Ultramercial v. Hulu Llc

• Decision Date: 18 November 2011
• Docket Number: No. 2010–1544.,2010–1544.
• Citation: 657 F.3d 1323,100 U.S.P.Q.2d 1140
• Parties: ULTRAMERCIAL, LLC and Ultramercial, Inc., Plaintiffs–Appellants,v.HULU, LLC, Defendant,andWildTangent, Inc., Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

657 F.3d 1323

100 U.S.P.Q.2d 1140

ULTRAMERCIAL, LLC and Ultramercial, Inc., Plaintiffs–Appellants,

v.HULU, LLC, Defendant,andWildTangent, Inc., Defendant–Appellee.

No. 2010–1544.

United States Court of Appeals, Federal Circuit.

Sept. 15, 2011.Rehearing En Banc Denied Nov. 18, 2011.

Lawrence M. Hadley, Hennigan Dorman, LLP, of Los Angeles, CA, 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 brief were Richard G. Frenkel and Lisa K. Nguyen, Menlo Park, CA. 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 District 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 “process” 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 copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, 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 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.

'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 WildTangent'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 failure 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).

II

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 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, –––U.S. ––––, 130 S.Ct. 3218, 3231, 177 L.Ed.2d 792 (2010) (finding 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.

III

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 explained that “[i]n choosing such expansive terms modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope.” 130 S.Ct. at 3225 (quoting Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (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, 100 S.Ct. 2204.

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, nonobviousness, and adequate disclosure. 35 U.S.C. § 101; see Classen Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d 1057, 1064 (Fed.Cir.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 requirements 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, nonobvious, 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 presented a different set of interpretive problems, particularly 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 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 legislature has not expressed.” Id. at 3226 (quoting Diamond v. Diehr, 450 U.S. 175, 182, 101 S.Ct. 1048, 67 L.Ed.2d 155 (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, 653 F.3d 1329, 1348 (Fed.Cir.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, ––– U.S. ––––, 130 S.Ct. 3543, 177 L.Ed.2d 1120 (2010) (patent-ineligible categories are “not compelled by the statutory text”); see also Bilski, 130 S.Ct. at 3225 (Supreme Court acknowledging that judge-created “exceptions are not required by the statutory text”).

In an effort to grapple with the non-statutory “abstractness” limit, this court at one point set forth a machine-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...