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Throwing Down the Gauntlet: Rader Rules in Utramercial that Breadth and Lack Specificity Does Not Make Claimed Method Impermissibly Abstract*


Written by Eric W. Guttag
Eric W. Guttag IP Law Office
Posted: September 16, 2011 @ 10:10 am
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Chief Judge Rader

In CyberSource Corporations v. Retail Decisions, Inc., Judge Dyk (joined by Judges Bryson and Prost) ruled that a  method and system for detecting credit card fraud in Internet transactions was  patent-ineligible under 35 U.S.C. §101.  But in Ultramercial, LLC v. Hulu, LLC, Chief Judge Rader (joined by  Judges Lourie and O’Malley) just ruled that a claimed method for monetizing and  distributing copyrighted products over the Internet was patent-eligible.  In fact, our good Chief Judge has “thrown down  the gauntlet” at his Federal Circuit colleagues by stating “breadth and lack of specificity does not render the claimed subject matter impermissibly abstract.”  Wow!  That “judicial donnybrook” I mentioned in my recent article on the remand  decision in Classen Immunotherapies, Inc. v. Biogen IDEC (see CAFC on Patent-Eligibility: A Firestorm of Opinions in Classen ) on what the standard is (or should be) for patent-eligibility under 35 U.S.C. §101 has now broken out.

In Ultramercial, the patentee (Ultramercial) asserted that U.S. Pat. No. 7,346,545 (the ‘545 patent) was  infringed by Hulu, LLC (“Hulu”), YouTube, LLC (“YouTube”), and WildTangent,  Inc. (“WildTangent”).  The ‘545 patent,relates to a method for distributing copyrighted products (e.g., songs, movies,  books, etc.) over the Internet for free in exchange for viewing an advertisement with the advertiser paying for the copyrighted content.  What is interesting in this case is that Claim 1 of the ‘545 patent that is allegedly infringed by Hulu, YouTube, and  WildTangent recites a method having not one, not two, but eleven total steps.  (Side note:  One might wonder how anyone can infringe an eleven step method.)  WildTangent’s motion to dismiss for failure to state a claim was granted by the district  court based on the claimed method being patent-ineligible under 35 U.S.C. § 101.  (Hulu and YouTube were dismissed from the  case apparently for other reasons.)

In reviewing Ultramercial’s appeal, Chief Judge Rader noted that the district court had failed to formally construe the claims of the ‘545 patent.  Rader acknowledged that formally construing the claims was not required for determining patent-eligibility 35 U.S.C. § 101, as patent-eligibility is a “coarse” gauge, citing his opinion in Research Corp. Technologies v. Microsoft  Corp.  But the Chief Judge also observed that on “many occasions, however, a definition of the invention via claim construction can clarify the basic character of the subject matter of the invention,” and that “claim meaning may clarify the actual subject matter at stake in the invention and can enlighten, or even answer, questions about subject matter abstractness.”

Most significantly, Rader also observed that patent-eligibility under 35 U.S.C. § 101 “is merely a threshold check; claim patentability ultimately depends on ‘the conditions and requirements of this title,’ such as novelty, non-obviousness,  and dequate disclosure,” citing to the decision in the Classen remand in which he joined Judge Newman’s majority  opinion.  Citing again to his opinion in Research Corp. Technologies, Rader further observed that the broad statutory categories in 35 U.S.C. § 101 “are certainly not substitutes for the substantive patentability requirements set forth in [35 U.S.C.] § 102, § 103, and § 112.”  Amen to that statement!

The Chief Judge then stated that the “judicial case law” had created only three exceptions to patent-eligibility, namely laws of nature, physical phenomena, and abstract ideas, citing to the Supreme Court’s recent decision in Bilski v. Kappos.  Noting that laws of nature and physical phenomena “cannot be invented,” Rader made an interesting yet astute statement regarding  the third category of exceptions (abstract ideas):  “Abstractness, however, has presented a different set of interpretive problems, particularly for the [35 U.S.C.] § 101 ‘process’ category.”  Amen to that statement as well!

