WildTangent Cert Petition _with Pet App_

Document Sample
WildTangent Cert Petition _with Pet App_ Powered By Docstoc
					                No. 11-____

                   In the
 Supreme Court of the United States
             WILDTANGENT, INC.,

                                   Petitioner,

                     v.

 ULTRAMERCIAL, LLC AND ULTRAMERCIAL, INC.,

                                  Respondents.

 ON PETITION FOR A WRIT OF CERTIORARI TO THE
  UNITED STATES COURT OF APPEALS FOR THE
              FEDERAL CIRCUIT

 PETITION FOR A WRIT OF CERTIORARI



RICHARD G. FRENKEL        GREGORY G. GARRE
LISA K. NGUYEN             Counsel of Record
LATHAM & WATKINS LLP      LATHAM & WATKINS LLP
140 Scott Drive           555 11th Street, NW
Menlo Park, CA 94025      Suite 1000
(650) 328-4600            Washington, DC 20004
                          (202) 637-2207
                          gregory.garre@lw.com
                          Counsel for Petitioner
             QUESTION PRESENTED
  Whether, or in what circumstances, a patent’s
general and indeterminate references to “over the
Internet” or at “an Internet website” are sufficient to
transform an unpatentable abstract idea into a
patentable process for purposes of 35 U.S.C. § 101.
                         ii

              RULE 29.6 STATEMENT
   WildTangent, Inc. has no parent company and no
publicly held company owns 10% or more of its stock.
                                          iii

                       TABLE OF CONTENTS
                                                                               Page
QUESTION PRESENTED .............................................. i
RULE 29.6 STATEMENT ............................................... ii
TABLE OF AUTHORITIES........................................... v
OPINIONS BELOW ......................................................... 1
JURISDICTION ................................................................ 1
STATUTORY PROVISIONS INVOLVED ................. 1
STATEMENT OF THE CASE ....................................... 1
REASONS FOR GRANTING THE PETITION......... 8
      A. The Decision Below Conflicts With This
         Court’s Decisions On The Proper Scope Of
         35 U.S.C. § 101 In Bilski And Benson ............ 11
      B. At A Minimum, The Petition Should Be
         Held Pending The Decision In Mayo v.
         Prometheus......................................................... 21
CONCLUSION................................................................. 25


                                 APPENDIX
Opinion of the United States Court of Appeals
   for the Federal Circuit, Ultramercial, LLC,
   et al. v. Hulu, LLC, et al. (Fed. Cir. Sept. 15,
   2011)............................................................................. 1a
Order of the United States District Court for
   the Central District of California,
   Ultramercial, LLC et al. v. Hulu, LLC, et
   al. (C.D. Cal. Aug. 13, 2010) ................................... 15a
                                          iv

            TABLE OF CONTENTS—Continued
                                                                              Page
Order of the United States Court of Appeals for
   the Federal Circuit Denying Rehearing and
   Rehearing En Banc, Ultramercial, LLC et
   al. v. Hulu, LLC, et al. (Fed. Cir. Nov. 18,
   2011)........................................................................... 30a
35 U.S.C. § 100(b)............................................................ 32a
35 U.S.C. § 101................................................................. 33a
                                      v

                 TABLE OF AUTHORITIES
                                                                   Page(s)
                                 CASES

Bilski v. Kappos,
    130 S. Ct. 3218 (2010) ....................................... passim

Cochrane v. Deener,
   94 U.S. 780 (1877)....................................................... 18

CLS Bank International v. Alice Corp. Pty.
   Ltd.,
   768 F. Supp. 2d 221 (D.D.C. 2011) ........................... 13

CyberSource Corp. v. Retail Decisions, Inc.,
   654 F.3d 1366 (Fed. Cir. 2011) ............................. 9, 19

Dealertrack, Inc. v. Huber,
   --- F.3d ----, Nos. 2009-1566, 2009-1588,
   2012 WL 164439 (Fed. Cir. Jan. 20, 2012) .......... 9, 21

Diamond v. Diehr,
   450 U.S. 175 (1981)......................................... 13, 17, 19

Funk Brothers Seed Co. v. Kalo Inoculant Co.,
   333 U.S. 127 (1948)....................................................... 3

Gottschalk v. Benson,
    409 U.S. 63 (1972)......................................... 6, 9, 16, 18

IconFind, Inc. v. Google, Inc.,
    No. 2:11-cv-0319-GEB-JFM, 2012 WL
    158366 (E.D. Cal. Jan. 18, 2012) ............................... 13
                                         vi

      TABLE OF AUTHORITIES—Continued
                                                            Page(s)
In re Alappat,
    33 F.3d 1526 (Fed. Cir. 1994) ..................................... 8

In re Bilski,
    545 F.3d 943 (Fed. Cir. 2008) ................................... 22

O’Reilly v. Morse,
   56 U.S. 62 (1854)......................................................... 17

Parker v. Flook,
   437 U.S. 584 (1978)..................................................... 16

Prometheus Laboratories, Inc. v. Mayo
   Collaborative Services,
   628 F.3d 1347 (Fed. Cir. 2010), cert. granted,
   131 S. Ct. 3027 (2011) ................................................ 22

Research Corp. Technologies, Inc. v. Microsoft
   Corp.,
   627 F.3d 859 (Fed. Cir. 2010) ......................... 7, 12, 13

