Ultramercial, Inc. v. Hulu, Llc , 722 F.3d 1335 ( 2013 )

United States Court of Appeals
for the Federal Circuit
______________________
ULTRAMERCIAL, INC., AND ULTRAMERCIAL, LLC,
Plaintiffs-Appellants,
v.
HULU, LLC,
Defendant,
AND
WILDTANGENT, INC.,
Defendant-Appellee.
______________________
2010-1544
______________________
Appeal from the United States District Court for the
Central District of California in No. 09-CV-6918, Judge R.
Gary Klausner.
______________________
Decided: June 21, 2013
______________________
LAWRENCE M. HADLEY, Hennigan, Bennett & Dorman
LLP, of Los Angeles, California, argued for plaintiffs-
appellants. With him on the brief were HAZIM ANSARI and
MIEKE K. MALMBERG.
GREGORY G. GARRE, Latham & Watkins, LLP, of
Washington, DC, argued for defendant-appellee. On the
2 ULTRAMERCIAL, INC. v. HULU, LLC
brief were RICHARD G. FRENKEL and LISA K. NGUYEN, of
Palo Alto, California. Of counsel were RICHARD P. BRESS,
GABRIEL BELL and KATHERINE TWOMEY, of Washington,
DC.
______________________
Before RADER, Chief Judge, LOURIE, and O’MALLEY,
Circuit Judges.
Opinion for the court filed by Chief Judge RADER.
Concurring opinion filed by Circuit Judge LOURIE.
RADER, Chief Judge.
The United States District Court for the Central Dis-
trict of California dismissed this patent suit, filed by
Ultramercial, LLC and Ultramercial, Inc. (collectively,
“Ultramercial”), by holding that U.S. Patent No. 7,346,545(“the ’545 patent”) does not claim patent-eligible subject
matter. In an earlier decision, later vacated by the Unit-
ed States Supreme Court, this court reversed the district
court’s holding and remanded. Ultramercial, LLC v.
Hulu, LLC, 657 F.3d 1325 (Fed. Cir. 2011), vacated sub
nom. WildTangent, Inc. v. Ultramercial, LLC, 132 S.Ct.
2431 (2012). Because this court again holds that the
district court erred in holding that the subject matter of
the ’545 patent is not a “process” within the language and
meaning of 35 U.S.C. § 101, this court again reverses and
remands.
I.
The ’545 patent claims a method for distributing copy-
righted products (e.g., songs, movies, books) over the
Internet where the consumer receives a copyrighted
product for free in exchange for viewing an advertise-
ment, and the advertiser pays for the copyrighted content.
Claim 1 of the ’545 patent reads:
ULTRAMERCIAL, INC. v. HULU, LLC 3
A method for distribution of products over the In-
ternet 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 mes-
sage to be associated with the media
product, said sponsor message being se-
lected from a plurality of sponsor messag-
es, 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 prod-
uct 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 ac-
cess 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 consum-
er a request to view the sponsor message,
wherein the consumer submits said re-
quest in response to being offered access to
the media product;
4 ULTRAMERCIAL, INC. v. HULU, LLC
a seventh step of, in response to receiving
the request from the consumer, facilitat-
ing 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 af-
ter 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 al-
lowing 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 pre-
sented; and
an eleventh step of receiving payment
from the sponsor of the sponsor message
displayed.
’545 patent col. 8, ll. 5-48.
Ultramercial sued 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. WildTan-
gent moved 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 pre-
answer motion to dismiss under Rule 12(b)(6). Ultramer-
cial appeals. This court has jurisdiction under 28 U.S.C.
§ 1295(a)(1).
ULTRAMERCIAL, INC. v. HULU, LLC 5
This court reviews a district court’s dismissal for fail-
ure to state a claim under the law of the regional cir-
cuit. Juniper Networks, Inc. v. Shipley, 643 F.3d 1346,
1350 (Fed. Cir. 2011) (citation omitted). The Ninth Cir-
cuit reviews de novo challenges to a dismissal for failure
to state a claim under Fed. R. Civ. P. 12(b)(6). Livid
Holdings Ltd. v. Salomon Smith Barney, Inc., 403 F.3d
1050, 1055 (9th Cir. 2005). This court also reviews the
ultimate determination 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 and, further, without requiring
defendants to file answers. This raises several prelimi-
nary issues.
First, it will be rare that a patent infringement suit
can be dismissed at the pleading stage for lack of patent-
able subject matter. This is so because every issued
patent is presumed to have been issued properly, absent
clear and convincing evidence to the contrary. See, e.g.,
CLS Bank Int’l v. Alice Corp., __ F.3d __, 2013 WL
1920941, *33 (Fed. Cir. May 10, 2013) (Chief Judge Rad-
er, and Judges Linn, Moore, and O’Malley, concluding
that “any attack on an issued patent based on a challenge
to the eligibility of the subject matter must be proven by
clear and convincing evidence,” and Judges Lourie, Dyk,
Prost, Reyna, and Wallach, concluding that a statutory
presumption of validity applies when § 101 is raised as a
basis for invalidity in district court proceedings.). Fur-
ther, if Rule 12(b)(6) is used to assert an affirmative
defense, dismissal is appropriate only if the well-pleaded
factual allegations in the complaint, construed in the light
most favorable to the plaintiff, suffice to establish the
defense. See Bell Atlantic Corp. v. Twombly, 550 U.S.
6 ULTRAMERCIAL, INC. v. HULU, LLC
544, 555 (2007); Jones v. Bock, 549 U.S. 199, 215 (2007).
Thus, the only plausible reading of the patent must be
that there is clear and convincing evidence of ineligibility.
For those reasons, Rule 12(b)(6) dismissal for lack of
eligible subject matter will be the exception, not the rule.
Second, as is shown more fully below, the analysis
under § 101, while ultimately a legal determination, is
rife with underlying factual issues. For example, while
members of this court have used varying formulations for
the precise test, there is no doubt the § 101 inquiry re-
quires a search for limitations in the claims that narrow
or tie the claims to specific applications of an otherwise
abstract concept. CLS Bank, __ F.3d at __, 2013 WL
1920941 at *27-30 (meaningful limitations); Id. at *10(opinion of Lourie, J.). Further, factual issues may under-
lie determining whether the patent embraces a scientific
principle or abstract idea. Id. (opinion of Lourie, J.) (“The
underlying notion is that a scientific principle . . . reveals
a relationship that has always existed.”) (quoting Parker
v. Flook, 437 U.S. 584, 593 n.15 (1978)). If the question is
whether “genuine human contribution” is required, and
that requires “more than a trivial appendix to the under-
lying abstract idea,” and were not at the time of filing
“routine, well-understood, or conventional,” factual inquir-
ies likely abound. Id. at *11-12. Almost by definition,
analyzing whether something was “conventional” or
“routine” involves analyzing facts. Id. at *12. Likewise,
any inquiry into the scope of preemption—how much of
the field is “tied up” by the claim—by definition will
involve historic facts: identifying the “field,” the available
alternatives, and preemptive impact of the claims in that
field. The presence of factual issues coupled with the
requirement for clear and convincing evidence normally
will render dismissal under Rule 12(b)(6) improper.
