United States Court of Appeals
for the Federal Circuit
__________________________
ULTRAMERCIAL, LLC AND ULTRAMERCIAL, INC.,
Plaintiffs-Appellants,
v.
HULU, LLC,
Defendant,
and
WILDTANGENT, INC.,
Defendant-Appellee.
__________________________
2010-1544
__________________________
Appeal from the United States District Court for the
Central District of California in case No. 09-CV-6918,
Judge R. Gary Klausner.
___________________________
Decided: September 15, 2011
___________________________
LAWRENCE M. HADLEY, Hennigan Dorman, LLP, of
Los Angeles, California, argued for plaintiffs-appellants.
With him on the brief were HAZIM ANSARI and MIEKE K.
MALMBERG.
GREGORY C. GARRE, Latham & Watkins, LLP, of
Washington, DC, argued for defendant-appellee. On the
ULTRAMERCIAL v. HULU 2
brief were RICHARD G. FRENKEL and LISA K. NGUYEN,
Menlo Park, California. Of counsel was RICHARD P. BESS.
__________________________
Before RADER, Chief Judge, LOURIE and O’MALLEY,
Circuit Judges.
RADER, Chief Judge.
The United States District Court for the Central Dis-
trict of California dismissed Ultramercial, LLC and
Ultramercial, Inc.’s (collectively, “Ultramercial”) patent
infringement claims, finding that U.S. Patent No.
7,346,545 (“the ’545 patent”) does not claim patent-eligible
subject matter. Because the ’545 patent claims a “proc-
ess” within the language and meaning of 35 U.S.C. § 101,
this court reverses and remands.
I
The ’545 patent claims a method for distributing copy-
righted products (e.g., songs, movies, books) over the
Internet where the consumer receives a copyrighted
product for free in exchange for viewing an advertise-
ment, and the advertiser pays for the copyrighted content.
Claim 1 of the ’545 patent reads:
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 pro-
vider, 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;
3 ULTRAMERCIAL v. HULU
a second step of selecting a sponsor message to
be associated with the media product, said
sponsor message being selected from a plu-
rality 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 pre-
sented is less than the number of transac-
tion 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 con-
sumer 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 con-
sumer;
an eighth step of, if the sponsor message is not
an interactive message, allowing said con-
sumer access to said media product after
said step of facilitating the display of said
sponsor message;
ULTRAMERCIAL v. HULU 4
a ninth step of, if the sponsor message is an in-
teractive 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.
’545 patent col.8 ll.5-48.
Ultramercial filed suit against Hulu, LLC (“Hulu”),
YouTube, LLC (“YouTube”), and WildTangent, Inc.
(“WildTangent”), alleging infringement of the ’545 patent.
Hulu and YouTube have been dismissed from the case.
WildTangent filed a motion to dismiss for failure to state
a claim, arguing that the ’545 patent did not claim patent-
eligible subject matter. The district court granted Wild-
Tangent’s motion to dismiss. Ultramercial appeals. This
court has jurisdiction under 28 U.S.C. § 1295(a)(1).
This court reviews a district court’s dismissal for fail-
ure to state a claim without deference. Gillig v. Nike,
Inc., 602 F.3d 1354, 1358 (Fed. Cir. 2010). This court also
reviews determinations regarding patent-eligible subject
matter under 35 U.S.C. § 101 without deference. In re
Ferguson, 558 F.3d 1359, 1363 (Fed. Cir. 2009).
Il
The district court dismissed Ultramercial’s claims for
failure to claim statutory subject matter without formally
construing the claims. This court has never set forth a
5 ULTRAMERCIAL v. HULU
bright line rule requiring district courts to construe
claims before determining subject matter eligibility.
