Ultramercial , LLC v. Hulu, LLC: Federal Circuit Reverses Dismissal of Ultramercial Patent Infringement Claim

Ultramercial , LLC v. Hulu, LLC, No. 2010-1544 (Fed. Cir. Sept. 15, 2011) Slip Opinion

The United States Court of Appeals for the Federal Circuit reversed and remanded the U.S. District Court for the Central District of California’s dismissal of Ultramercial’s patent infringement claim against Hulu, LLC and Wildtangent, Inc.. The District Court had found that U.S. Patent No. 7,346,545 did not claim patent-eligible subject matter.

The Federal Circuit held that the ‘545 patent claims a “process” that is patent-eligible under 35 U.S.C. § 101. The ‘545 patent consists of a method of distributing copyrighted material, such as movies, television shows, music, or books, through a website to consumers who view or interact with advertisements in exchange for free access. The revenue generated from the advertisers would then pay for the copyrighted material. The court did not consider this process abstract, finding that it went beyond mere “mental steps.” Following the Supreme Court’s decision in Bilski v. Kappos, 130 S.Ct. 3218 (2010), the court rejected the machine-or-transformation test, noting its waning application to the “inventions of the Information Age.”

Patently-O provides an overview of the case. JOLT Digest previously reported on the District Court’s 2010 decision. JOLT Digest also reported on the Bilski decision. 

Ultramercial filed suit against Hulu, LLC, YouTube, LLC, and Wildtangent, Inc. for infringement of its ‘545 patent. Hulu and YouTube were dismissed from the case, and Wildtangent filed a motion to dismiss for failure to state a claim, which the district court granted. Ultramercial appealed. In its decision, the Federal Circuit noted that there are only three categories of subject matter outside of eligibility under § 101: laws of nature, physical phenomena, and abstract ideas. The court found that ‘545 is not an abstract idea, but an application of an abstract idea, which counts as a “process” and is thus patent-eligible. The court considered ‘545 innovative because it seeks to solve problems associated with prior art banner advertising. Moreover, the ‘545 patent proposes a practical set of steps, many of which were “likely to require intricate and complex computer programming,” factors that the court found relevant to the claim’s patent eligibility. The court went on to reject the contention that the software programming necessary to implement the ‘545 patent was itself not patent-eligible, relying on its own precedent to conclude that programming a computer creates a “new machine” and that software enhancements, like hardware enhancements, “deserve patent protection.”

This decision presents an interpretation of Bilski that differs markedly from the District Court’s reading. As noted when JOLT Digest previously reported on the case, the District Court relied on the machine-or-transformation test, which Bilski stated remained an important indicator of patent eligibility. In reversing, the Federal Circuit emphasized the limits that Bilski placed on the machine-or-transformation test and indicated that the test may not enjoy widely continued use in the modern age.

Amy Rossignol is a 1L at the Harvard Law School.