VS Technologies, LLC v. Twitter, Inc.,
   No. 2:11cv43, 2011 WL 4744911 (E.D. Va.
   Oct. 4, 2011) ................................................................ 13

                                STATUTES

28 U.S.C. § 1254(1).............................................................. 1

35 U.S.C. § 100(b)................................................................ 3

35 U.S.C. § 101................................................................. 2, 8
                                       vii

        TABLE OF AUTHORITIES—Continued
                                    Page(s)
              OTHER AUTHORITY

Eric W. Guttag, Throwing Down the Gauntlet:
    Rader Rules in Ultramercial That Breadth
    and Lack [Of] Specificity Does Not Make
    Claimed Method Impermissibly Abstract,
    IPWatchdog           (Sept.               16,            2011),
    http://www.ipwatchdog.com/2011/09/16/
    throwing-down-the-gauntlet-rader-
    rules/id=19217/ ........................................................... 20

Interim Guidance for Determining Subject
    Matter Eligibility for Process Claims in
    View of Bilski v. Kappos, 75 Fed. Reg.
    43,922 (July 27, 2010)................................................. 15

Jonathan Masur, Patent Inflation, 121 Yale L.J.
   470 (2011) .............................................................. 10, 20

Recent Case, CyberSource, 125 Harv. L. Rev.
   851 (2012) ........................................................ 10, 12, 20

Transcript of Oral Argument, Bilski v. Kappos,
   130 S. Ct. 3218 (2010) (No. 08-964) .......................... 22

Transcript  of     Oral     Argument,      Mayo
   Collaborative Services v. Prometheus
   Laboratories, Inc., No. 10-1150 (2011).................... 23

WildTangent,   About      Us:        Company
   Background, http://about.wildtangent.com/
   about/background (last visited Jan. 30, 2012).......... 4
                                         viii

        TABLE OF AUTHORITIES—Continued
                                    Page(s)

WildTangent, WildTangent Games Help:
   WildCoins FAQ, http://www.wildtangent.
   com/support/coinsfaq.aspx (last visited Jan.
   30, 2012)......................................................................... 4
   PETITION FOR A WRIT OF CERTIORARI

   Petitioner, WildTangent, Inc. (WildTangent)
respectfully petitions for a writ of certiorari to review
the judgment of the Court of Appeals for the Federal
Circuit in this case.
                 OPINIONS BELOW
    The opinion of the court of appeals (App. 1a-14a) is
reported at 657 F.3d 1323 (Fed. Cir. 2011). The opinion
of the district court (App. 15a-29a) is not reported but
is available at 2010 WL 3360098 (C.D. Cal. Aug. 13,
2010).
                   JURISDICTION
    The court of appeals entered its judgment on
September 15, 2011. WildTangent filed a timely
petition for rehearing. The court of appeals denied
rehearing on November 18, 2011. App. 30a-31a. This
petition is filed within 90 days of that order. The
jurisdiction of this Court is invoked under 28 U.S.C.
§ 1254(1).
     STATUTORY PROVISIONS INVOLVED
    Pertinent provisions are set out in the appendix to
this petition. App. 32a-33a.
           STATEMENT OF THE CASE
   This case concerns the scope of patentable subject
matter under 35 U.S.C. § 101. The Federal Circuit
recognized that the “broadly claimed” economic
concept underlying the patent at issue—trading
advertisement viewing for access to media content—
was an unpatentable abstract idea. App. 10a, 12a. But
                           2

the court held that the fact that the patent called for
the application of this abstract concept “over the
Internet” or at “an Internet website” converted it into
patentable subject matter under § 101, simply because
the claimed invention would require a computer
“interface.” Id. at 2a, 11a. Yet the patent itself does
not reference any “interface,” let alone specify any
computer programming implementing an “interface.”
    The Federal Circuit’s decision in this case conflicts
with this Court’s precedents, including this Court’s
decision in Bilski v. Kappos, 130 S. Ct. 3218 (2010), in
refashioning the framework for determining when an
abstract idea is patentable under § 101. The Federal
Circuit’s decision already has contributed to confusion
on the scope of patentability under § 101 in the wake of
Bilski. And the decision has unquestioned importance
given the function served by § 101 and the role of the
Internet in our economy. Indeed, under the decision
below, all the patent holder in Bilski had to do was add
a step saying “over the Internet,” and the patent would
have survived. This Court’s review is warranted. But
at a minimum, the Court should hold the petition for
Mayo      Collaborative    Services     v.    Prometheus
Laboratories, Inc., No. 10-1150 (argued Dec. 7, 2011).
Mayo may shed additional light on the propriety of the
Federal Circuit’s § 101 analysis in this case.
    1. The Patent Act provides that “[w]hoever
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, subject to the conditions and
requirements of this title.” 35 U.S.C. § 101. The Act
defines a “process” as a “process, art or method, and
includes a new use of a known process, machine,
                            3