Indeed, because eligibility is a “coarse” gauge of the
suitability of broad subject matter categories for patent
protection, Research Corp. Techs., Inc. v. Microsoft Corp.,
627 F.3d 859, 869 (Fed. Cir. 2010), claim construction
may not always be necessary for a § 101 analysis. See,
e.g., Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010) (find-
ing subject matter ineligible for patent protection without
claim construction). On many occasions, however, a
definition of the invention via claim construction can
clarify the basic character of the subject matter of the
invention. Thus, claim meaning may clarify the actual
subject matter at stake in the invention and can
enlighten, or even answer, questions about subject matter
abstractness. In this case, the subject matter at stake
and its eligibility does not require claim construction.
lll
35 U.S.C. § 101 sets forth the categories of subject
matter that are eligible for patent protection: “[w]hoever
invents or discovers any new and useful process, machine,
manufacture, or composition of matter, or any new and
useful improvement thereof, may obtain a patent therefor,
subject to the conditions and requirements of this title”
(emphasis added). In Bilski, the Supreme Court ex-
plained that “[i]n choosing such expansive terms modified
by the comprehensive ‘any,’ Congress plainly contem-
plated that the patent laws would be given wide scope.”
130 S. Ct. at 3225 (quoting Diamond v. Chakrabarty, 447
U.S. 303, 308 (1980)). After all, the purpose of the Patent
Act is to encourage innovation, and the use of broadly
inclusive categories of statutory subject matter ensures
that “ingenuity . . . receive[s] a liberal encouragement.”
Chakrabarty, 447 U.S. at 308.
ULTRAMERCIAL v. HULU 6
More importantly, as § 101 itself expresses, subject
matter eligibility is merely a threshold check; claim
patentability ultimately depends on “the conditions and
requirements of this title,” such as novelty, non-
obviousness, and adequate disclosure. 35 U.S.C. § 101;
see Classen Immunotherapies, Inc. v. Biogen IDEC, Nos.
2006-1634, 2006-1649, 2011 WL 3835409, at *6 (Fed. Cir.
Aug. 31, 2011) (pointing out the difference between “the
threshold inquiry of patent-eligibility, and the substantive
conditions of patentability”). By directing attention to
these substantive criteria for patentability, the language
of § 101 makes clear that the categories of patent-eligible
subject matter are no more than a “coarse eligibility
filter.” Research Corp., 627 F.3d at 869. In other words,
the expansive categories—process, machine, article of
manufacture, and composition of matter—are certainly
not substitutes for the substantive patentability require-
ments set forth in § 102, § 103, and § 112 and invoked
expressly by § 101 itself. Moreover, title 35 does not list a
single ineligible category, suggesting that any new, non-
obvious, and fully disclosed technical advance is eligible
for protection, subject to the following limited judicially
created exceptions.
In line with the broadly permissive nature of § 101’s
subject matter eligibility principles, judicial case law has
created only three categories of subject matter outside the
eligibility bounds of § 101—laws of nature, physical
phenomena, and abstract ideas. Bilski, 130 S. Ct. at
3225. Indeed, laws of nature and physical phenomena
cannot be invented. Abstractness, however, has pre-
sented a different set of interpretive problems, particu-
larly for the § 101 “process” category. Actually, the term
“process” has a statutory definition that, again, admits of
no express subject matter limitation: a title 35 “process” is
a “process, art or method, and includes a new use of a
7 ULTRAMERCIAL v. HULU
known process, machine, manufacture, composition of
matter, or material.” 35 U.S.C. § 100(b). Indeed, the
Supreme Court recently examined this definition and
found that the ordinary, contemporary, common meaning
of “method” may include even methods of doing business.
See Bilski, 130 S. Ct. at 3228. Accordingly, the Court
refused to deem business methods ineligible for patent
protection and cautioned against “read[ing] into the
patent laws limitations and conditions which the legisla-
ture has not expressed.” Id. at 3226 (quoting Diamond v.
