District court rules Internet advertising patent invalid under Bilski

This week a California court used the U.S. Supreme Court’s analysis in Bilski v. Kappos to find invalid a patent covering a method of delivering media products (film, music, etc.) to consumers over the Internet.

In 2008, Ultramercial LLC received U.S. patent 7,346,545 covering media distribution methods that allow users to view copyrighted material over the Internet free of charge in exchange for watching advertisements.  The claims include options for making the advertisements interactive.  For example, claim 1 of the ‘545 patent reads:

1. 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 presented is less than the number of transaction 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 consumer 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 consumer 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.

Ultramercial sued Hulu.com and Wildtangent, Inc. for infringement of the ‘545 patent.  The defendants filed a motion to dismiss, arguing that the ‘545 patent neither disclosed nor claimed patentable subject matter.

Considering the motion, the court first considered the pre-Bilski machine or transformation test, stating that “the machine or transformation test appears to have a major screening function – albeit not perfect – that separates unpatentable ideas from patentable ones.”  The court found that the patent did not satisfy this test, stating that “the Internet is not a machine”, “the mere act of storing media on computer memory does not tie the ‘545 invention to a machine in a meaningful way”, and the “mere transfer of data” is not transformation of an article.

The court then applied Bilski to consider whether the claims covered an abstract idea or an invention, and found the claims to be similar to those found to be an abstract idea in Bilski:

At the core of the ‘545 patent is the basic idea that one can use advertisement as an exchange or currency. An Internet user can pay for copyrighted media by sitting through a sponsored message instead of paying money to download the media. This core principle, similar to the core of the Bilski patent, is an abstract idea. Indeed, public television channels have used the same basic idea for years to provide free (or offset the cost of) media to their viewers. At its heart, therefore, the patent does no more than disclose an abstract idea.

The court acknowledged that its ruling will likely be reviewed by the Federal Circuit on appeal.  Explaining its decision to grant the motion before claim construction, the decision states:

given the lack of clarity in this area of patent law, it is perhaps even more appropriate for this Court to render its decision at the earliest stage so that the parties may benefit from the Federal Circuit’s guidance on the issue sooner rather than later, if they so desire.

UPDATE:  In September 2011, the U.S. Court of Appeals reversed the District Court’s decision and remanded the case to the District Court.  However, on May 21 2012, the U.S. Supreme Court ordered the Federal Circuit to reconsider its decision in view of Mayo Collaborative Services, Inc. v Prometheus, Inc. (U.S. 2012).  More details are available here.