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Ultramercial Revisited: Rader Throws Down the Gauntlet on Patent-Eligibility of Computer-Implemented Inventions*


Written by Eric W. Guttag
Eric W. Guttag IP Law Office
Posted: June 26, 2013 @ 4:11 pm
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Chief Judge Rader at UNH, September 2011.

Before I finally waded through the 135-page monstrosity called the en banc decision in CLS Bank International v. Alice Corp. (seven opinions, one a brief per curiam opinion, and six full opinions, including Chief Judge Rader at the end “waxing lyrically” about the “good old days” when he first joined the Federal Circuit), out came last Friday the remand decision in Ultramercial, LLC v. Hulu, LLC (Ultramercial II).  I’ve already observed that Rader had “thrown down the gauntlet” at his Federal Circuit colleagues in Ultramercial I by stating that “breadth 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 Make Claimed Method Impermissibly Abstract*.  In Ultramercial II, Rader (again joined by Judge O’Malley but not completely by Judge Lourie) has squarely “thrown down the gauntlet” again, now before the Supreme Court to either clarify their “fuzzy” Bilski ruling, or “get out of the way” and let the Federal Circuit do the job it was created by Congress to do in 1982, namely be the primary arbiter of patent law jurisprudence, including patent eligibility under 35 U.S.C. § 101.

In Ultramercial I and II, 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.  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 Ultramercial I, Rader’s opinion ruled that the claimed method for monetizing and distributing copyrighted products over the Internet was, in fact, patent-eligible, noting that 35 U.S.C. § 101 is only a “coarse gauge,” and citing to his opinion in Research Corp. Technologies v. Microsoft Corp.  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.”

Following the Supreme Court’s decision in Mayo Collaborative Services. Inc. v. Prometheus Laboratories, Inc. (claimed drug dosage calibration method deemed patent-ineligible under ), Ultramercial I was a GVR’d (certiorari granted, ruling vacated, and decision remanded to the Federal Circuit) for further consideration in view of this Supreme Court decision.  Meanwhile, and at polar opposite ends of the patent-eligibility spectrum, out came in sequence the Federal Circuit panel decisions in CLS Bank International (computerized trading platform for exchanging obligations deemed patent-eligible) and Bancorp Services v. Sun Life Assurance Co. of Canada (seven-step method for “managing a life insurance policy on behalf of a policy holder” ruled patent-ineligible) which further fractured the landscape for judging the patent-eligibility of business methods and systems.  See CLS Bank International: A Fractured Landscape of Patent Eligibility for Business Methods and Systems and Bancorp Services: Further Fracturing of the Patent Eligibility Landscape for Business Methods and Systems*.  That then led to the en banc ruling in CLS Bank International which held (by a bare per curiam majority) that the asserted method and software media claims were patent-ineligible under 35 U.S.C. § 101, but divided equally on the patent-eligibility of the asserted system claims.  What a jurisprudential mess!

Accordingly, it was a pleasant surprise when Ultramercial II came out last week with the original Federal Circuit panel (albeit with a reluctant concurrence by Judge Lourie), essentially reaffirming the rationales for patent-eligibility previously stated in Ultramercial II.  So here are my “seven pearls of wisdom” that can be gleaned from the Ultramercial II opinion on the patenting of computer-implemented (e.g., software) inventions:

  1. Rarely will you be able to decide that the claimed invention is patent-ineligible under 35 USC 101 early in the law suit (e.g., at the pleading stage or during a motion for summary judgments).  That’s because (something the Supreme Court unfortunately chooses to ignore) there will be often factual issues in dispute as to what, exactly, the claimed invention covers, and especially whether it covers merely an “abstract idea.”  In fact, the presumption in Ultramercial II is that claims in the granted patent are patent-eligible under 35 U.S.C. § 101 unless shown/proven otherwise under the higher “clear and convincing” standard.
  2. The term “process” (synonymous with the term “method”) used in 35 U.S.C. §100(b) should be defined broadly to cover patent-eligible subject matter under 35 U.S.C. § 101.  That’s another point that the Supreme Court unfortunately gets wrong repeatedly because they choose to ignore what the patent statutes (as enacted by Congress) actually say, including their so-called exceptions (i.e., “abstract idea,” “law of nature,” and “natural phenomena”) to the specific enumerated statutory classes (like “process”) which, by the way, appear nowhere in 35 U.S.C. § 101.  In fact, Rader’s opinion in Ultramercial II astutely notes that these “exceptions” could completely “eviscerate” the patent-eligibility of “processes” under 35 U.S.C. § 101.
  3. 35 U.S.C. § 101 shouldn’t be read restrictively to exclude “unanticipated inventions” that are “unforeseeable.” That’s a “no brainer” (but effectively lost upon the technologically-challenged Supreme Court Justices), given that granting patents is for the purpose of “promoting the useful arts.”
  4. Defining what is an “abstract idea” is difficult.  As described in Rader’s opinion, an “abstract idea” is one that “has no reference to material objects or specific objects,” i.e., isn’t “concrete” enough to qualify as a patent-eligible claimed invention.  In addition, a claim embracing an “abstract idea” can still be patent-eligible as long as it involves an application of that “abstract idea” which includes “meaningful limitations” restricting that “application,” i.e., is a “practical application” of that “abstract idea.”
  5. Determining patent-eligibility under 35 U.S.C. § 101 requires that the claim be “considered as a whole,” i.e., without “dissecting the claims into old and new elements and then [ignoring] the presence of the old elements in the analysis” That’s an important adherence to a fundamental standard for evaluating patent-eligibility under 35 U.S.C. § 101 that comes out of the Supreme Court’s Diamond v. Diehr decision which the later Mayo Collaborative Services ruling unfortunately pays only “lip service” to.  Frankly, despite on the “hemming and hawing” to the contrary, the ruling in Mayo Collaborative Services cannot be squared with this “fundamental standard” from Diehr which has caused utter “chaos” in the patent bar, as well as the Federal Circuit, on how to determine patent-eligibility of computer-implemented inventions under 35 U.S.C. § 101 going forward.
  6. Patent-ineligible “preemption” must preempt “all practical uses of the abstract idea.”  Just because the claim covers a broad range of subject matter doesn’t make it “preemptive” under 35 U.S.C. § 101.
  7. Most importantly, a claim is “meaningful limited if it requires a particular machine implementing a process or a particular transformation of matter.”  What that essentially says is that machine-implemented (e.g., computer-implemented) technology is presumptively patent-eligible under 35 U.S.C. § 101.  That includes computer software.  In other words, tying a “process/method” to computer-implementation, especially with one or more steps of the “process/method” being specifically implemented by a computer (or implicitly by computer-based technology, such as the Internet) is a clear path to the patent-eligibility “zone” under this Ultramercial II decision.