Diehr, 450 U.S. 175, 182 (1981)). And this court detects
no limitations or conditions on subject matter eligibility
expressed in statutory language. See, e.g., Ass’n for
Molecular Pathology v. U.S. Patent & Trademark Office,
No. 2010-1406, 2011 WL 3211513, at *14 (Fed. Cir. July
29, 2011) (patent-ineligible categories of subject matter
are “judicially created exceptions”); Prometheus Labs.,
Inc. v. Mayo Collaborative Servs., 628 F.3d 1347, 1353
(Fed. Cir. 2010), cert. granted, 130 S.Ct. 3543 (2010)
(patent-ineligible categories are “not compelled by the
statutory text”); see also Bilski, 130 S. Ct. at 3225 (Su-
preme Court acknowledging that judge-created “excep-
tions are not required by the statutory text”).
In an effort to grapple with the non-statutory “ab-
stractness” limit, this court at one point set forth a ma-
chine-or-transformation test as the exclusive metric for
determining the subject matter eligibility of processes. In
re Bilski, 545 F.3d 943, 956 (Fed. Cir. 2008), aff'd on other
grounds, Bilski, 130 S.Ct. 3218. The Supreme Court
rejected this approach in Bilski, noting that the machine-
or-transformation test is simply “a useful and important
clue, an investigative tool, for determining whether some
claimed inventions are processes under § 101” and is not
“the sole test for deciding whether an invention is a
patent-eligible ‘process.’” 130 S. Ct. at 3227 (emphasis
ULTRAMERCIAL v. HULU 8
added). While machine-or-transformation logic served
well as a tool to evaluate the subject matter of Industrial
Age processes, that test has far less application to the
inventions of the Information Age. See id. at 3227-28
(“[I]n deciding whether previously unforeseen inventions
qualify as patentable ‘processes,’ it may not make sense to
require courts to confine themselves to asking the ques-
tions posed by the machine-or-transformation test. Sec-
tion 101’s terms suggest that new technologies may call
for new inquiries.”). Technology without anchors in
physical structures and mechanical steps simply defy easy
classification under the machine-or-transformation cate-
gories. As the Supreme Court suggests, mechanically
applying that physical test “risk[s] obscuring the larger
object of securing patents for valuable inventions without
transgressing the public domain.” Id. at 3228.
Both members of the Supreme Court and this court
have recognized the difficulty of providing a precise
formula or definition for the judge-made ineligible cate-
gory of abstractness. See id. at 3236 (Stevens, J., concur-
ring) (“The Court . . . [has] never provide[d] a satisfying
account of what constitutes an unpatentable abstract
idea.”); Research Corp., 627 F.3d at 868. Because technol-
ogy is ever-changing and evolves in unforeseeable ways,
this court gives substantial weight to the statutory reluc-
tance to list any new, non-obvious, and fully disclosed
subject matter as beyond the reach of title 35. In sum,
§ 101 is a “dynamic provision designed to encompass new
and unforeseen inventions.” J.E.M. Ag Supply, Inc. v.
Pioneer Hi-Bred Int’l, Inc., 534 U.S. 124, 135 (2001). With
this in mind, this court does “not presume to define ‘ab-
stract’ beyond the recognition that this disqualifying
characteristic should exhibit itself so manifestly as to
override the broad statutory categories of eligible subject
matter and the statutory context that directs primary
9 ULTRAMERCIAL v. HULU
attention on the patentability criteria of the rest of the
Patent Act.” Research Corp., 627 F.3d at 868.
Although abstract principles are not eligible for pat-
ent protection, an application of an abstract idea may well
be deserving of patent protection. See Diehr, 450 U.S. at
187 (“an application of a law of nature or mathematical
formula to a known structure or process may well be
deserving of patent protection”); Parker v. Flook, 437 U.S.
584, 591 (1978) (“While a scientific truth, or the mathe-
matical expression of it, is not a patentable invention, a
novel and useful structure created with the aid of knowl-
edge of scientific truth may be.”). The application of an
abstract idea to a “new and useful end” is the type of
invention that the Supreme Court has described as de-
serving of patent protection. Gottschalk v. Benson, 409
U.S. 63, 67 (1972). After all, unlike the Copyright Act
which divides idea from expression, the Patent Act covers
and protects any new and useful technical advance,
including applied ideas.