Third, and in part because of the factual issues in-
volved, claim construction normally will be required. This
court has never set forth a bright line rule requiring
ULTRAMERCIAL, INC. v. HULU, LLC 7
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, 130 S. Ct. 3218,
3231 (2010) (finding subject matter ineligible for patent
protection without claim construction); CLS Bank, __ F.3d
__, 2013 WL 1920941 (court decided eligibility of subject
matter without formal claim construction).
On the other hand, if there are factual disputes, claim
construction should be required. The procedural posture
of the case may indicate whether claim construction is
required. This case involves Rule 12(b)(6), which requires
courts to accept the well-pleaded factual allegations as
true and to require the accused infringer to establish that
the only plausible reading of the claims is that, by clear
and convincing evidence, they cover ineligible subject
matter. It may also be feasible for the district court to
choose to construe the claims in accordance with this
court’s precedent, or to adopt the construction proffered
by the patentee. In either case, it cannot decide factual
questions at this stage. At summary judgment, the
district court may choose to construe the claims in accord-
ance with this court’s precedent, or if not it may choose to
give a construction most favorable to the patentee, and to
apply the usual rules pertaining to summary judgment
from there, and still require clear and convincing evidence
of ineligible subject matter.
Of course, even if not required, on many occasions a
definition of the invention by 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 enlight-
en, or even answer, questions about subject matter ab-
stractness. In this procedural posture, however, the
8 ULTRAMERCIAL, INC. v. HULU, LLC
subject matter at stake and its eligibility does not require
formal claim construction.
Finally, fourth, the question of eligible subject matter
must be determined on a claim-by-claim basis. Constru-
ing every asserted claim and then conducting a § 101
analysis may not be a wise use of judicial resources.
With these thoughts in mind, the court turns to the
question of whether the court correctly dismissed the suit
under § 101.
III.
A.
The statute controls the inquiry into patentable sub-
ject matter. 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 pro-
cess, machine, manufacture, or composition of matter, or
any new and useful improvement thereof, may obtain a
patent therefor, subject to the conditions and require-
ments of this title.” (Emphasis added). Underscoring its
breadth, § 101 both uses expansive categories and modi-
fies them with the word “any.” In Bilski, the Supreme
Court emphasized 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 (1980)).
The pertinent, expansive definition of “process” in
§ 100(b) confirms the statute’s intended breadth. At first
examination, the Act’s definition of “process” to include a
new use of a known machine seems superfluous. After
all, if “any” process may be patented under § 101, § 100(b)
seems wholly unnecessary. The amendment was neces-
sary to avoid narrow judicial interpretations of “process”
given to the pre-1952 statute. Specifically, the 1952
amendments added § 100(b) to ensure that doubts about
ULTRAMERCIAL, INC. v. HULU, LLC 9
the scope of a “process” under the pre-1952 version of the
patent statute would not be read into the new Act. P.J.
Federico, Commentary on the New Patent Act, reprinted in
75 J. Pat. & Trademark Off. Soc’y 161, 177 (1993) (“Re-
marks have appeared in a few decisions and elsewhere
that new uses are not patentable . . . . [I]f such remarks
are interpreted to mean that a new use or application of
an old machine . . . cannot result in anything patentable
then such statements are not and have never been an
accurate statement of the law.”); Hearing Before Sub-
comm. No. 3 of the Comm. on the Judiciary, at 37 (1951)
(Federico testifying that the “definition of ‘process’ has
been added . . . to clarify the present law as to certain
types of methods as to which some doubts have been
expressed . . . .”); S. Rep. No. 82-1979, at 17 (1952) (Ex-
plaining that the definition clarified that “processes or
methods which involve merely the new use of a known
process . . . are processes or methods under the statute
and may be patented provided the conditions of patenta-
bility are satisfied.”). Thus, changes were made to the
1952 Act to broaden eligible subject matter and eliminate
doubt caused by narrow interpretations given to the prior
statute. Moreover, not only did Congress expand the
definition of “process” in 1952, Title 35 does not list a
single ineligible category. At a time when Congress
considered § 101, it broadened the statute and certainly
did not place any specific limits on it.
The limited role of § 101 even in patentability (the pa-
tentee did not argue that § 101 is not a defense to in-
fringement) is confirmed by other aspects of the Patent
Act. As § 101 itself expresses, subject matter eligibility is
merely a threshold check; patentability of a claim ulti-
mately depends on “the conditions and requirements of
this title,” such as novelty, non-obviousness, and adequate
disclosure. 35 U.S.C. § 101; see Bilski, 130 S. Ct. at 3225(Characterizing § 101 as a “threshold test”); Classen
Immunotherapies, Inc. v. Biogen IDEC, 659 F.3d
10 ULTRAMERCIAL, INC. v. HULU, LLC
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 the substantive criteria for patentability,
Congress made it clear that the categories of patent-
eligible subject matter are no more than a “coarse eligibil-
ity filter.” Research Corp., 627 F.3d at 869. In other
words, Congress made it clear that the expansive catego-
ries—process, machine, article of manufacture, and
composition of matter—are not substitutes for the sub-
stantive patentability requirements set forth in §§ 102,
103, and 112 and invoked expressly by § 101 itself. After
all, the purpose of the Patent Act is to encourage innova-
tion, and the use of broadly inclusive categories of statu-
tory subject matter ensures that “ingenuity . . . receive[s]
a liberal encouragement.” Chakrabarty, 447 U.S. at 308.
The plain language of the statute provides that any new,
non-obvious, and fully disclosed technical advance is
eligible for protection.
B.
The Supreme Court has on occasion recognized nar-
row judicial exceptions to the 1952 Act’s deliberately
broadened eligibility provisions. In line with the broadly
permissive nature of § 101’s subject matter eligibility
principles and the structure of the Patent Act, case law
has recognized only three narrow categories of subject
matter outside the eligibility bounds of § 101—laws of
nature, physical phenomena, and abstract ideas. Bilski,
130 S. Ct. at 3225. The Court’s motivation for recognizing
exceptions to this broad statutory grant was its desire to
prevent the “monopolization” of the “basic tools of scien-
tific and technological work,” which “might tend to impede
innovation more than it would tend to promote it.” Mayo
Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct.