manufacture, composition of matter, or material.” Id.
§ 100(b).
    This Court’s precedents have long recognized three
exceptions from the universe of patentable subject
matter established by § 101 for laws of nature, physical
phenomena, and abstract ideas. As the Court has
explained, “[t]he concepts covered by these exceptions
are ‘part of the storehouse of knowledge of all men ...
free to all men and reserved exclusively to none.’”
Bilski, 130 S. Ct. at 3225 (alteration in original)
(quoting Funk Brothers Seed Co. v. Kalo Inoculant
Co., 333 U.S. 127, 130 (1948)). Accordingly, it is settled
that these concepts are not encompassed by § 101.
    In determining whether a concept is “a patent-
eligible ‘process’” or a patent-ineligible abstract idea,
courts have long utilized “a machine-or-transformation
test.” Bilski, 130 S. Ct. at 3227. Under that test, a
claimed process is patent-eligible under § 101 if “(1) it
is tied to a particular machine or apparatus, or (2) it
transforms a particular article into a different state or
thing.”     Id. at 3224 (citation omitted) (internal
quotation marks omitted). As this Court held in Bilski,
while it is not the “sole test” for determining
patentability, “the machine-or-transformation test is a
useful and important clue … for determining whether
some claimed inventions are processes under § 101.”
Id. at 3227 (emphasis added).
    2. WildTangent operates a games service that
allows consumers around the world to access
downloadable, online, and social games via the
Internet. Consumers can rent, purchase, or play the
games using either actual dollars or WildTangent’s
proprietary digital currency. Games offered on the
service typically come with two “free trials” which
                                 4

advertisers can sponsor. Advertisers can sponsor
additional free play, thereby saving a consumer’s
digital currency. But the consumer must agree to
display the advertisement while the game is loading.1
As most users of the Internet appreciate, numerous
websites likewise restrict access to content by
requiring users to view advertisements before gaining
access to desired content. And that concept was of
course the economic linchpin for broadcast television.
    The patent-in-suit, U.S. Patent No. 7,346,545 (the
’545 patent)—issued March 18, 2008, and assigned to
respondent Ultramercial—claims exclusivity on the
basic economic concept of trading advertisement
viewing for access to content. Claim 1 lists eleven
steps that relate to receiving the content, selecting an
advertisement, and restricting access to the content
based on advertisement viewing.2 One step provides
that the content should be offered “for sale at an


  1 See WildTangent, About Us: Company Background, http://
about.wildtangent.com/about/background (last visited Jan. 30,
2012); WildTangent, WildTangent Games Help: WildCoins FAQ,
http://www.wildtangent.com/support/coinsfaq.aspx (last visited
Jan. 30, 2012).
  2 As the district court explained, the steps are: “1) receiving
media from content provider, 2) selecting an ad after consulting an
activity log to determine how many times the ad has been played
and how many more times it need be played, 3) offering media
products on the Internet, 4) restricting general public access to
the media, 5) offering various media to customers for free in
exchange for their watching the selected ad, 6) receiving a request
to view the media from the Internet user, 7) facilitating the
display of the ad, 8) allowing the Internet user access to the media,
9) same as 8 but for interactive media, 10) recording the
transaction in the activity log, and 11) receiving payment from
sponsor for the ad.” App. 16a-17a; see id. at 2a-3a.
                                 5

Internet website.” ’545 patent col. 8 ll.20-21. Claim 8,
the other independent claim, similarly refers to “an
Internet website.” ’545 patent col. 9 ll.3-4. The patent
does not specify any computer programming.
Ultramercial seeks exclusivity not on the software or
computer programming steps necessary to restrict
access to content over the Internet, but rather on the
basic concept of trading access to content based on
advertisement viewing on “an Internet website.”
    3. On September 23, 2009, Ultramercial filed suit in
the Central District of California, asserting that
WildTangent—along with Hulu, LLC and YouTube,
LLC—had infringed its ’545 patent by limiting access
to content on the popular Internet websites that
defendants operate based on advertisement viewing.
WildTangent and the other defendants moved for
dismissal under Rule 12(b)(6) on the ground that the
’545 patent failed to disclose patentable subject matter
under § 101.3 At the time, Bilski was pending before
this Court. “In order to benefit from [this Court’s]
guidance on the law regarding patentable subject
matter and because of similarities between the case at
hand and Bilski,” the district court stayed the case
pending this Court’s decision in Bilski. App. 18a.
Then, after allowing supplemental briefing on Bilski,
the district court granted WildTangent’s motion to
dismiss this case under § 101. Id. at 18a-19a.
    The district court’s decision was framed around
Bilski. The court began by explaining that “at least
five (and maybe all) Justices seem to agree that the
machine or transformation test should retain much of


  3 The parties later stipulated to the dismissal of Hulu and
YouTube. See App. 3a, 15a n.1.
                            6

its utility after [Bilski],” and thus concluded that the
test continues to serve “a major screening function—
albeit not perfect—that separates unpatentable ideas
from patentable ones.” Id. at 20a. Applying that test,
the court first concluded that the ’545 patent is not tied
to a machine. The court explained that there was
“nothing inherently computer-specific” about the basic
“concept of advertisement-media-exchange,” and that
“[o]ne cannot circumvent the patentability test by
merely limiting the use of an invention to a computer.”
Id. at 24a-25a (citing Gottschalk v. Benson, 409 U.S. 63,
64 (1972)). The court further emphasized that an “‘over
the Internet’ recitation does not make an otherwise
unpatentable idea patentable.” Id. at 22a. The court
next concluded that the ’545 does not satisfy the
transformation prong and, indeed, does not disclose a
method for transforming anything. Id. at 25a-26a.
    Drawing from Bilski, the district court also
separately considered whether the ’545 patent
discloses an abstract idea. The court observed that the
’545 patent is “very similar” to the patent in Bilski. As
the court explained, “[a]t the core of the ’545 patent is
the basic idea that one can use advertisement as an
exchange or currency,” i.e., “[a]n Internet user can pay
for copyrighted media by sitting through a sponsored
message instead of paying money to download the
media.” Id. at 27a. “This core principle, similar to the
core of the Bilski patent, is an abstract idea,” the court
held. Id. Moreover, the court continued, “[a]lso similar
to the patent in Bilski, the added features, examples,
or limitations of the ’545 patent … do[] not limit the
patent in a meaningful way.” Id. Accordingly, the
district court held that, as was true for the patent in
                           7