In what may become the definitive answer to a question that has (unfortunately) lingered since the Supreme Court’s ruling in Bilski, Chief Judge Rader categorically stated that the Supreme Court, in Bilski, “refused to deem business methods ineligible for patent protection.”  That statement may cause an “Excedrin-size headache” for the “naysayers” of so-called “business methods” being patent-eligible.  In fact, Rader’s next statement may truly cause a conniption for those who oppose the patent-eligibility of computer software:  “this court [i.e., the Federal Circuit] detects no limitations or conditions on subject matter eligibility expressed in the statutory language [i.e., in reference to 35 U.S.C. § 101],” citing to Association for Molecular Pathology (AMP) v. USPTO and Prometheus Laboratories, Inc. v. Mayo Collaborative Services, as well as the Supreme Court’s Bilski decision.

In somewhat nostalgically noting how the “machine-or-transformation” logic (rejected by the Supreme Court in Bilski as the  exclusive test for determining patent-eligibility under 35 U.S.C. § 101) “served well as a tool to evaluate the subject matter of Industrial Age processes,” the Chief Judge stated “that test has far less application to the inventions of the Information Age.”  In fact, Rader also astutely observed that “[t]echnology without anchors in physical structures and mechanical steps simply defy easy classification under the machine-or-transformation categories.”  What a refreshing comment from the judiciary aboutthe reality of today’s “growth” technology!

In an ultimate “truism,” the Chief Judge stated that “[b]oth members of the Supreme Court and this court have recognized the difficulty of providing a precise formula or definition for the judge-made ineligible category of abstractness.”  (Rader pointed to Judge Steven’s comment in Bilski about the Supreme Court never providing a “satisfactory account of what constitutes an unpatentable abstract idea,” which is the only part of Steven’s concurring/dissenting opinion I agree with at all.)  In a real “cathartic” moment for patent-eligibility determinations under 35 U.S.C. § 101, Rader said:  “Because technology is ever-changing and evolves in unforeseeable ways, this court gives substantial weight to the statutory reluctance to list any new, non-obvious, and fully disclosed subject matter as beyond the reach of [T]itle 35.”  (Rader also made reference to 35 U.S.C. § 101 a being a “dynamic provision designed to encompass new and unforeseen inventions,” citing the Supreme Court’s 2001  decision in J.E.M Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc.)  The Chief Judge concluded this exposition on where the law on patent-eligibility should (hopefully) go in the future by saying that, while “abstract principles” are not patent-eligible, “an application of an abstract idea may well be deserving of patent protection,” citing the trio of early Supreme Court  cases directed to the patent-eligibility of computer technology (i.e., Diamond v. Diehr, Parker v. Flook, and Gottschalk  v. Benson).

Turning next to the claims of the ‘545 patent, the Chief Judge first noted that, as reciting a method, these claims easily fell within the definition of “process” in 35 U.S.C. § 100(b), and thus were within the statutory categories set forth in 35 U.S.C. § 101.  Next, Rader made reference to his Research Corp. Technologies opinion again:  “’[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.”  In this regard, he noted the following with respect to the claimed method:  (1) it “purport[ed]  to improve existing technology in the marketplace; and (2) it “invoke[d] computers and applications of computer technology.”  Unlike the “vague, unapplied concept of hedging” in Bilski, the method of the ‘545 patent “discloses a practical application of [the age-old idea that advertising can serve as currency].”  For example, Rader observed that many of the eleven steps recited in the claimed method “are likely to require intricate and complex computer programming.”  Rader later noted that the 1994 Federal  Circuit case of In re Alappat had confronted the “contention” that software programming wasn’t entitled to patent protection, and that he had, in a concurring opinion, essentially considered a software process to be the functional equivalent of hardware circuitry (and thus not “abstract”).