1289, 1293 (2012) (“Prometheus”) (internal quotation
marks omitted).
ULTRAMERCIAL, INC. v. HULU, LLC 11
Though recognizing these exceptions, the Court has
also recognized that these implied exceptions are in
obvious tension with the plain language of the statute, its
history, and its purpose. See Chakrabarty, 447 U.S. at
308 (“In choosing such expansive terms as ‘manufacture’
and ‘composition of matter,’ modified by the comprehen-
sive ‘any,’ Congress plainly contemplated that the patent
laws would be given wide scope.”); id. at 315 (“Broad
general language is not necessarily ambiguous when
congressional objectives require broad terms.”). As the
Supreme Court has made clear, too broad an interpreta-
tion of these exclusions from the grant in § 101 “could
eviscerate patent law.” Prometheus, 132 S. Ct. at 1293; cf.
Bilski, 130 S. Ct. at 3226 (“This Court has not indicated
that the existence of these well-established exceptions
gives the Judiciary carte blanche to impose other limita-
tions that are inconsistent with the text and the statute’s
purpose and design.”).
Thus, this court must not read § 101 so restrictively
as to exclude “unanticipated inventions” because the most
beneficial inventions are “often unforeseeable.” See
Chakrabarty, 447 U.S. at 316; see also J.E.M. Ag Supply,
534 U.S. at 135 (describing § 101 as “a dynamic provision
designed to encompass new and unforeseen inventions.”).
Broad inclusivity is the Congressional goal of § 101, not a
flaw.
To sum up, because eligibility requires assessing judi-
cially recognized exceptions against a broad and deliber-
ately expanded statutory grant, one of the principles that
must guide our inquiry is these exceptions should apply
narrowly. Indeed, the Supreme Court has cautioned that,
to avoid improper restraints on statutory language,
acknowledged exceptions thereto must be rare.
C.
In the eligibility analysis as well, the presumption of
proper issuance applies to a granted patent. As a practi-
12 ULTRAMERCIAL, INC. v. HULU, LLC
cal matter, because judicially acknowledged exceptions
could eviscerate the statute, application of this presump-
tion and its attendant evidentiary burden is consistent
with the Supreme Court’s admonition to cabin exceptions
to § 101. Further, applying the presumption is consistent
with patent office practice. Before issuing a patent, the
Patent Office rejects claims if they are drawn to ineligible
subject matter, just as it rejects claims if not compliant
with §§ 102, 103, or 112. With one exception, the Su-
preme Court’s decisions since 1952 have addressed the
propriety of those decisions. Thus, when a patent issues,
it does so after the Patent Office assesses and endorses its
eligibility under § 101, just as it assesses and endorses its
patentability under the other provisions of Title 35. See
Microsoft Corp. v. i4i Ltd. P’ship, 131 S. Ct. 2238, 2242,
(2011) (“Congress has set forth the prerequisites for
issuance of a patent, which the PTO must evaluate in the
examination process. To receive patent protection a
claimed invention must, among other things, fall within
one of the express categories of patentable subject matter,
§ 101, and be novel, § 102, and nonobvious, § 103.”).
In sum, the high level of proof applies to eligibility as
it does to the separate patentability determinations.
Accordingly, any attack on an issued patent based on a
challenge to the eligibility of the subject matter must be
proven by clear and convincing evidence. Cf. Microsoft, 31
S. Ct. at 2242 (“We consider whether § 282 requires an
invalidity defense to be proved by clear and convincing
evidence. We hold that it does.”).
IV.
A.
Defining “abstractness” has presented difficult prob-
lems, particularly for the § 101 “process” category. Clear-
ly, a process need not use a computer, or some machine, in
order to avoid “abstractness.” In this regard, the Su-
preme Court recently examined the statute and found
ULTRAMERCIAL, INC. v. HULU, LLC 13
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 legisla-
ture has not expressed.” Id. at 3226 (quoting Diamond v.
Diehr, 450 U.S. 175, 182 (1981)).
In an effort to grapple with this non-statutory “ab-
stractness” exception to “processes,” the dictionary pro-
vides some help. See Merriam-Webster’s Collegiate
Dictionary 5 (11th ed. 2003) (defining abstract as “disas-
sociated from any specific instance . . . expressing a quali-
ty apart from an object ”). An abstract idea is one that has no
reference to material objects or specific examples—i.e., it
is not concrete. This court at one point set forth a ma-
chine-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 Court
rejected this approach in Bilski, noting that the machine-
or-transformation test is simply “a useful and important
clue, an investigative tool, for determining whether some
claimed inventions are processes under § 101” and is not
“the sole test for deciding whether an invention is a
patent-eligible ‘process.’” 130 S. Ct. at 3227 (emphasis
added). While machine-or-transformation logic served
well as a tool to evaluate the subject matter of Industrial
Age processes, that test has far less application to the
inventions of the Information Age. See id. at 3227-28(“[I]n deciding whether previously unforeseen inventions
qualify as patentable ‘processes,’ it may not make sense to
require courts to confine themselves to asking the ques-
tions posed by the machine-or-transformation test.
§ 101’s terms suggest that new technologies may call for
new inquiries.”). Technology without anchors in physical
14 ULTRAMERCIAL, INC. v. HULU, LLC
structures and mechanical steps simply defy easy classifi-
cation under the machine-or-transformation categories.
As the Supreme Court suggests, mechanically applying
that physical test “risk[s] obscuring the larger object of
securing patents for valuable inventions without trans-
gressing the public domain.” Id. at 3227.
Members of both the Supreme Court and this court
have recognized the difficulty of providing a precise
formula or definition for the abstract concept of abstract-
ness. See id. at 3236 (Stevens, J., concurring) (“The Court
. . . [has] never provide[d] a satisfying account of what
constitutes an unpatentable abstract idea.”); Research
Corp., 627 F.3d at 868. 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 Title 35.
B.
A claim can embrace an abstract idea and be patenta-
ble. See Prometheus, 132 S. Ct. at 1294 (explaining that
the fact that a claim uses a basic tool does not mean it is
not eligible for patenting). Instead, a claim is not patent
eligible only if, instead of claiming an application of an
abstract idea, the claim is instead to the abstract idea
itself. The inquiry here is to determine on which side of
the line the claim falls: does the claim cover only an
abstract idea, or instead does the claim cover an applica-
tion of an abstract idea? See Bilski, 130 S. Ct. at 3230(“[W]hile an abstract idea, law of nature, or mathematical
formula could not be patented, an application of a law of
nature or mathematical formula to a known structure or
process may well be deserving of patent protection.”
