Ultramercial, LLC v. Hulu, LLC: District court dismisses patent infringement claim against Wildtangent


Ultramercial, LLC v. Hulu, LLC, No. CV 09-06918 RGK (C.D. Cal. Aug. 13, 2010)

Opinion hosted by The Hollywood Reporter

On August 13, the United States District Court for the Central District of California granted Wildtangent, Inc.’s motion to dismiss against Ultramercial, LLC’s patent infringement claim. Hulu, LLC also made a similar motion that was rendered moot. In granting the motion to dismiss, the court analyzed Ultramercial’s patent, which claims a means by which users can watch copyrighted material in exchange for viewing advertisements. The court evaluated the patent under the machine or transformation test endorsed by the Supreme Court in Bilski v. Kappos, 561 U.S. ___ (2010), as “a useful and important clue” to process patent validity.  The court also looked to whether the patent claimed an “abstract idea.” The court held that because the claimed invention deals with the abstract concept of advertisement, and because it is not tied to a machine nor does it transform data, the patent is invalid.

JOLT Digest previously reported on the Bilski decision. The 271 Patent Blog provides an overview of the decision in this case. Patents4Software critiques the decision and considers how this case could affect future applications of the Bilski decision.

On March 18, 2008, the United States Patent and Trademark Office issued Patent No. 7,346,545 to Ultramercial for a means for distributing copyrighted material over the Internet. The invention requires users to watch an entire advertisement in order to view copyrighted material, such as a television show, for free. Ultramercial brought suit against Hulu and Wildtangent for patent infringement. In response, the defendants filed motions to dismiss, claiming that the patent’s subject matter did not meet the standards required by the Patent Act of 1952. Because the defendant filed the motions before the Supreme Court issued its decision in Bilski, the district court stayed this case until the Bilski decision.

In the opinion by Judge R. Gary Klausner, the court analyzed the Bliski decision and determined that the machine or transformation test, while not the exclusive test for patentability, is still an important indicator of whether something is patentable. The court held that that Ultramercial’s patent was not tied to a machine. Ultramercial argued that there were two references to machines in the patent: a “facilitator,” and the Internet. The court determined that the notion of a “facilitator” was too broad to qualify as a machine and that the Internet was not a machine. The decision rejected Ultramercial’s argument that the invention’s reliance on computers fulfilled the machine test, as requiring the use of a computer did not limit the scope of the patent in a sufficient manner. The court held that the patent did not fulfill the transformation prong, as the transferring of data between computers was not transformative, nor was it a significant part of the process outlined in the patent.

Judge Klausner also determined that since Ultramercial’s patent’s core concept was advertising, this patent (like the patent in Bliski) was abstract and therefore not eligible for patent protection.

This decision is one of the first applications of Bliski in a district court. It demonstrates that courts may utilize the narrow holding of Bliski in order to continue using the machine or transformation test as a very important indicator of patentability.

Andrew Segna is a 2L at the Harvard Law School.