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Ultramercial's Patent on Ads in Online Videos Finally Gets Tossed

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By Mark Wilson, Esq. on November 19, 2014 3:01 PM

Following Alice v. CLS Bank last term, all those "on a computer" business method patents were seriously called into question. We've seen new lawsuits spring up over invalidating old patents, and Alice get invoked in current litigation over "on a computer" patents.

One of the highest-profile cases was Ultramercial v. Hulu, also known as the WildTangent case for one of its other defendants. The short, short version is that Ultramercial owns a patent that purports to cover viewing free streaming videos online in exchange for watching a little advertising throughout -- basically, exactly what Hulu and YouTube do.

Boom Goes the Dynamite

The Supreme Court vacated the Federal Circuit's previous decision and remanded for reconsideration in light of Alice. In two separate trips to the Federal Circuit, the court has sided with Ultramercial. This time, though, the court said that Ultramercial's wacky "new" idea -- paying for free content by watching ads, but this time on a computer! -- is exactly the sort of thing that Alice disapproved.

The first step in the Alice framework is figuring out if the claim is ineligible because it's an abstract idea. "But, but, but!" Ultramercial says this situation is different because the patent on injecting ads into a streaming video is "directed to a specific method of advertising and content distribution that was previously unknown and never employed on the Internet before."

Yeah, no dice. The court declined to adopt Ultramercial's picayune level of abstraction of the idea, which would have abstracted the problem out of existence. Instead, the court construed the patent claim as the district court did: "that one can use [an] advertisement as an exchange or currency."

The second step is asking if the claims do more than just take that abstract idea and describe it in a different way. The key concern is whether the patent claims "transform the nature of the claim into patent-eligible subject matter." Ultramercial threw all it could at the Federal Circuit in an attempt to meet this second prong. What if you add some new and different steps to the same old concept? What if you do it on the Internet? What if you make it interactive?

No, no, and, no: "Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter."

Concurrence: Business Method Patents Might Be Out the Door?

Judge Haldane Mayer concurred to make clear some of the analysis points that will undoubtedly become important to future Alice-type cases. First, he said, the question of eligibility is addressed at the outset. Second, there should be no presumption of eligibility. Third, Alice "articulated a technological arts test for patent eligibility." This means -- with no small amount of controversy -- that the innovation to be patented must improve the technology or technical field in some way.

Claims "directed to an entrepreneurial objective, such as methods for increasing revenue, minimizing economic risk, or structuring commercial transactions, rather than a technological one," said Mayer, simply don't count. This stance, which broadens the scope of Alice significantly, seems directed at the broader world of "business method" patents, which do little more than describe a way to do something.

You haven't seen the last of Mayer's concurrence. I guarantee it.

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