(emphasis in original) (internal quotation marks omit-
ted)); Gottschalk v. Benson, 409 U.S. 63, 67 (1972) (“He
who discovers a hitherto unknown phenomenon of nature
has no claim to a monopoly of it which the law recogniz-
ULTRAMERCIAL, INC. v. HULU, LLC 15
es. If there is to be invention from such a discovery, it
must come from the application of the law of nature to a
new and useful end.” (emphasis added) (internal quota-
tion marks omitted)); Diehr, 450 U.S. at 187 (“It is now
commonplace that an application of a law of nature or
mathematical formula to a known structure or process
may well be deserving of patent protection.”)
In determining on which side of the line the claim
falls, the court must focus on the claim as a whole. As the
Court explained:
In determining the eligibility of respondents’
claimed process for patent protection under § 101,
their claims must be considered as a whole. It is
inappropriate to dissect the claims into old and
new elements and then to ignore the presence of
the old elements in the analysis. This is particu-
larly true in a process claim because a new combi-
nation of steps in a process may be patentable
even though all the constituents of the combina-
tion were well known and in common use before
the combination was made.
Diehr, 450 U.S. at 188 (emphasis added). The majority in
Diehr rejected the minority’s approach ignoring portions
of the claims: “[i]n order for the dissent to reach its con-
clusion it is necessary for it to read out of respondents’
patent application all the steps in the claimed process
which it determined were not novel or ‘inventive.’ That is
not the purpose of the § 101 inquiry . . . .” Id. at 193 n.15
(citations omitted); Aro Mfg. Co. v. Convertible Top Re-
placement Co., 365 U.S. 336, 345 (1961) (“[T]here is no
legally recognizable or protected ‘essential’ element, ‘gist’
or ‘heart’ of the invention.”).
The Court has long-recognized that any claim can be
stripped down, simplified, generalized, or paraphrased to
remove all of its concrete limitations, until at its core,
something that could be characterized as an abstract idea
16 ULTRAMERCIAL, INC. v. HULU, LLC
is revealed. A court cannot go hunting for abstractions by
ignoring the concrete, palpable, tangible limitations of the
invention the patentee actually claims.
Instead, the relevant inquiry is whether a claim, as a
whole, includes meaningful limitations restricting it to an
application, rather than merely an abstract idea. See
Prometheus, 132 S. Ct. at 1297 (“[D]o the patent claims
add enough to their statements of the correlations to allow
the processes they describe to qualify as patent-eligible
processes that apply natural laws?”); see also Fort Props.,
Inc. v. Am. Master Lease LLC, 671 F.3d 1317, 1323 (Fed.
Cir. 2012) (“[T]o impart patent-eligibility to an otherwise
unpatentable process under the theory that the process is
linked to a machine, the use of the machine must impose
meaningful limits on the claim’s scope.” (internal quota-
tion marks omitted)). For these reasons, a claim may be
premised on an abstract idea and, indeed, the abstract
idea may be of central importance to the invention—the
question for patent eligibility is whether the claim con-
tains limitations that meaningfully tie that abstract idea
to an actual application of that idea through meaningful
limitations.
This analysis is not easy, but potentially wrought
with the risk of subjectivity and hindsight evaluations. It
also, as noted at the outset, often entails factual inquiries
inappropriate on a motion directed to the pleadings.
Fortunately, the Supreme Court has provided some
guideposts.
An old example may be the most informative. The
claims in O’Reilly v. Morse, 56 U.S. (15 How.) 62 (1854),
and a case described therein, illustrate the distinction
between a patent ineligible abstract idea and a practical
application of an idea. The “difficulty” in Morse arose
with the claim in which Morse:
d[id] not propose to limit [him]self to the specific
machinery or parts of machinery described in
ULTRAMERCIAL, INC. v. HULU, LLC 17
the . . . specification and claims; the essence of
[his] invention being the use of the motive power
of the electric or galvanic current . . . however de-
veloped for marking or printing intelligible char-
acters, signs, or letters, at any distances . . . .
Id. at 112 (internal quotation marks omitted). In consid-
ering Morse’s claim, the Supreme Court referred to an
earlier English case that distinguished ineligible claims to
a “principle” from claims “applying” that principle:
[I]t seems that the court at first doubted, whether
it was a patent for anything more than the discov-
ery that hot air would promote the ignition of fuel
better than cold. And if this had been the con-
struction, the court, it appears, would have held
his patent to be void; because the discovery of a
principle in natural philosophy or physical sci-
ence, is not patentable.
But after much consideration, it was finally decid-
ed that this principle must be regarded as well
known, and that the plaintiff had invented a me-
chanical mode of applying it to furnaces; and that
his invention consisted in interposing a heated re-
ceptacle, between the blower and the furnace, and
by this means heating the air after it left the
blower, and before it was thrown into the fire.
Whoever, therefore, used this method of throwing
hot air into the furnace, used the process he had
invented, and thereby infringed his patent, alt-
hough the form of the receptacle or the mechani-
cal arrangements for heating it, might be different
from those described by the patentee.
Id. at 116. The claim in Morse itself was impermissible
because it covered “‘an effect produced by the use of
electro-magnetism, distinct from the process or machinery
necessary to produce it.’” The Telephone Cases, 126 U.S.
1, 534 (1888) (quoting Morse, 56 U.S. (15 How.) at 120).
18 ULTRAMERCIAL, INC. v. HULU, LLC
This was in contrast to a sustained claim that was limited
to:
making use of the motive power of magnetism,
when developed by the action of such current or
currents, substantially as set forth in the . . . de-
scription, . . . as means of operating or giving mo-
tion to machinery, which may be used to imprint
signals upon paper or other suitable material, or
to produce sounds in any desired manner, for the
purpose of telegraphic communication at any dis-
tances.
Id. (first ellipsis added, second ellipsis in original) (quot-
ing Morse, 56 U.S. (15 How.) at 85). “‘The effect of [Morse]
was, therefore, that the use of magnetism as a motive
power, without regard to the particular process with
which it was connected in the patent, could not be
claimed, but that its use in that connection could.’”
Benson, 409 U.S. at 68 (quoting The Telephone Cases, 126
U.S. at 534).
The concern underscoring Morse, which has become
clearer through the Supreme Court’s more recent prece-
dents, is to deny patentability to an idea itself, rather
than an application of that idea. The Court has provided
some guidance on discerning when this should occur.