Turning to the ’545 patent, the claimed invention is a
method for monetizing and distributing copyrighted
products over the Internet. As a method, it satisfies
§ 100’s definition of “process” and thus falls within a § 101
category of patent-eligible subject matter. Thus, this
court focuses its inquiry on the abstractness of the subject
matter claimed by the ’545 patent.
“[I]nventions with specific applications or improve-
ments to technologies in the marketplace are not likely to
be so abstract that they override the statutory language
and framework of the Patent Act.” Research Corp., 627
F.3d at 869. The ’545 patent seeks to remedy problems
with prior art banner advertising, such as declining click-
through rates, by introducing a method of product distri-
bution that forces consumers to view and possibly even
ULTRAMERCIAL v. HULU 10
interact with advertisements before permitting access to
the desired media product. ’545 patent col.2 ll.14-18. By
its terms, the claimed invention purports to improve
existing technology in the marketplace. By its terms, the
claimed invention invokes computers and applications of
computer technology. Of course, the patentability of the
’545 patent, though acknowledged by the U.S. Patent
Office, would still need to withstand challenges that the
claimed invention does not advance technology (novelty),
does not advance technology sufficiently to warrant
patent protection (obviousness), or does not sufficiently
enable, describe, and disclose the limits of the invention
(adequate disclosure).
Returning to the subject matter of the ’545 patent, the
mere idea that advertising can be used as a form of cur-
rency is abstract, just as the vague, unapplied concept of
hedging proved patent-ineligible in Bilski. However, the
’545 patent does not simply claim the age-old idea that
advertising can serve as currency. Instead the ’545
patent discloses a practical application of this idea. The
’545 patent claims a particular method for monetizing
copyrighted products, consisting of the following steps: (1)
receiving media products from a copyright holder, (2)
selecting an advertisement to be associated with each
media product, (3) providing said media products for sale
on an Internet website, (4) restricting general public
access to the media products, (5) offering free access to
said media products on the condition that the consumer
view the advertising, (6) receiving a request from a con-
sumer to view the advertising, (7) facilitating the display
of advertising and any required interaction with the
advertising, (8) allowing the consumer access to the
associated media product after such display and interac-
tion, if any, (9) recording this transaction in an activity
log, and (10) receiving payment from the advertiser. ’545
11 ULTRAMERCIAL v. HULU
patent col.8 ll.5-48. Many of these steps are likely to
require intricate and complex computer programming. In
addition, certain of these steps clearly require specific
application to the Internet and a cyber-market environ-
ment. One clear example is the third step, “providing said
media products for sale on an Internet website.” Id. col.8
ll.20-21. And, of course, if the products are offered for sale
on the Internet, they must be “restricted”—step four—by
complex computer programming as well. Viewing the
subject matter as a whole, the invention involves an
extensive computer interface. This court does not define
the level of programming complexity required before a
computer-implemented method can be patent-eligible.
Nor does this court hold that use of an Internet website to
practice such a method is either necessary or sufficient in
every case to satisfy § 101. This court simply find the
claims here to be patent-eligible, in part because of these
factors.
In this context, this court examines as well the con-
tention that the software programming necessary to
facilitate the invention deserves no patent protection or
amounts to abstract subject matter or, in the confusing
terminology of machines and physical transformations,
fails to satisfy the “particular machine” requirement.
This court confronted that contention nearly two decades
ago in the en banc case of In re Alappat, 33 F.3d 1526
(Fed. Cir. 1994). At that time, this court observed that
“programming creates a new machine, because a general
purpose computer in effect becomes a special purpose
computer once it is programmed to perform particular
functions pursuant to instructions from program soft-
ware.” Id. at 1545. As computer scientists understand:
the inventor can describe the invention in terms of
a dedicated circuit or a process that emulates that
circuit. Indeed, the line of demarcation between a
ULTRAMERCIAL v. HULU 12
dedicated circuit and a computer algorithm ac-
complishing the identical task is frequently
blurred and is becoming increasingly so as the
technology develops. In this field, a software
process is often interchangeable with a hardware
circuit.