Bilski, the ’545 patent simply “discloses an abstract
idea garnished with accessories.” Id.
    4. The Federal Circuit reversed. At the outset,
the court stated that, “[w]hile 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.” Id. at 7a. As a result, instead of
utilizing the machine-or-transformation test as a
screening tool, the court simply focused on whether the
subject matter of the ’545 patent was impermissibly
“abstract.” In framing its inquiry into abstractness,
the court held that “this court does ‘not presume to
define “abstract” beyond the recognition that this
disqualifying characteristic should exhibit itself so
manifestly as to override the broad statutory
categories of eligible subject matter and the statutory
context that directs primary attention on the
patentability criteria of the rest of the Patent Act.’”
Id. at 8a (quoting Research Corp. Techs., Inc. v.
Microsoft Corp., 627 F.3d 859, 868 (Fed. Cir. 2010)).
    The court of appeals acknowledged that the basic
concept of using advertising as currency—like the
concept of hedging in Bilski—“is abstract.” Id. at 10a.
But the court reasoned that the ’545 patent discloses a
“practical application” of this idea—taking it out of the
realm of abstractness—on the ground that its steps are
“likely to require intricate and complex computer
programming” and “clearly require specific application
to the Internet.” Id. at 10a-11a (emphasis added). The
court did not define the “level of programming
complexity required before a computer-implemented
method can be patent eligible.” Id. at 11a. But in this
case, the patent disclosed no programming, and the
                           8

reference to the Internet ultimately was the sole basis
for the “computer interface” on which the court relied
in holding that § 101 was satisfied. Id.
    The court recognized that the method disclosed by
the ’545 patent was “broadly claimed.” Id. at 12a. But
the court reasoned that “[t]his breadth and lack of
specificity does not render the claimed subject matter
impermissibly abstract.” Id. The court also engaged in
a broad-based discussion of the patentability of
computer software, despite the fact that the ’545 patent
does not mention software at all. The court reasoned
that computer programming may turn a general
purpose computer into a “particular machine.” Id. at
11a (citing In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994)
(en banc)). But in the next paragraph, the court
explicitly recognized that the patent does not mention
any computer programming. Id. at 12a.
    5. The court of appeals denied WildTangent’s
timely petition for rehearing. Id. at 30a-31a.
  REASONS FOR GRANTING THE PETITION
   The lower courts have continued to struggle in the
wake of this Court’s decision in Bilski v. Kappos, 130 S.
Ct. 3218 (2010), in applying the subject matter
limitation on patentability established by 35 U.S.C.
§ 101. One of the most important areas where the § 101
question has frequently arisen is patents that refer to
the use of the Internet or a general purpose computer
necessary to access the Internet. The published
decision in this case addresses that question in broad-
based terms and relegates the machine-or-
transformation test to an afterthought in conducting
the § 101 analysis in this context. The decision holds
that general and indeterminate references to “over the
                           9

Internet”     and    at    “an   Internet     website”—
unaccompanied by references to any software or
particular computer programming required to practice
the invention—are sufficient to transform what the
panel recognized was an unpatentable abstract idea
into a patentable process for purposes of § 101.
    The decision conflicts with this Court’s decisions in
several important respects. First, in conflict with
Bilski, the Federal Circuit’s decision seriously
discounts the role of the machine-or-transformation
test for an important category of cases and employs a
heightened—and virtually insurmountable—standard
for demonstrating abstractness under § 101. Second, in
conflict with Gottschalk v. Benson, 409 U.S. 63 (1972),
the Federal Circuit’s decision essentially holds that any
claim that is even superficially Internet- or computer-
related is patent-eligible. Contrary to Benson, the
court of appeals’ decision holds that the use of the
phrase “at an Internet website” establishes “an
extensive computer interface,” which in turn converts
an unpatentable abstract idea into a patentable
“practical application” of such an idea—even when (as
here) the patent does not specify any software or
particular computer programming. App. 2a, 10a-11a.
    The decision in this case also exacerbates the
growing conflict and confusion within the Federal
Circuit on the proper application of § 101 to Internet-
related patents. Cf. Dealertrack, Inc. v. Huber, ---
F.3d ----, Nos. 2009-1566, 2009-1588, 2012 WL 164439,
at *16 (Fed. Cir. Jan. 20, 2012) (“computer aided”
method for processing credit applications is § 101
ineligible); CyberSource Corp. v. Retail Decisions, Inc.
654 F.3d 1366, 1373 (Fed. Cir. 2011) (method for
detecting fraud in credit card transactions over
                           10

