical applications.

Applying this test, the Federal Circuit found that someone could build a system for using advertising as currency on the web without including all of Ultramercial’s claimed steps. The Court therefore found that the claim covered only some of the practical applications of the abstract idea and was eligible for patenting. Without going into detail, the Court also mentioned that its ruling was buttressed by the “complex” computer hardware and software needed to implement the ideas described by the claims.

Takeaways

This case provides helpful guidance on what types of software may be protected by a patent and how one can draft a patent application to ensure the claims are found to be patent-eligible. For example, ensuring the claims include multiple, specific steps or elements can be helpful, particularly when those steps/elements are tied to the practical implementation created by the inventor. Because it is always important to ensure broad scope of claims to prevent competitors from easily designing around a patent, careful analysis will be needed to confirm that any specific steps/elements included in the claim are not overly limiting.

While this case offers helpful guidance, other judges on the Federal Circuit are known to disagree with the test it describes. Indeed, one of the judges on the Ultramercial panel noted that while he agreed that Ultramercial’s patent covers patent-eligible technologies, he would have applied the test laid out by the other CLS decision.

Subsequent court decisions will try to distinguish this one and lay out further tests. This has already been done in the September 2013 decision in Accenture Global Services, GMBH v. Guidewire Software. It will be important to monitor new cases as the law evolves, to be certain new patent applications are drafted to pass any new rules laid out by the Federal Circuit.