First, the Supreme Court has stated that a claim is
not meaningfully limited if it merely describes an abstract
idea or simply adds “apply it.” See Prometheus, 132 S. Ct.
at 1294, 1297. The broad claim in Morse provides a
striking example of this. We also know that, if a claim
covers all practical applications of an abstract idea, it is
not meaningfully limited. See id. at 1301-02. For exam-
ple, “[a]llowing petitioners to patent risk hedging would
pre-empt use of this approach in all fields, and would
effectively grant a monopoly over an abstract idea.”
Bilski, 130 S. Ct. at 3231 (emphasis added). While this
concept is frequently referred to as “pre-emption,” it is
ULTRAMERCIAL, INC. v. HULU, LLC 19
important to remember that all patents “pre-empt” some
future innovation in the sense that they preclude others
from commercializing the invention without the patent-
ee’s permission. Pre-emption is only a subject matter
eligibility problem when a claim pre-empts all practical
uses of an abstract idea. For example, the claims in
Benson “purported to cover any use of the claimed method
in a general-purpose digital computer of any type.” 409
U.S. at 64 (emphasis added). The claims were not allowed
precisely because they pre-empted essentially all uses of
the idea:
It is conceded that one may not patent an idea.
But in practical effect that would be the result if
the formula for converting [binary-coded decimal]
numerals to pure binary numerals were patented
in this case. The mathematical formula involved
here has no substantial practical application ex-
cept in connection with a digital computer, which
means that . . . the patent would wholly pre-empt
the mathematical formula and in practical effect
would be a patent on the algorithm itself.
Id. at 71-72 (emphasis added). When the steps of the
claim “must be taken in order to apply the [abstract idea]
in question,” the claim is essentially no different from
saying apply the abstract idea. Prometheus, 132 S. Ct. at
1299-1300. It is not the breadth or narrowness of the
abstract idea that is relevant, but whether the claim
covers every practical application of that abstract idea.1
1 The pre-emption analysis must also recognize that
the Patent Act does not halt or impede academic research,
without commercial ends, to test, confirm, or improve a
patented invention. See Sawin v. Guild, 21 F. Cas. 554,
555 (C.C.D. Mass. 1813) (No. 12,391) (Story, J.) (in-
fringement does not occur when the invention is used “for
20 ULTRAMERCIAL, INC. v. HULU, LLC
As noted at the outset, whether a claim preempts “too
much” will often require claim construction and factual
inquiries.
And, the Supreme Court has stated that, even if a
claim does not wholly pre-empt an abstract idea, it still
will not be limited meaningfully if it contains only insig-
nificant or token pre- or post-solution activity—such as
identifying a relevant audience, a category of use, field of
use, or technological environment. See Prometheus, 132
S. Ct. at 1297-98, 1300-01; Bilski, 130 S. Ct. at 3230-31;
Diehr, 450 U.S. at 191-92 & n.14; Parker v. Flook, 437
U.S. 584, 595 n.18 (1978). Again, these may involve
factual inquiries.
Finally, the Supreme Court has stated that a claim is
not meaningfully limited if its purported limitations
provide no real direction, cover all possible ways to
achieve the provided result, or are overly-generalized. See
Prometheus, 132 S. Ct. at 1300 (“[S]imply appending
conventional steps, specified at a high level of generality,
to laws of nature, natural phenomena, and abstract ideas
cannot make those laws, phenomena, and ideas patenta-
ble.”); Fort Props., 671 F.3d at 1323 (“Such a broad and
general limitation does not impose meaningful limits on
the claim’s scope.” (internal quotation marks omitted)).
For example, in Prometheus, “the ‘determining’ step tells
the doctor to determine the level of the relevant metabo-
lites in the blood, through whatever process the doctor or
the laboratory wishes to use.” 132 S. Ct. at 1297. Diehr
the mere purpose of philosophical experiment, or to
ascertain the verity and exactness of the specification”).
Further, Morse shows that a claim is not “abstract” mere-
ly because it is broad, because the “hot air” claims were
broad and covered many “mechanical arrangements” but
yet found patent eligible.
ULTRAMERCIAL, INC. v. HULU, LLC 21
explained that the application in Flook “did not purport to
explain how these other variables were to be determined,
nor did it purport to contain any disclosure relating to the
chemical processes at work, the monitoring of process
variables, or the means of setting off an alarm or adjust-
ing an alarm system,” and that “[a]ll that it provides is a
formula for computing an updated alarm limit.” Diehr,
450 U.S. at 186-87 (footnote omitted) (internal quotation
marks omitted).
Just as the Supreme Court has indicated when a
claim likely should not be deemed meaningfully limited, it
has also given examples of meaningful limitations which
likely remove claims from the scope of the Court’s judicial-
ly created exceptions to § 101. Thus, a claim is meaning-
fully limited if it requires a particular machine
implementing a process or a particular transformation of
matter. See Bilski, 130 S. Ct. at 3227 (“This Court’s
precedents establish that the machine-or-transformation
test is a useful and important clue . . . for determining
whether some claimed inventions are processes under
§ 101.”); see also Prometheus, 132 S. Ct. at 1302-03; Diehr,
450 U.S. at 184, 192. A claim also will be limited mean-
ingfully when, in addition to the abstract idea, the claim
recites added limitations which are essential to the inven-
tion. In those instances, the added limitations do more
than recite pre- or post-solution activity, they are central
to the solution itself. And, in such circumstances, the
abstract idea is not wholly pre-empted; it is only pre-
empted when practiced in conjunction with the other
necessary elements of the claimed invention. See Diehr,
450 U.S. at 187 (“[T]he respondents here do not seek to
patent a mathematical formula. Instead, they seek
patent protection for a process of curing synthetic rubber.
Their process admittedly employs a well-known mathe-
matical equation, but they do not seek to pre-empt the use
of that equation. Rather, they seek only to foreclose from
others the use of that equation in conjunction with all of
22 ULTRAMERCIAL, INC. v. HULU, LLC
the other steps in their claimed process.”); see also Prome-
theus, 132 S. Ct. at 1298-99 (discussing Diehr, 450 U.S.
175).
In specifying what the scope of the abstract idea ex-
ception to patent eligibility is, it is also important to
specify what the analysis is not. Flook suggested that an
abstract idea is to be “treated as though it were a familiar
part of the prior art.” 437 U.S. at 591-92. Prometheus
used the language of “inventive concept” to describe the
“other elements or a combination of elements . . . suffi-
cient to ensure that the patent in practice amounts to
significantly more than a patent upon the natural law
itself” and explain that purported limitations must be
more than “routine” or “conventional” to confer patent
eligibility. 132 S. Ct. at 1294, 1298-99. While these
inquiries do require an understanding of what existed in
the ken of those skilled in the art during the relevant time
frame, principles of patent eligibility must not be conflat-
ed with those of validity, however.