Internet is § 101 ineligible). Indeed, commentators
have already recognized that the Federal Circuit’s
post-Bilski case law with respect to computer-related
processes is in disarray and internally conflicted. See,
e.g., Recent Case, CyberSource, 125 Harv. L. Rev. 851,
857 (2012); Jonathan Masur, Patent Inflation, 121 Yale
L.J. 470, 530 & n.256 (2011). The application of § 101 to
Internet- or computer-related patents arises
frequently and is of unquestioned importance given the
role of the Internet in the nation’s economy.
    Mayo Collaborative Services v. Prometheus
Laboratories, Inc., No. 10-1150 (argued Dec. 7, 2011),
may shed additional light on the proper analysis in this
case. While they arise in different factual contexts,
both this case and Mayo concern the scope of
patentable subject matter under § 101, the role of the
machine-or-transformation test in that inquiry, and the
framework for assessing whether a process claim is
impermissibly directed to a fundamental principle
(such as an abstract idea, law of nature, or natural
phenomenon). Given the possibility that the Court’s
decision in Mayo may bear on the propriety of the
novel § 101 analysis applied by the Federal Circuit in
this case, the petition for a writ of certiorari at a
minimum should be held pending the disposition of
Mayo. At that time, the Court may determine whether
the most appropriate course would be to grant the
petition, vacate the decision below, and remand for
further consideration in light of its decision in Mayo;
or, alternatively, simply to grant plenary review on the
exceptionally important question presented.
                          11

   A. The Decision Below Conflicts With This
      Court’s Decisions On The Proper Scope Of 35
      U.S.C. § 101 In Bilski And Benson
    1. The Federal Circuit’s novel framework for
analyzing abstractness conflicts with this Court’s
decision in Bilski in two important respects. First, the
court of appeals improperly diminished, if not
eliminated, the key screening role of the machine-or-
transformation test for an important category of
patents. The court contorted Bilski’s holding that the
machine-or-transformation test is not the exclusive
test for patentability into a rule that the machine-or-
transformation test has virtually no role in applying
§ 101 in Internet- or computer-related cases. That
ruling in itself warrants further review.
    In Bilski, this Court emphatically reaffirmed that
“the machine-or-transformation test is a useful and
important clue, an investigative tool, for determining
whether some claimed inventions are processes under
§ 101.” 130 S. Ct. at 3227 (emphasis added). Justice
Scalia, who was part of the Bilski majority, joined
Justice Breyer’s opinion concurring in the judgment,
which made clear that, “in reemphasizing that the
‘machine-or-transformation’ test is not necessarily the
sole test of patentability, the Court intends neither to
deemphasize the test’s usefulness nor to suggest that
many patentable processes lie beyond its reach.” Id. at
3259. Justice Stevens’ opinion concurring in the
judgment, which Justices Ginsburg, Breyer, and
Sotomayor joined, similarly emphasized that “[f]ew, if
any, processes cannot effectively be evaluated using”
the machine-or-transformation test and that it
understood the majority “to hold only that the
machine-or-transformation test remains an important
                           12

test for patentability.” Id. at 3235.
    In stark contrast, the court of appeals’ decision in
this case essentially eliminates the machine-or-
transformation test as a meaningful “investigative
tool” for determining patentability in this important
context. Id. at 3227. To the extent that the court of
appeals discussed the machine-or-transformation test,
it essentially dismissed the test as an anachronism:
“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.” App. 7a (emphasis
added); see also Recent Case, supra, 125 Harv. L. Rev.
at 854 n.39 (noting the “unclear” role of the machine-or-
transformation under the Federal Circuit’s post-Bilski
case law). The court of appeals’ dismissive view of the
machine-or-transformation test stands in stark
contrast with this Court’s admonition in Bilski that the
test continues to serve as a “useful and important” tool
under § 101. 130 S. Ct. at 3227.
    Second, the Federal Circuit’s decision in this case
applies a heightened standard for abstractness that
conflicts with Bilski and has even broader implications
for § 101. In place of the machine-or-transformation
test, the Federal Circuit applied an “abstractness” test
under which, to be “disqualifying” for purposes of
§ 101, abstractness must “‘exhibit itself so manifestly
as to override the broad statutory categories of eligible
subject matter and the statutory context that directs
primary attention on the patentability criteria of the
rest of the Patent Act.’” App. 8a (quoting Research
Corp., 627 F.3d at 868) (emphasis added); see also id. at
14a. The practical effect of this “so manifestly” test is
to impose a strong presumption of non-abstractness—
                           13

and thus patentability under § 101.
    The Federal Circuit drew the “so manifestly”
language from its post-Bilski decision in Research
Corp. Technologies, Inc. v. Microsoft Corp., 627 F.3d
859 (Fed. Cir. 2010). The court of appeals’ validation of
the patent at issue in Research Corp. represents a
straightforward application of Diamond v. Diehr, 450
U.S. 175 (1981), because the “claimed methods” at issue
in the case “incorporate[d] algorithms and formulas”
that produced new and improved digital images
through the process of “halftoning.” 627 F.3d at 862-63,
869. By contrast, the decision in this case validates a
patent that bears no resemblance to the one in Diehr—
thus transforming Research Corp.’s “so manifestly”
language into a new test of enormous doctrinal
significance under § 101. That is underscored by the
fact that district courts already have begun regularly
applying the Federal Circuit’s “so manifestly” standard
in making § 101 determinations. See, e.g., IconFind,
Inc. v. Google, Inc., No. 2:11-cv-0319-GEB-JFM, 2012
WL158366, at *2 (E.D. Cal. Jan. 18, 2012) (quoting
Ultramercial); VS Techs., LLC v. Twitter, Inc., No.
2:11cv43, 2011 WL 4744911, at *3 (E.D. Va. Oct. 4,
2011) (quoting Ultramercial and Research Corp.); CLS
Bank Int’l v. Alice Corp. Pty. Ltd., 768 F. Supp. 2d 221,
232 (D.D.C. 2011) (quoting Research Corp.).
    Neither Bilski nor this Court’s prior precedents
have applied (or alluded to) anything like the Federal
Circuit’s “so manifestly” standard. Bilski stated that
the Court was not “foreclos[ing]” the Federal Circuit
from developing “other limiting criteria that further
the purposes of the Patent Act.” 130 S. Ct. at 3231.
But the Federal Circuit’s “so manifestly” standard
seriously erodes the limitations in § 101 in this context
                           14