At that point, the Chief Judge made his “quintessential” statement above about “broadness” and “lack of specificity” not being necessarily equivalent to “impermissible abstractness.”  But Rader also had to confront one other case law “obstacle” that loomed in the way:  Judge Dyk’s opinion in CyberSource to the contrary on what might appear, at first blush, a similar method  involving transactions on the Internet.  But the Chief Judge deftly distinguished CyberSource as involving a claimed method considered to be purely “mental steps” which was a “particularly narrow” exclusion.  By contrast, the claimed method in Ultramercial was “something far removed from purely mental steps,” as well as requiring at least “controlled interaction with a consumer via an Internet website.”  Rader then concluded with yet one last reference to his Research Corp. Technologies opinion that the claimed method in Ultramercial was not “so manifestly abstract as to override the statutory language of [35 U.S.C.  § 101].”  (Well, at least concluded with respect to the patent-eligibility question, as the opinion then finished with the  following statement:  “This decision does not opine at all on the patentability of the claimed invention under the substantive criteria set forth in [35 U.S.C.] § 102, § 103, and § 112.”)

Some will undoubtedly view the Chief Judge’s basis in Ultramercial for distinguishing the ruling in CyberSource as being “slight of hand” and using “mirrors,” but it certainly illustrates the wide gulf of views between the various members on the Federal  Circuit on the patent-eligibility question.  I wouldn’t be surprised (and frankly it needs to happen) if both Ultramercial and CyberSource ended up before the en banc Federal Circuit.  As I’ve noted previously, we’ve currently got what appear to be irreconcilable decisions in the Classen, Prometheus, and AMP cases in determining the patent-eligibility of certain medical (e.g., diagnostic) methods.  With what appears to be similarly conflicting decisions in Ultramercial and CyberSource, the gauntlet has truly been thrown down.  An en banc Federal Circuit needs to step in soon, or the conflagration that currently exists in the patent-eligibility “war” might soon consume us all.

*© 2011 Eric W. Guttag.


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25 comments
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  1. As a take-home message for the USPTO, it is probably more cost-effective to examine for novelty, unobviousness and enablement first and then consider eligible subject-matter only as a final step. For example, in Diamond v Diehr, the most immediately apparent objection was that the Arrenhius equation was known to every chemist from schooldays onwards, so that the subject matter claimed lacked inventive step.

  2. I had supposed that there was, in the USA, no longer (if there ever was) any technological arts test for patentability. So what is CJ Rader hinting at, in his linking 35 USC 103 to non-trivial advances in “technology”?

    Did he get it from Graham?

  3. 4Mark,

    The only thing I think the Chief Judge is hinting at (and a pretty strong hint at that) is that we should be focusing more on the “patentable merits” questions (i.e, 35 USC 102, 103, and 112) and less on patent-eligibilty under 35 USC 101, which, if you read Rader’s “additional views” opinion in the recent Classen Immunotherapies v. Biogen IDEC remand case, he views as more of a “distraction” than a help. That’s all I would “read” into Rader’s comments on 35 USC 103 (and definitely not any oblique reference to Graham v. John Deere).

    Thanks for your comment.

  4. Paul,

    Thanks for the comment. I TOTALLY agree with your “pecking order” for review of patent applications by the USPTO. I would also suggest that courts should use that “pecking order” as well (they have to at least generally construe what the claims recite, even in view of Rader’s comments about the district court’s failure to construe the claims formally not being a fatal flaw).

  5. In this opinion, Chief Judge Rader has made a number of good and perceptive comments. Nevertheless, I’m still not entirely convinced that the patent at issue in Ultramercial, as described, passes the “abstract idea” test. I agree that it’s time for an en banc review, in order to try to clear up the muddle that the Supreme Court helped create with its buck-passing Bilski decision.
    http://www.generalpatent.com/blog/

  6. PE,

    You could do better with a Ouija board in determining whether a particular process/method is patent-eligible under 35 USC 101 than using the nebulous “I know it when I see it” “abstract idea” test. Your comment that SCOTUS’ Bilski decision is “buck-passing” on the patent-eligibility standard issue is very much on point. Thanks for the commetn.

  7. How much does 101 vagueness matter, if the tests for patentability under 103 and 112 are clear and sharp?

    Experience at the EPO suggests that patent-eligibility is inherently vague, whereas the 103 and 112 tools can be made fair, predictable and razor-sharp.

