Two months ago, in a long-awaited decision, the Federal Circuit invalided Ultramercial's U.S. Patent No. 7,346,545, directed to online video advertisements, as lacking patent-eligibility under 35 U.S.C. § 101.  The Court indicated that the claims were directed to an "ordered combination of steps recit[ing] an abstraction -- an idea, having no particular concrete or tangible form."  Despite explicitly reciting that the advertisements were delivered over the Internet, these limitations, in the Court's view, were merely "conventional steps, specified at a high level of generality."  Thus, the claims failed the two-prong patent-eligibility test set forth by the Supreme Court in Alice Corp. v. CLS Bank Int'l.

Ultramercial has petitioned the Federal Circuit for en banc review on the grounds that this decision goes far beyond the limits of § 101 the Supreme Court staked out in Alice, and when combined with the Federal Circuit's subsequent decision in DDR Holdings, LLC v. Hotels.com, leaves § 101 in a state of disarray.

Background

Ultramercial sued Hulu, YouTube, and WildTangent for infringement.  Hulu and YouTube were eventually dismissed from the case.  On a 12(b)(6) motion, and without construing the claims, the District Court held that the '545 patent does not claim patent-eligible subject matter under 35 U.S.C. § 101.  On appeal, the Federal Circuit reversed and remanded.  However, that decision was vacated by the Supreme Court.  Back in the Federal Circuit again, a unanimous panel of Chief Judge Rader, Judge O'Malley, and Judge Lourie once more reversed the District Court, finding that the claims did indeed address patent-eligible subject matter.

WildTangent petitioned for Supreme Court review.  On June 30, 2014, the Court granted the petition, vacated the Federal Circuit's judgment, and remanded the case back to the Federal Circuit for further consideration in view of the Alice decision.  Since Chief Judge Rader had stepped down in the interim, Judge Mayer was appointed to take his place.  On remand, Judges Lourie, Mayer, and O'Malley ruled against Ultramercial, as noted above.  About three weeks later, the Federal Circuit found claims directed to a modification of web page hyperlinking in DDR to be patent-eligible.

The Petition

Ultramercial attempts to establish that any clarity brought to § 101 jurisprudence after Alice has been shattered by this recent pair of decisions.  Ultramercial characterizes its claims as pertaining to "a computer-implemented invention for preventing users from accessing online copyrighted content without first viewing paid advertisements electronically paired to the content," while characterizing those of DDR as "a computer-implemented invention for keeping users on a host website by retrieving data from other websites and displaying the data with the same 'look and feel' as the host site."  This, according to Ultramercial, indicates that the Federal Circuit is just as divided as it was pre-Alice, resulting in confusion in the district courts when reviewing § 101 challenges.  Ultramercial writes that finding its patent invalid is "irreconcilable with DDR," and that "[c]omparing Ultramercial's claim 1 to DDR's claim 1 reveals no articulable basis for finding one claim eligible and the other abstract."

Further, Ultramercial contends that Alice stood for the principle that inventions directed to "performing, on a computer, well-known, conventional rules or fundamental, routine economic practices, and lack[ing] any innovation beyond applying those known ideas to a stand-alone or networked computer," were patent-ineligible.  Ultramercial distinguishes its claims by noting they cover a procedure that "sharply departed from conventional advertising in the brick-and-mortar context," and "offered a solution unique to the technological environment of networked computers."  Thus, Ultramercial's invention was counter-conventional and new.

In addition, Ultramercial points out that the first time the Federal Circuit reviewed its patent, the Court found that "the claims recite more than the age-old idea that advertising can serve as currency, but instead disclose a practical application of this idea" that was "an improvement to prior art technology."  The Court came to a similar conclusion the second time it reviewed the patent, writing that the "recited steps are neither highly generalized nor inherent in the idea of monetizing advertising."  Particularly, Ultramercial points to Judge Lourie's concurrence in the second decision, noting that "Judge Lourie found the claims patent-eligible because the added limitations in these claims represent significantly more than the underlying abstract idea of using advertising as an exchange or currency and, as a consequence, do not preempt the use of that idea in all fields."  But in the post-Alice review, and in contrast to its prior analysis, the Court wrote that "the claimed sequence of steps comprises only conventional steps, specified at a high level of generality, and tied only to a general purpose computer."  In the third decision, the Court also rejected the notion that the reasoning of Alice only applied to known, fundamental, and routine economic or commercial practices implemented on a generic computer.

Analysis

With such a storied history involving its patent, it is not surprising to that Ultramercial is not ready to give up just yet.  Ultramercial's position that the dispositions of its claims and those of DDR are incompatible may be enough to convince the Federal Circuit judges to meet en banc, but ultimately may not win the day.  The Court may instead take the opportunity to synthesize these cases, and could point out that Ultramercial merely added use of the Internet to an otherwise disembodied transaction, while DDR fundamentally changed how an aspect of the Internet operates.

But, given the gray area at issue, the Federal Circuit might decide that the claims of Ultramercial and DDR rise or fall together.  As DDR is the only post-Alice § 101 case reviewed by the Court that has found claims to be patent-eligible, it is a currently valuable data point for applicants and patentees.  Losing this data point would deepen the mystery of what claims incorporating an abstract idea need to recite in order to be patentable.

Ultramercial's argument that Alice does not apply to inventions that are not known, fundamental, or routine seems risky.  While this logic is implicitly supported by the Alice and Mayo v. Prometheus cases, the Supreme Court never stated as much.  The argument also seems to be in conflict with the "mental process" doctrine, which proclaims inventions that could be carried out in the human brain or using pencil and paper are abstract ideas.  When combined with the holding of Alice, one could conclude that performing such a process, even an objectively new one, on a generic computer would still fail to meet the requirements of § 101.

Perhaps Ultramercial's best position is that the Federal Circuit panel that carried out the third review of its patent took the Alice decision too far by equating the Internet with a generic computer.  As a result, the § 101 exceptions threaten to "swallow all of patent law."