and conflicts with the Court’s recognition in Bilski that
abstract ideas are not patentable under § 101. The
question under this Court’s cases is whether the
subject matter is abstract, not whether the subject
matter is “‘so manifestly [abstract]’” that abstractness
is obvious. App. 8a, 14a (citation omitted). Of course,
subject matter that is manifestly abstract flunks § 101.
But under this Court’s precedent, subject matter that
is simply abstract flunks § 101 too. The “so manifestly”
test heightens the bar in establishing abstractness.
    Bilski repeatedly explained that abstract ideas are
an “exception[] to § 101’s broad patent-eligibility
principles” that has “defined the reach of the statute as
a matter of statutory stare decisis going back 150
years.” 130 S. Ct. at 3225. The Court rejected the
machine-or-transformation test as an absolute
requirement because the “well-established exceptions”
to § 101 do not give courts “carte blanche to impose
other limitations that are inconsistent with the text and
the statute’s purpose and design.”          Id. at 3226
(emphasis added). But the Court in no way narrowed
the longstanding exception for abstract ideas, or
opened the door for the Federal Circuit to heighten the
bar in establishing abstractness under § 101.
    Indeed, Bilski teaches that when a patent flunks
the machine-or-transformation test (as the ’545 patent
does), there is a high bar for showing that the patent is
not abstract. In their pivotal concurring opinion,
Justices Breyer and Scalia explained that there are not
“many” processes that will fail the machine-or-
transformation test and nevertheless qualify for
protection under § 101. 130 S. Ct. at 3259. And after
Bilski, the Patent and Trademark Office observed that
“no court, presented with a subject matter eligibility
                           15

issue, has ever ruled that a method claim that lacked a
machine or a transformation was patent-eligible.”
Interim Guidance for Determining Subject Matter
Eligibility for Process Claims in View of Bilski v.
Kappos, 75 Fed. Reg. 43,922, 43,924 (July 27, 2010).
The Federal Circuit’s decision here upends the settled
practice by adopting what amounts to a strong
presumption that a patent is not abstract, regardless of
whether it fails the machine-or-transformation test.
    The district court’s decision in this case shows the
outcome-determinative significance of the Federal
Circuit’s departure from Bilski. As discussed, the
district court stayed its decision pending Bilski,
carefully studied this Court’s decision in Bilski, and
then decided this case based on Bilski and, thus,
utilized the machine-or-transformation test as a
screening tool. See supra at 5-7. Indeed, the district
court correctly found that the patent in this case was
“very similar” to the patent in Bilski, in that “[a]t the
core of the ’545 patent is the basic idea that one can use
advertisement as an exchange or currency,” just like
the abstract economic concept (hedging) that lay at the
core of the patent in Bilski. App. 27a. The Federal
Circuit reached the opposite conclusion only by
deviating sharply from the analysis outlined by Bilski.
And the upshot is that, under the decision below, the
patentee in Bilski could have survived § 101 if it had
only added a step saying “over an Internet” or “at an
Internet website.” It is inconceivable that the Court
could have intended its decision to be evaded so easily.
    2. The Federal Circuit’s decision also effectively
holds that so long as a claim, such as the ’545 patent,
superficially involves the Internet or a computer, it
does not merely claim an abstract idea, but instead per
                           16

se claims a patentable “practical application” of an
abstract idea. This conflicts with this Court’s holding
in Gottschalk v. Benson that “a method of
programming a general-purpose digital computer to
convert signals from binary-coded decimal form into
pure binary form” was merely an unpatentable
abstract idea. 409 U.S. at 65, 67-68.
    The court of appeals recognized 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.” App. 10a.
But the court concluded that the ’545 patent claims a
“practical application of this idea,” because it
purportedly “involves an extensive computer
interface”—specifically, the court observed, the claims’
steps are “likely to require intricate and complex
computer programming” and “require specific
application to the Internet and a cyber-market
environment.” Id. at 10a-11a. That holding conflicts
with Benson and is remarkably broad for two reasons.
    First, the court of appeals reached this conclusion
based solely on the ’545 patent’s general reference to
the Internet. All the patent says is that the transaction
is “over the Internet,” ’545 patent col.8 l.5, and the
media is provided for sale “at an Internet website,” id.
col. 8 ll.20-21. These broad statements do not make the
process any more concrete or provide any meaningful
limits on use. The claim does not even mention a
computer or computer programming, much less
describe how to provide the media or restrict and grant
access to the media. And in that respect, the claim is
also similar to the claim in Parker v. Flook, 437 U.S.
584 (1978), which was impermissibly abstract because
it did not explain how to select the variables for the
                           17

