The third time is the charm in Ultramercial v. Hulu: After twice finding that an advertising method patent was directed to patent eligible subject matter, the Court of Appeals for the Federal Circuit’s third Ultramercial decision has applied Alice v. CLS Bank to find the asserted patent claims an abstract idea that is not patent eligible.  

The decision is important because the Federal Circuit now seems on board with what the district courts have been increasingly doing in recent months – considering subject matter eligibility early in a patent case and, if the patent is directed to patent ineligible subject matter, granting a defendant’s motion to dismiss.

The Ultramercial litigation is also interesting because it is a microcosm of the recent furor over patent eligible subject matter and its evolution from Bilski to Alice. Following the Supreme Court’s In re Bilski decision, the Ultramercial district court determined that the patent-in-suit was directed to patent ineligible subject matter and granted the defendant’s motion to dismiss under Rule 12(b)(6).

That decision was reversed twice by the Federal Circuit, the first time after Bilski, and the second time after the Supreme Court’s Mayo v. Prometheus decision. But the Supreme Court vacated and remanded both reversals, the first time after Mayo, and the second time after Alice. In its third attempt, the Federal Circuit has now changed course and has affirmed the district court.

Although the Federal Circuit’s second Ultramercial decision states that granting a motion to dismiss under Section 101 should be a “rare” occurrence, the Federal Circuit seems to have gotten the message this time: If asked, the court may consider subject matter eligibility early in a case and, if the patent-in-suit is directed to ineligible subject matter, the court may grant an early dispositive motion. Judge Mayer’s concurrence is particularly prescient and may be a harbinger of what is to come in similar cases:

First, whether claims meet the demands of 35 U.S.C. § 101 is a threshold question, one that must be addressed at the outset of litigation. Second, no presumption of eligibility attends the section 101 inquiry [for subject matter eligibility]. Third, Alice . . . sets out a technological arts test for patent eligibility.

The future of many business method and software patents issued under pre-Bilski or pre-Alice rules may be in doubt, but the court also offered some hope for patentees in these areas: “[W]e do not purport to state that all claims in all software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.”