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A recent ruling by the Federal Circuit makes it harder to enforce Internet-based method patents. The court explained that "invocation of the Internet" cannot by itself transform an abstract concept into a patentable invention under 35 U.S.C. § 101, and a concurring opinion added that resolving patent eligibility under § 101 early in litigation "provides a bulwark against vexatious infringement suits."




In Ultramercial v. Hulu, the Federal Circuit – for the third time – considered a method patent purportedly covering the familiar practice of allowing Internet users to watch copyrighted content free of charge in exchange for viewing an advertisement, with the advertiser paying for the copyrighted content. Ultramercial, the owner of the patent, sued Hulu, YouTube, and WildTangent. Notably, the Federal Circuit had twice held that the Ultramercial patent claimed patent-eligible subject matter under 35 U.S.C. § 101, but both rulings were vacated by the Supreme Court.


The third time was the charm for WildTangent, which had moved to dismiss the lawsuit under § 101. Earlier this year, in Alice Corp. v. CLS Bank International, the Supreme Court held that abstract ideas, which are generally not patentable under § 101, do not become patent-eligible merely by requiring "generic computer implementation." Applying the Alice decision, the Federal Circuit has now ruled in Ultramercial that the patent at issue does not claim eligible subject matter under § 101. In an opinion by Judge Lourie, the Federal Circuit explained:


The majority of those steps [set forth in the Ultramercial patent] comprise the abstract concept of offering media content in exchange for viewing an advertisement. 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. Instead, the claimed sequence of steps comprised only "conventional steps, specified at a high level of generality," which is insufficient to supply an "inventive concept."


In short, merely adding routine method steps implementing an abstract concept does not render the concept patentable. More specifically, the court stated that "invocation of the Internet also adds no inventive concept ... [T]he use of the Internet is not sufficient to save otherwise abstract claims from ineligibility under § 101."


Perhaps equally notable, in affirming the district court's grant of a motion to dismiss, the Federal Circuit confirmed the appropriateness of early dismissal on the pleadings on § 101 grounds. The concurring opinion by Judge Mayer stated, among other things:


[R]esolving subject matter eligibility at the outset provides a bulwark against vexatious infringement suits. The scourge of meritless infringement claims has continued unabated for decades due, in no small measure, to the ease of asserting such claims and the enormous sums required to defend against them ... Given the staggering costs associated with discovery, "Markman" hearings, and trial, it is hardly surprising that accused infringers feel compelled to settle early in the process. Addressing section 101 at the threshold will thwart attempts – some of which bear the "indicia of extortion" – to extract "nuisance value" settlements from accused infringers.


In light of the latest Ultramercial ruling, those seeking patents for Internet-based inventions should work closely with counsel to help ensure that patent-eligible subject matter – something beyond the mere generic implementation of an abstract concept in an Internet application – is set forth. On the other hand, those defending against claims of infringement of method patents for Internet-based technologies should consider opportunities for early – and economical – dismissal on § 101 grounds.