The Supreme Court repeatedly has cautioned against
conflating the analysis of the conditions of patentability in
the Patent Act with inquiries into patent eligibility. See
Diehr, 450 U.S. at 190 (“The question therefore of wheth-
er a particular invention is novel is wholly apart from
whether the invention falls into a category of statutory
subject matter.” (internal quotation marks omitted)); see
also Prometheus, 132 S. Ct. at 1304 (recognizing that “to
shift the patent-eligibility inquiry entirely to [§§ 102, 103,
and 112] risks creating significantly greater legal uncer-
tainty, while assuming that those sections can do work
that they are not equipped to do”). Because a new combi-
nation of old steps is patentable, as is a new process using
an old machine or composition, subject matter eligibility
must exist even if it was obvious to use the old steps with
the new machine or composition. Otherwise the eligibility
analysis ignores the text of §§ 101 and 100(b), and reads
§ 103 out of the Patent Act.
ULTRAMERCIAL, INC. v. HULU, LLC 23
In this regard, the Supreme Court’s reference to “in-
ventiveness” in Prometheus can be read as shorthand for
its inquiry into whether implementing the abstract idea
in the context of the claimed invention inherently requires
the recited steps. Thus, in Prometheus, the Supreme
Court recognized that the additional steps were those that
anyone wanting to use the natural law would necessarily
use. See Prometheus, 132 S. Ct. at 1298. If, to implement
the abstract concept, one must perform the additional
step, or the step is a routine and conventional aspect of
the abstract idea, then the step merely separately re-
states an element of the abstract idea, and thus does not
further limit the abstract concept to a practical applica-
tion. Id. (“Anyone who wants to make use of these laws
must first administer a thiopurine drug and measure the
resulting metabolite concentrations, and so the combina-
tion amounts to nothing significantly more than an in-
struction to the doctor to apply the applicable laws when
treating their patients.”)
C.
There are also additional guideposts specific to com-
puter-implemented inventions. When assessing computer
implemented claims, while the mere reference to a gen-
eral purpose computer will not save a method claim from
being deemed too abstract to be patent eligible, the fact
that a claim is limited by a tie to a computer is an im-
portant indication of patent eligibility. See Bilski, 130 S.
Ct. at 3227. This tie to a machine moves it farther away
from a claim to the abstract idea itself. Moreover, that
same tie makes it less likely that the claims will pre-empt
all practical applications of the idea.
This inquiry focuses on whether the claims tie the
otherwise abstract idea to a specific way of doing some-
thing with a computer, or a specific computer for doing
something; if so, they likely will be patent eligible. On the
other hand, claims directed to nothing more than the idea
24 ULTRAMERCIAL, INC. v. HULU, LLC
of doing that thing on a computer are likely to face larger
problems. While no particular type of limitation is neces-
sary, meaningful limitations may include the computer
being part of the solution, being integral to the perfor-
mance of the method, or containing an improvement in
computer technology. See SiRF Tech., Inc. v. Int’l Trade
Comm’n, 601 F.3d 1319, 1332-33 (Fed. Cir. 2010) (noting
that “a machine,” a GPS receiver, was “integral to each of
the claims at issue” and “place[d] a meaningful limit on
the scope of the claims”). A special purpose computer, i.e.,
a new machine, specially designed to implement a process
may be sufficient. See Alappat, 33 F.3d at 1544 (“Alt-
hough many, or arguably even all, of the means elements
recited in claim 15 represent circuitry elements that
perform mathematical calculations, which is essentially
true of all digital electrical circuits, the claimed invention
as a whole is directed to a combination of interrelated
elements which combine to form a machine for converting
discrete waveform data samples into anti-aliased pixel
illumination intensity data to be displayed on a display
means. This is not a disembodied mathematical concept
which may be characterized as an ‘abstract idea,’ but
rather a specific machine to produce a useful, concrete,
and tangible result.” (footnotes omitted)); see also id. at
1545 (“We have held that such programming creates a
new machine, because a general purpose computer in
effect becomes a special purpose computer once it is
programmed to perform particular functions pursuant to
instructions from program software.”).
At bottom, with a claim tied to a computer in a specif-
ic way, such that the computer plays a meaningful role in
the performance of the claimed invention, it is as a matter
of fact not likely to pre-empt virtually all uses of an
underlying abstract idea, leaving the invention patent
eligible. “[I]nventions with specific applications or im-
provements to technologies in the marketplace are not
likely to be so abstract that they override the statutory
ULTRAMERCIAL, INC. v. HULU, LLC 25
language and framework of the Patent Act.” Research
Corp., 627 F.3d at 869.
With this background, the court turns to the asserted
claims here.
VI.
The district court did not construe the claims in ac-
cordance with this court’s precedent. Instead, it held that
there was no “reasonable construction” that would “bring
the patent within patentable subject matter.” A. 6. The
district court erred in requiring the patentee to come
forward with a construction that would show the claims
were eligible. That is presumed. In this procedural
posture, the district court should either have construed
the claims in accordance with Markman, required the
defendant to establish that the only plausible construction
was one that, by clear and convincing evidence rendered
the subject matter ineligible (with no factual inquiries), or
adopted a construction most favorable to the patentee.
For purposes of this appeal, this court adopts the latter
approach. It may be that formal claim construction will
still be required to determine the merits of eligibility.
The district court held the asserted claim to be ineli-
gible because it is “abstract.” In this procedural posture,
the complaint and the patent must by themselves show
clear and convincing evidence that the claim is not di-
rected to an application of an abstract idea, but to a
disembodied abstract idea itself. See Diehr, 450 U.S. at
187; Parker, 437 U.S. at 591; Gottschalk, 409 U.S. at 67.
After all, unlike the Copyright Act which divides ideas
from expression, the Patent Act covers and protects any
new and useful technical advance, including applied
ideas.
The claimed invention is a method for monetizing and
distributing copyrighted products over the Internet. As a
method, it easily satisfies § 100’s definition of “process”
26 ULTRAMERCIAL, INC. v. HULU, LLC
and thus falls within a § 101 category of patent-eligible
subject matter. Thus, this court focuses on whether the
claim is meaningfully limited to something less than an
abstract idea that pre-empts use of an abstract concept.