formula, how the chemical processes work, how to
monitor the process variables, or how to set off an
alarm. See Diehr, 450 U.S. at 192 n.14, 186 n.10.
    The court of appeals overlooked that a patent
applicant could claim this process without having
actually invented any of the computer programming
necessary to operate the claimed process on an
Internet website, or to restrict access to content on a
website. Indeed, the ’545 patent itself does not disclose
or describe any necessary software or computer
programming to operate the claimed process. Website
operators like WildTangent must determine for
themselves what software or programming is
necessary or desirable to operate their websites. By
adding “over the Internet” to an otherwise abstract
idea, Ultramercial is simply trying to monopolize the
abstract idea of trading advertisement viewing for
content over the Internet, claiming dominion over a
broad range of inventions that Ultramercial never
conceived and that must be implemented through
computer programming not specified in the ’545 patent.
See O’Reilly v. Morse, 56 U.S. 62, 112-14 (1854).
    The court of appeals stated that it did not “define
the level of programming complexity required before a
computer-implemented method can be patent-eligible.”
App. 11a (emphasis added). But the court’s own
decision illustrates that this attempted limitation is
illusory, because the court held in broad terms that a
claim (such as those in the ’545 patent) that does not
disclose any computer programming or software was
sufficient to satisfy § 101. The court of appeals also
claimed not to hold “that use of an Internet website to
practice such a method is either necessary or sufficient
in every case to satisfy § 101.” Id. (emphasis added).
                           18

But if reference to the Internet was sufficient here
because of the computer “interface” necessitated by
the Internet, id.—despite the fact that the ’545 patent
does not disclose an interface or any computer
programming or software for an interface—then as a
practical matter the court’s decision articulates no
limiting principle at all when it comes to the Internet.
    Second, the court of appeals expanded the breadth
of its holding by suggesting that the non-existent
computer programming somehow tied the claim to a
“particular machine.” Id. at 11a-12a. But the court
held that the very thing that ordinarily converts a
general purpose computer into a sufficiently particular
machine—i.e., specialized computer programming—
does not need to be specified, since here it is
undisputed that the ’545 patent does not disclose any
computer programming needed to practice the claim.
Id. So if the ’545 patent is tied to a “particular
machine,” then any patent that references the Internet
or an Internet website is tied to a “particular machine.”
That is another way in which the Federal Circuit’s
decision in this case renders the machine-or-
transformation test obsolete in this important context.
    The court of appeals pointed to this Court’s
statement in Benson that processes are patentable
“‘irrespective of the particular form of the
instrumentalities used.’” 409 U.S. at 69-70 (quoting
Cochrane v. Deener, 94 U.S. 780, 787-88 (1877)). But
the court of appeals omitted that the Court was
describing processes involving transformations. The
very next paragraph in Benson states that
“[t]ransformation and reduction of an article ‘to a
different state or thing’ is the clue to the patentability
of a process claim that does not include particular
                          19

machines.” Id. at 70. Benson does not support the
proposition that a patent that merely mentions the
“Internet” is tied to a particular machine. Not only did
the court of appeals diminish the importance of the
machine-or-transformation test, the court dismantled it
for all intents and purposes when it comes to computer-
or Internet-related patents by concluding that a
reference to the Internet is enough.
    Whether framed in terms of abstractness or
particular machines, the Federal Circuit’s expansive
holding conflicts with Benson. Indeed, the abstract
idea in Benson was unpatentable even though
performed by a computer, and this Court did not
suggest that the patents claiming abstract ideas in
Flook and Bilski “could have avoided invalidity under
§ 101 by merely requiring a computer to perform the
method.” CyberSource, 654 F.3d at 1376. But that is
exactly what the Federal Circuit held here. The court
of appeals recognized that the concept of trading
advertisement viewing for content was an abstract idea
similar to the concept of hedging risk in Bilski, App.
10a, and then found that adding “over the Internet”
made it a practical application. This Court has long
held that an abstract idea “does not suddenly become
patentable subject matter simply by having the
applicant acquiesce to limiting the reach of the patent
for the formula to a particular technological use.”
Diehr, 450 U.S. at 192 n.14 (describing Flook); see also
Bilski, 130 S. Ct. at 3230-31. Purporting to limit the
application of an abstract idea to a computer or the
Internet does not warrant any different conclusion.
    3. The Federal Circuit itself seems internally
divided on this issue. For example, the decision in this
case is difficult to square with the Federal Circuit’s
                           20

holding one month earlier in CyberSource that a
“computer readable medium containing program
instructions for detecting fraud” in Internet credit card
transactions is abstract. 654 F.3d at 1373 (emphasis
omitted) (citation omitted).            Indeed, recent
commentators have recognized the disarray within the
Federal Circuit’s post-Bilski case law and the conflict
between this case and CyberSource in particular. See,
e.g., Recent Case, supra, 125 Harv. L. Rev. at 857
(recognizing that the decision in this case is in “tension
with CyberSource” and that the “attempt to distinguish
the two seemed forced”); Jonathan Masur, supra, 121
Yale L.J. at 530 & n.256 (observing that “patentable
subject matter rules have … returned to a state of
substantial uncertainty” and noting the “conflict[]”
between Ultramercial and CyberSource); Eric W.
Guttag, Throwing Down the Gauntlet: Rader Rules in
Ultramercial That Breadth and Lack [Of] Specificity
Does Not Make Claimed Method Impermissibly
Abstract,      IPWatchdog        (Sept.     16,     2011),
http://www.ipwatchdog.com/2011/09/16/throwing-down
-the-gauntlet-rader-rules/id=19217/ (suggesting that
Ultramercial’s attempt to distinguish Cybersource
depended on “‘sl[e]ight of hand’ and using ‘mirrors’”
and stating that Ultramercial “illustrates the wide gulf
of views between the various members of the Federal
Circuit on the patent-eligibility question”).
    The Federal Circuit’s recent decision in Dealertrack
has only added to the confusion. There, the Federal
Circuit held that a computer-based method for
automating the redundant process of a car dealer
sending credit applications, on behalf of prospective car
purchasers, to multiple banks is ineligible under § 101.
The court reasoned that the claims are directed to an
                           21