  8. Judge Rader’s decision should be considered as a direct response to recent cases and decisions (e.g., Myriad) which blatantly conflate 35 USC 101 with 103 or 102 or 112. Just because the basic concept of isolating a strand of DNA from a gene seems obvious to many laypersons does not mean that it is non-patentable subject matter under 101. I feel like the anti-patent side in the Myriad case would have made a much more compelling case if they had attacked isolated gene patents as being drawn to an obvious product instead of non-stautory subject matter. (In other words, since we now know that we can isolate DNA and use it for genetic therapy or cloning or study, etc., isolation of any DNA is obvious as an equivalent or as analogous chemical compounds or as new species in a broad, but limited, genus known in the art).

    Similarly, in the instant case, just because the crux of the 11-step method would seem to be obvious to a layperson does not mean that it is an abstract idea. It’s good to see CJ Rader setting the record straight in this case.

  9. Mark4,

    It matters much when courts are too often granting summary judgment motions (and in the Ultramercial case, granting motions for failure to state a claim on which relief can be granted) of alleged patent-ineligibility under 35 USC 101 based on such a nebulous standard as the “abstract idea” currently is. In fact, in granting such motions of patent-ineligibility under 35 USC 101 with what is usually an incomplete factual record, rulings based on more “clear and sharp” 35 USC 103/112 become virtually impossible (see recent Classen Immunotherapies v. Biogen IDEC where the majority lamented that the factual record was so sparse because of the 35 USC 101 ruling, no ruling could be made under 35 USC 102/103/112). Unless your interested in piecemeal litigation, as well as subjective and inconsistent rulings, the standard for determining patent-eligibility needs to be more precise, and/or needs to be resorted to far less often than it currently is. But thanks for the comment/observation.

  10. There’s an easy, razor-sharp test to determine if a method is “too abstract”:
    Can it be infringed merely by a human thinking or acting?

    If I can infringe a patent by walking, thinking, and talking, then something is horribly wrong.

    The ‘545 passes this test with flying colors via steps 1 and 3.

  11. Examiner, I don’t understand your test. Presumably what you are driving at is that any process claim that includes a “thinking” step is “abstract”. How about a claim to a process of blood transfusion that includes a step of judging subject data, to categorise the subject as Type X or Type Y, and then injecting Type X or Type Y serum in dependence on that judgement, that diagnosis, that thinking step. Is that process claim “abstract” because it includes a thinking step? You say it is, right. But if I were the one receiving the serum, I would think not. If I were the categorizer, the doctor, I would think not. If I were the attorney prosecutor, I would think not, Yet, thinking “X or Y” is what the doctor has to do, as an essential step in the claimed process.

  12. Examiner and 4Mark,

    Your discussion illustrates the problems with the “mental steps aren’t patent-eligible” conundrum. The case law rule (repeated again by Rader in Ultramercial) is that PURELY “mental steps’ methods/processes aren’t patent-eligible, but does that include a method/process where it would be possible (if highly impractical) to perform some/all of the steps in your head?

    What might be a better approach is to make what is simply “thinking in your head” non-infringement instead of the more drasitc “it’s patent-ineligible in all cases” approach. How you would phrase such an “exception” the infringement might also be a challenge, but would be better than the “all or nothing” PURELY “mental steps” test.

    Thanks to both of you for your comments. As you’ve shown, the “mental steps” conundrum isn’t an easy one to resolve with a “bright line” test.

  13. Some tests are inherently vague, others have vagueness thrust upon them. I agree that the “mental steps” test in the USA is vague. I do not agree that at the EPO it is vague.

    Consider the annual Caselaw Digest the EPO publishes. In recent years it has been remarkably thin, on the substantive law of patent-eligibility and patentability under the European Patent Convention. Nothing much new to say really.

    Perhaps that is because the 24 Technical Boards of Appeal at the EPO publish upwards of a thousand decisions per year, none being appealable to any court sitting atop the EPO. Darwinian evolution of the “fittest” line of legal logic, over these past 30 years, is what has delivered, and continues to deliver increasing legal clarity. What has happened is that the EPO’s 101 test is very generous, while the EPO’s 103 test is strictly limited to what is “technologically” obvious (as opposed to what is or is not obvious to a marketeer or a market trader in their respectiuve fields of activity).