The parties proceed on the assumption that the mere
idea that advertising can be used as a form of currency is
abstract, just as the vague, unapplied concept of hedging
proved patent-ineligible in Bilski. However, the ’545
patent does not simply claim the age-old idea that adver-
tising can serve as currency. Instead, for the following
reasons, the court holds that the district court erred in
holding that the ’545 patent does not claim a practical
application of this concept.2
The ’545 patent seeks to remedy problems with prior
art banner advertising over the Internet, such as declin-
ing click-through rates, by introducing a method of prod-
uct distribution that forces consumers to view and
possibly even interact with advertisements before permit-
ting access to the desired media product. ’545 patent col.
2, ll.14-18. By its terms, the claimed invention purports
2 When assessing the abstract idea exception, the §
101 inquiry is a two-step one: first, whether the claim
involves an intangible abstract idea; and if so, whether
meaningful limitations in the claim make it clear that the
claim is not to the abstract idea itself, but to a non-
routine and specific application of that idea. Because the
parties here focus only on the second step, we do as well.
We note, however, that it is arguable that we are not even
dealing with an intangible abstraction in the first in-
stance; the claims relate to things that people do, not to
mere mental steps. Because the district court did not
enter judgment on that ground and the parties do not
brief it, we decline to address this alternative ground
upon which this matter might be resolved.
ULTRAMERCIAL, INC. v. HULU, LLC 27
to improve existing technology in the marketplace. By its
terms, the claimed invention invokes computers and
applications of computer technology.
Specifically, the ’545 patent claims a particular inter-
net and computer-based method for monetizing copyright-
ed products, consisting of the following steps: (1) receiving
media products from a copyright holder, (2) selecting an
advertisement to be associated with each media product,
(3) providing said media products for sale on an Internet
website, (4) restricting general public access to the media
products, (5) offering free access to said media products on
the condition that the consumer view the advertising, (6)
receiving a request from a consumer to view the advertis-
ing, (7) facilitating the display of advertising and any
required interaction with the advertising, (8) allowing the
consumer access to the associated media product after
such display and interaction, if any, (9) recording this
transaction in an activity log, and (10) receiving payment
from the advertiser. ’545 patent col. 8, ll. 5-48. This court
does not need the record of a formal claim construction to
see that many of these steps require intricate and com-
plex computer programming.
Even at this general level, it wrenches meaning from
the word to label the claimed invention “abstract.” The
claim does not cover the use of advertising as currency
disassociated with any specific application of that activity.
It was error for the district court to strip away these
limitations and instead imagine some “core” of the inven-
tion. A. 6.
Further, and even without formal claim construction,
it is clear that several steps plainly require that the
method be performed through computers, on the internet,
and in a cyber-market environment. One clear example is
the third step, “providing said media products for sale on
an Internet website.” Id. col. 8, ll. 20-21. And, of course,
if the products are offered for sale on the Internet, they
28 ULTRAMERCIAL, INC. v. HULU, LLC
must be “restricted”—step four—by complex computer
programming as well.
In addition, Figure 1, alone, demonstrates that the
claim is not to some disembodied abstract idea but is
instead a specific application of a method implemented by
several computer systems, operating in tandem, over a
communications network:
ULTRAMERCIAL, INC. v. HULU, LLC 29
Almost all of the steps in this process, as explained in the
flow chart of Figure 2, are tied to computer implementa-
tion:
30 ULTRAMERCIAL, INC. v. HULU, LLC
Viewing the subject matter as a whole, the invention
involves an extensive computer interface. Unlike Morse,
the claims are not made without regard to a particular
process. Likewise, it does not say “sell advertising using a
computer,” and so there is no risk of preempting all forms
of advertising, let alone advertising on the Internet.
Further, the record at this stage shows no evidence that
the recited steps are all token pre- or post-solution steps.
Finally, the claim appears far from over generalized, with
eleven separate and specific steps with many limitations
and sub-steps in each category. The district court im-
properly made a subjective evaluation that these limita-
tions did not meaningfully limit the “abstract idea at the
core” of the claims. A. 6.
Having said that, this court does not define the level
of programming complexity required before a computer-
implemented method can be patent-eligible. Nor does this
court hold that use of an Internet website to practice such
a method is either necessary or sufficient in every case to
satisfy § 101. This court simply holds the claims in this
case to be patent-eligible, in this posture, in part because
of these factors.
In this context, this court examines as well the con-
tention that the software programming necessary to
facilitate the invention deserves no patent protection or
amounts to abstract subject matter or, in the confusing
terminology of machines and physical transformations,
fails to satisfy the “particular machine” requirement.
This court confronted that contention nearly two decades
ago in In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en
banc). At that time, this court observed that “program-
ming creates a new machine, because a general purpose
computer in effect becomes a special purpose computer
once it is programmed to perform particular functions
pursuant to instructions from program software.” Id. at
1545. As computer scientists understand:
ULTRAMERCIAL, INC. v. HULU, LLC 31
[T]he inventor can describe the invention in terms
of a dedicated circuit or a process that emulates
that circuit. Indeed, the line of demarcation be-
tween a dedicated circuit and a computer algo-
rithm accomplishing the identical task is
frequently blurred and is becoming increasingly so
as the technology develops. In this field, a soft-
ware process is often interchangeable with a
hardware circuit.
Id. at 1583 (Rader, J., concurring). In other words, a
programmed computer contains circuitry unique to that
computer. That “new machine” could be claimed in terms
of a complex array of hardware circuits, or more efficient-
ly, in terms of the programming that facilitates a unique
function. With the digital computer, considered by some
the greatest invention of the twentieth century, as a vital
invention, both this court and the Patent Office have long
acknowledged that “improvements thereof” through
interchangeable software or hardware enhancements
deserve patent protection. Far from abstract, advances in
computer technology—both hardware and software—drive
innovation in every area of scientific and technical en-
deavor.
The court also notes that the claims in this case are
not highly generalized. Instead, the ten specific steps in
the claim limit any abstract concept within the scope of
the invention. Further, common sense alone establishes
that these steps are not inherent in the idea of monetizing
advertising. There are myriad ways to accomplish that
abstract concept that do not infringe these claims.
This court understands that the broadly claimed
method in the ’545 patent does not specify a particular
mechanism for delivering media content to the consumer
(i.e., FTP downloads, email, or real-time streaming). This
breadth and lack of specificity does not render the claimed
subject matter impermissibly abstract. Assuming the
32 ULTRAMERCIAL, INC. v. HULU, LLC
patent provides sufficient disclosure to enable a person of
ordinary skill in the art to practice the invention and to
satisfy the written description requirement, the disclosure
need not detail the particular instrumentalities for each
step in the process.
That a process may be patentable, irrespective of
the particular form of the instrumentalities used,
cannot be disputed. If one of the steps of a process
be that a certain substance is to be reduced to a
powder, it may not be at all material what in-
strument or machinery is used to effect that ob-
ject, whether a hammer, a pestle and mortar, or a
mill.