As is also pretty clear from the Ultramercial II decision, what we have here is a serious power struggle between the Supreme Court and the Federal Circuit (especially its Chief Judge) over who will be the primary arbiter of patent law jurisprudence, including patent-eligibility under 35 U.S.C. § 101.  In Ultramercial II, Chief Judge Rader has definitely thrown the “gauntlet” down before the Supreme Court.  It remains to be seen whether the Supreme Court will take up the “gauntlet” thrown down by Rader.

*© 2013 Eric W. Guttag.  Posted June 26, 2013 on IPWatchdog.com


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9 comments
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  1. IMHO the promise made in 35 USC 101 is directed to skilled artisans in their respective useful arts and not to poetry majors:

    35 U.S.C. § 101 35 U.S.C. 101 Inventions patentable:
    “Whoever 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, …”

    Certainly Congress could not have rationally thought that poetry majors would be reading the above and then saying to themselves, “OK then; I’m going to go back out to my garage and start inventing a turn of phrase or two and then I’m going to get me a patent for that! How about this: Roses are red, Maple leaves are green, Though shall not patent the naturally fragmented gene!”.

    Skilled artisans know what a process is, what a machine is, what a non-naturally occurring “composition of matter” is, etc. in their respective useful arts.

    All this talk about “abstractness” and laws of nature and software and basic tools of them there true “innovators” is the work of poetry majors (i.e. them that see an Argle-Bargle plucked from every tree: http://www.huffingtonpost.com/2013/06/26/doma-scalia_n_3503706.html )

    Yes indeed. It is time to throw down the gauntlet and exorcise the demons of irrationality out of patent law. Abstractness, my a$$…ets. We need to stop the Idiocracy before it takes over completely.

  2. SB,

    “Waxing lyrical” eh, like Rader did in CLS Bank International?

  3. Don’t ask me to sing like Rader. I don’t do Broadway musicals. ;-)

  4. Speaking of anti-patent poetry, here is a rant against IP Watchdog:
    A Big Blow to Patents on Software and Genetics:

    http://techrights.org/2013/06/13/policy-rulings/

    The winner observations is this:

    The problem is [that of patent] scope being expanded to things which did not exist when the patent system was conceived. It predates understanding of germs, let alone genetics. It also predates software, let alone computing machines

    Funny. I recall Congress having passed a “modernized” patent act way back in, was it 2011, that far back?

  5. SB,

    Yeah, I see the linked article you mentioned refers to the PTAB’s ruling in SAP America, Inc. v. Versata Development Group, Inc.; if that PTAB decision gets appealed and is heard by a Federal Circuit panel that includes Rader and/or O’Malley (not to mention Newman and possibly even Moore), that decision will most likely wind up as a “pile of ash.”

  6. Eric, this talk of “throw down the gauntlet” strikes me as a test of will/ego, and unfortunately, if it is read in that light by scotus, they will smash Rader just for being uppity… probably have Holder sic the NSA on him.

    Instead, if the Fed Cir can just talk plainly, clearly, and explain that the touchy-feely-poetic approach is not one that lower courts can work with. Also remind them that, in fact, a computer is a machine, as provided for as patent eligible in section 101. Then it the analysis can shift to where it might almost make sense, namely that some software is obvious and should not be granted a patent, not because it runs afoul of 101 but because it does not meet the standards of 103.

  7. AC,

    I hear you, but this whole question of who should be the arbiter of patent law jurisprudence has become of a test of wills/egos. Unfortunately, SCOTUS (who should be deferring to the Federal Circuit that was created by Congress in 1982 to be the primary arbiter) is in way over its head, as even Scalia admitted in Myriad. As I’ve said before, we are about to undergo a “battle of attrition” in the patent law area, and if the Federal Circuit stays the course (as Rader obviously intends to do), the Federal Circuit can win that battle (SCOTUS can’t take every patent case that is petitioned for cert), and did so before when Markey was the Chief Judge. That may not sound pretty, nice, or respectful of SCOTUS, but the current SCOTUS is frankly entitled to no respect in my eyes, and in the eyes of many others in the patent bar who feel the same way I do. Might does not make right, and that is exactly what SCOTUS is doing in the patent law world.

  8. I agree, but some part of me still fantasizes that it would be nice if we could get Scotus to make as much sense as Rader does.

  9. AC,

    Agreed. At least Rader bothered to define what an “abstract idea” is in Ultramercial II, whereas SCOTUS has repeatedly failed to do so, especially in Bilski.