Federal Circuit reverses course in Ultramercial v. Hulu; finds method of delivering advertisements to be an abstract idea

Yes or NoA method of providing advertising in connection with streaming media is not eligible for patenting, according to the latest decision of the Federal Circuit in the long-running Ultramercial v. Hulu patent saga.

Ultramercial’s patent claimed a method of distributing media over the Internet.  Claim 1 included eleven steps.  The steps described a process of associating ads with streaming media, allowing a consumer to access the media for free if the consumer first views the ad, and receiving payment from the advertiser after the consumer views the ad.

When the Federal Circuit first considered the claims in 2013, it found the claims to be patent-eligible. At the time, the court stated that ” it wrenches meaning from the word to label the claimed invention ‘abstract.'”  The court’s 2013 decision also stated that “the claim appears far from over generalized, with
eleven separate and specific steps with many limitations and sub-steps in each category.”

Fast forward to 2014, after the United States Supreme Court issued its decision in Alice v. CLS Bank.  The Alice decision established a two-part test for determining patent-eligibility: (1) Is the claim directed to an abstract idea? (2) If so, are there other elements in the claim sufficient to ensure that the claim amounts to significantly more than the abstract idea itself?

When faced with a new post-Alice appeal in the case, the Federal Circuit applied the new two-part test of Alice.  This time, the court reached a different conclusion to the question of whether the claims were directed to an abstract idea.  In particular, the court found that the claims “described nothing more than the abstract idea of showing an advertisement before delivering free content.”

Then, moving to the second part of the Alice test, the court asked whether the computer implemented more than “well-understood, routine, conventional activity,” and answered “no.”

Notably, despite essentially overruling its earlier decision that found the claims to not cover an abstract idea, the court did not refer back to its 2013 decision or explain how the definition of “abstract idea” changed to prompt the new result. Thus, the court missed an opportunity to provide specific guidance to future courts and patent applicants on this important issue.

The court did, however, answer the question of whether the transformation of data by a computer would satisfy the “machine-or-transformation” test with a flat “no” by stating that ‘[a]ny transformation from the use of computers or transfer of content between computers is merely what computers do.”

Other notable comments in the case come from a concurring opinion from Judge Mayer, who stated that Supreme Court precedent suggests that no presumption of patent validity exists in a section 101 patent-eligibility analysis. Judge Mayer’s opinion also found Alice to require a “technological arts” test, stating that a “rule holding that claims are impermissible abstract if they are directed to an entrepreneurial objective, such as methods for increasing revenue, minimizing economic risk, or structuring commercial transactions, rather than a technological one, would comport with the guidance provided in both Alice and Bilski [v. Kappos].”

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