Benson, 409 U.S. at 69-70 (quoting Cochrane v. Deener, 94
U.S. 780, 787-88 (1876)). Moreover, written description
and enablement are conditions for patentability that Title
35 sets “wholly apart from whether the invention falls
into a category of statutory subject matter.” Diehr, 450
U.S. at 190 (quoting In re Bergy, 596 F.2d 952, 961
(C.C.P.A. 1979)). The “coarse eligibility filter” of § 101 is
not the statutory tool to address concerns about vague-
ness, indefinite disclosure, or lack of enablement, as these
infirmities are expressly addressed by § 112. See 35
U.S.C. § 112; see also Research Corp., 627 F.3d at 869 (“In
§ 112, the Patent Act provides powerful tools to weed out
claims that may present a vague or indefinite disclosure
of the invention.”).
Finally, the ’545 patent does not claim a mathemati-
cal algorithm, a series of purely mental steps, or any
similarly abstract concept. It claims a particular method
for collecting revenue from the distribution of media
products over the Internet. In a recent case, this court
discerned that an invention claimed an “unpatentable
mental process.” CyberSource Corp. v. Retail Decisions,
Inc., 654 F.3d 1366, 1373 (Fed. Cir. 2011). Unlike the
claims in CyberSource, the claims here require, among
ULTRAMERCIAL, INC. v. HULU, LLC 33
other things, controlled interaction with a consumer over
an Internet website, something far removed from purely
mental steps.
In sum, as a practical application of the general con-
cept of advertising as currency and an improvement to
prior art technology, the claimed invention is not “so
manifestly abstract as to override the statutory language
of section 101.” Research Corp., 627 F.3d at 869. Accord-
ingly, this court reverses the district court’s dismissal of
Ultramercial’s patent claims for lack of subject matter
eligibility and remands for further proceedings. This
decision does not opine at all on the patentability of the
claimed invention under the substantive criteria set forth
in §§ 102, 103, and 112.
REVERSED AND REMANDED
United States Court of Appeals
for the Federal Circuit
______________________
ULTRAMERCIAL, INC., AND ULTRAMERCIAL, LLC,
Plaintiffs-Appellants,
v.
HULU, LLC,
Defendant,
AND
WILDTANGENT, INC.,
Defendant-Appellee.
______________________
2010-1544
______________________
Appeal from the United States District Court for the
Central District of California in No. 09-CV-6918, Judge R.
Gary Klausner.
______________________
LOURIE, Circuit Judge, concurring.
I concur in the result reached by the majority, but I
write separately because I believe that we should concise-
ly and faithfully follow the Supreme Court’s most recent
guidance regarding patent eligibility in Mayo Collabora-
tive Services v. Prometheus Laboratories, Inc., 132 S.Ct.
1289 (2012), and should track the plurality opinion of five
judges from this court in CLS Bank International v. Alice
Corp., __ F.3d __, 2013 WL 1920941, at *1–20 (Fed. Cir.
May 10, 2013) (Lourie, Dyk, Prost, Reyna, & Wallach, JJ.,
2 ULTRAMERCIAL, INC. v. HULU, LLC
plurality opinion). It is our obligation to attempt to follow
the Supreme Court’s guidance in Mayo rather than to set
forth our own independent views, however valid we may
consider them to be. Indeed, this appeal was specifically
vacated by the Supreme Court and remanded for further
consideration in light of Mayo. WildTangent, Inc. v.
Ultramercial, LLC, 132 S.Ct. 2431 (2012).
The claims at issue in this appeal are method claims,
not machine claims, and both Mayo and CLS Bank dealt
squarely with the issue of patent eligibility of method
claims. The plurality opinion in CLS Bank identified a
two-step process, derived from Mayo, for analyzing patent
eligibility under § 101. First, a court must identify
“whether the claimed invention fits within one of the four
statutory classes set out in § 101.” CLS Bank, 2013 WL
1920941, at *9. Second, one must assess whether any of
the judicial exceptions to subject-matter eligibility apply,
including whether the claims are to patent-ineligible
abstract ideas. Id.In the case of abstractness, as discussed in CLS Bank,
we must determine whether the claim poses “any risk of
preempting an abstract idea.” Id. To do so we must first
“identify and define whatever fundamental concept ap-
pears wrapped up in the claim”; a claim construction may
be helpful in this analysis. Id. Then, proceeding with
the preemption analysis, the balance of the claim is
evaluated to determine whether “additional substantive
limitations . . . narrow, confine, or otherwise tie down the
claim so that, in practical terms, it does not cover the full
abstract idea itself.” Id. at *10 (citing Mayo, 132 S.Ct. at
1300; Bilski v. Kappos, 130 S.Ct. 3218, 3231 (2010);
Diamond v. Diehr, 450 U.S. 175, 187 (1981)). Following
this procedure, we are then ready to evaluate the claims
at issue in this case.
I agree with the majority that no formal claim con-
struction is needed to interpret the claims at this stage.
ULTRAMERCIAL, INC. v. HULU, LLC 3
See Majority Op. at 27. As the majority correctly notes,
the ’545 patent “claims a particular method for collecting
revenue from the distribution of media products over the
Internet” and, as a process, “falls within a category of
patent-eligible subject matter.” Majority Op. at 25–26.
The abstract idea at the heart of the ’545 patent, which
the district court properly identified, is “us[ing] advertis-
ing as an exchange or currency.” Ultramercial, LLC v.
Hulu, LLC, No. CV 09-06918 RGK, 2010 WL 3360098, at *6
(C.D. Cal. Aug. 13, 2010). The ’545 patent claims, however,
require more than just that abstract idea as part of the
claimed method.
The additional claim limitations reciting how that
idea is implemented “narrow, confine, or otherwise tie
down the claim so that, in practical terms, it does not
cover the full abstract idea itself.” CLS Bank, 2013 WL
1920941, at *10. While a computer or complex computer
program, as discussed by the majority opinion, may be
necessary to perform the method, it is not what the claim
specifically requires and thus should not be the focus of
the analysis. Likewise, although the number of claim
limitations is also not an indication of patent-eligibility,
unlike the method claims in CLS Bank, in my view, the
added limitations in these claims represent significantly
more than the underlying abstract idea of using advertis-
ing as an exchange or currency and, as a consequence, do
not preempt the use of that idea in all fields. See CLS
Bank, 2013 WL 1920941, at *15. Thus, under the CLS
Bank plurality analysis, I agree with the majority that
the district court erred in dismissing Ultramercial’s
claims for lack of subject matter eligibility under § 101
due to abstractness.