Id. at 1583 (J. Rader, concurring). In other words, a
programmed computer contains circuitry unique to that
computer. That “new machine” could be claimed in terms
of a complex array of hardware circuits, or more effi-
ciently, in terms of the programming that facilitates a
unique function. The digital computer may be considered
by some the greatest invention of the twentieth century,
and both this court and the Patent Office have long ac-
knowledged that “improvements thereof” through inter-
changeable software or hardware enhancements deserve
patent protection. Far from abstract, advances in com-
puter technology—both hardware and software—drive
innovation in every area of scientific and technical en-
deavor.
This court understands that the broadly claimed
method in the ’545 patent does not specify a particular
mechanism for delivering media content to the consumer
(i.e., FTP downloads, email, or real-time streaming). This
breadth and lack of specificity does not render the claimed
subject matter impermissibly abstract. Assuming the
patent provides sufficient disclosure to enable a person of
ordinary skill in the art to practice the invention and to
satisfy the written description requirement, the disclosure
need not detail the particular instrumentalities for each
step in the process.
That a process may be patentable, irrespective of
the particular form of the instrumentalities used,
cannot be disputed. If one of the steps of a process
13 ULTRAMERCIAL v. HULU
be that a certain substance is to be reduced to a
powder, it may not be at all material what in-
strument or machinery is used to effect that ob-
ject, whether a hammer, a pestle and mortar, or a
mill.
Benson, 409 U.S. at 69-70 (quoting Cochrane v. Deener, 94
U.S. 780, 787-88 (1876)). Moreover, written description
and enablement are conditions for patentability that title
35 sets “wholly apart from whether the invention falls
into a category of statutory subject matter.” Diehr, 450
U.S. at 190 (quoting In re Bergy, 596 F.2d 952, 961
(C.C.P.A. 1979)). The “coarse eligibility filter” of § 101
should not be used to invalidate patents based on con-
cerns about vagueness, indefinite disclosure, or lack of
enablement, as these infirmities are expressly addressed
by § 112. See 35 U.S.C. § 112; see also Research Corp.,
627 F.3d at 869 (“In section 112, the Patent Act provides
powerful tools to weed out claims that may present a
vague or indefinite disclosure of the invention.”).
Finally, the ’545 patent does not claim a mathemati-
cal algorithm, a series of purely mental steps, or any
similarly abstract concept. It claims a particular method
for collecting revenue from the distribution of media
products over the Internet. In a recent case, this court
discerned that an invention claimed an “unpatentable
mental process.” CyberSource Corp. v. Retail Decisions,
Inc., No. 2009-1358, 2011 WL 3584472, at *3 (Fed. Cir.
Aug. 16, 2011). The eligibility exclusion for purely mental
steps is particularly narrow. See Prometheus Labs., 628
F.3d at 1358 (noting that claims must be considered as a
whole and that “the presence of mental steps [in a claim]
does not detract from the patentability of [other] steps”).
Unlike the claims in CyberSource, the claims here re-
quire, among other things, controlled interaction with a
ULTRAMERCIAL v. HULU 14
consumer via an Internet website, something far removed
from purely mental steps.
In sum, as a practical application of the general con-
cept of advertising as currency and an improvement to
prior art technology, the claimed invention is not “so
manifestly abstract as to override the statutory language
of section 101.” Research Corp., 627 F.3d at 869. Accord-
ingly, this court reverses the district court’s dismissal of
Ultramercial’s patent claims for lack of subject matter
eligibility and remands for further proceedings. This
decision does not opine at all on the patentability of the
claimed invention under the substantive criteria set forth
in § 102, § 103, and § 112.
REVERSED AND REMANDED