    What remains is “creep”, the tendency for the boundaries of what can be patented to get pushed back, bit by bit, by skilful advocacy and “lawyering”.

    Of course it does help, that the EPC (Art 52(2)(c) ) explicitly bars “mental acts” and “diagnostic methods practised on the body” from being patented. There is dense EPO caselaw on what constitutes a “diagnosis” as well as on “mental acts”

    Or do you still disagree? If so, cites please.

  14. 4Mark,

    Nothing to disagree about as you’re speaking from the EPO viewpoint, not the U.S. standpoint. It just like the Harvard mouse is patent-eligible in the U.S. but not in Canada. Different strokes (laws) for different folks (US v. Europe v. Canada).

  15. Agreed about different strokes, but how about how bright the line is, in each jurisdiction? You say no bright line is possible anywhere, while I think it is.

  16. 4Mark,

    You misinterpreted my comments if you think I believe that a “bright line” test isn’t possible. In my opinion, it is possible if you go to the “tangible, concrete, and useful result” test from State Street that was discarded by the en banc Federal Circuit in Bilski. But from what i can tell, it isn’t possible with the nebulous and apparently undefinable “abstract idea” standard (witness all the gyrations by SCOTUS in Bilski v. Kappos).

    Thanks for the further comment.

  17. Perhaps. But everything is “useful” and, for the time being, “tangible, concrete” looks to me like a precise antonym of “abstract”. If it is, how is it an improvement over “abstract”?

  18. 4Mark,

    Oh contraire, not everything is “useful” in the invention/patent sense. For example, the discovery of gravity might be useful to science, but it isn’t a “useful” application, by itself, of that law in the invention/patent sense. See Eibel Process Co. v. Minnesota & Ontario Paper Co., 261 US 45 (1923) which notes the difference. Also, the TCU test has three qualifiers (“tangible,” “concrete,” and “useful”) that put “practical” (as opposed to “abstract”) boundaries on what is patent-eligible. The TCU would be a TREMENDOUS improvement over the UNDEFINED “abstract idea” standard.

    Thanks for the comment.

  19. We are talking across each other here EG. I still think that, between the category 100% “abstract” and the category 100% “tangible and concrete” there is room for argument whether any particular borderline claimed subject matter up for review belongs to one category or the other. And I think the arguments whether something is “abstract”, and the arguments whether it is “tangible and concrete”, are the same arguments, in reverse. Whatever difficulties you have with “abstract” you have in reverse, in deciding whether a borderline claim gets up and over the “concrete” threshold and into the patent-eligible house.

  20. Set theory. Very small circle around “Abstract” – the rest of the Universe signifying non-abstract.

    The point I believe can be made about the non-abstract set is that that set is relatively easy to achieve – software per se falls to that easy set. And by software, I do not mean the thought of a software program, but an actual program. Per Ultramercial, software is just another machine component and is fully patent eligible on its own accord. People now must remember that patent applications are not meant to be blueprints and do not require actual code. Patents are legal documents and merely require enough to enable a PHOSITA to understand that the “thought” was solidly enough captured by the inventor such that the inventor possessed the invention. There is no legal requirement for actual reduction to practice.

  21. Be that as it may, EG, Blind, but does the presence of the word “result” make a decisive difference? In the CTU test, we look for a “result” while in the “abstract” test we do not.

  22. I am a bit surprised that the patentability of sofftware Per Se has not raised any clamor from the ardent techdirt types.

    This decision is a clear indication that software on its own is just like any other functional and interchangeable machine component.

  23. Too low on the “Rader” now to gather any feedback from the anti-software patent crowd.

    Perhaps if Gene writes an article on the massive call for Obama to ban software patents we might be able to interject this ruling which indicates Per Se patentability of software programs.

  24. [...] Throwing Down the Gauntlet: Rader Rules [...]

  25. [...] and lack of specificity does not render the claimed subject matter impermissibly abstract.”  See Throwing Down the Gauntlet: Rader Rules in Utramercial that Breadth and Lack Specificity Does Not Ma…*.  In Ultramercial II, Rader (again joined by Judge O’Malley but not completely by Judge Lourie) [...]