abstract idea and are not tied to a particular machine
because they “are silent as to how a computer aids the
method” and “[s]imply adding a ‘computer aided’
limitation to a claim covering an abstract concept,
without more, is insufficient to render the claim patent
eligible.” 2012 WL 164439, at *17 (relying on Benson).
That the specification in Dealertrack disclosed “certain
algorithms” did not change the result, because the
claims were not limited to a “particular algorithm.” Id.
    The Dealertrack court purported to distinguish the
present case as involving a “an extensive computer
interface.” Id. But that characterization is unfounded
and, thus, untenable. As discussed, the ’545 patent” is
likewise “silent” when it comes to any computer
programming actually needed to practice the invention
and instead refers solely to transactions “over the
Internet” or “at an Internet website.” See id. Indeed,
the case for patentability under § 101 is even less
plausible here than it was in Dealertrack, because in
this case there is not even a reference to an algorithm
in the specification (as there was in Dealertrack).
Accordingly, the decision in this case is simply
incompatible with Dealertrack.
   B. At A Minimum, The Petition Should Be Held
      Pending The Decision In Mayo v. Prometheus
   The framework for analyzing patent eligibility in
the context of computer- or Internet-related patents is
exceptionally important. The issue has far-reaching
economic implications given the critical role of the
Internet today.      Indeed, Ultramercial calls its
invention—trading advertisement viewing for access to
content—a “‘money-less’ way” to do business over the
Internet. ’545 patent col. 2 l.60. But if the ’545 patent
is eligible under § 101, then so is a patent claiming
                           22

exclusivity on the concept of using credit card
transactions “over the Internet” or “at an Internet
website.” Granting exclusivity on such a concept would
have a disastrous economic impact and is obviously not
what Congress intended when it enacted § 101.
    The en banc Federal Circuit in Bilski explicitly left
open “whether or when recitation of a computer
suffices to tie a process claim to a particular machine.”
In re Bilski, 545 F.3d 943, 962 (Fed. Cir. 2008). And
this Court highlighted the issue during oral argument
in Bilski. See, e.g., Transcript of Oral Argument at 32,
Bilski, 130 S. Ct. 3218 (2010) (No. 08-964) (“[A]re you
automatically patented—in the patent statute, if you
just sort of reduce this to a machine by adding a
computer on at the end? They’ve flagged that as a
problem. They haven’t answered it.”) (Breyer J.); id. at
34 (Roberts, C.J.) (questioning whether simply using a
computer makes the claim patentable).
    Although the question presented is of sufficient
importance to warrant plenary review, the Court’s
decision in Mayo Collaborative Services v. Prometheus
Laboratories, Inc., No. 10-1150 (argued on December 7,
2011), may shed light on the appropriate § 101 analysis
in this case as well as the continuing role of the
machine-or-transformation test in making § 101
determinations. In Mayo, the Federal Circuit held that
a particular method for diagnostic testing falls within
§ 101    because      it   satisfies  the     machine-or-
transformation test and does not improperly
monopolize a natural principle. Prometheus Labs., Inc.
v. Mayo Collaborative Servs., 628 F.3d 1347, 1354-59
(Fed. Cir. 2010), cert. granted, 131 S. Ct. 3027 (2011).
The parties’ briefs as well as the Solicitor General’s
brief discuss the proper § 101 analysis, including the
                                23

continuing     importance      of    the    machine-or-
transformation test, and several amici stressed the
potential impact of that case on computer-related
processes.4 At oral argument in Mayo, this Court
explored the boundary between unpatentable
fundamental principles (such as abstract ideas and laws
of nature) and patent-eligible processes that apply such
principles.5 Regardless of the outcome, the Court’s
decision in Mayo may well shed additional light on the
proper analysis of process claims under § 101—


  4 See, e.g., Petitioners’ Br. 38-40, Mayo, 2011 WL 3919717
(Sept. 2, 2011) (criticizing Federal Circuit’s reliance on the
machine-or-transformation test); Respondent’s Br. 18, Mayo, 2011
WL 5189089 (Oct. 31, 2011) (“The traditional machine-or-
transformation test provides an important clue to patentability
because it crisply distinguishes mere abstractions from processes
that operate in the real world.”). As the Solicitor General argued,
Bilski reaffirmed that the machine-or-transformation test
provides “‘a useful and important clue, an investigative tool,’ for
determining eligibility under Section 101.” Br. of United States as
Amicus Curiae Supporting Neither Party 13-14, Mayo, 2011 WL
4040414 (Sept. 9, 2011) (quoting Bilski, 130 S. Ct. at 3227).
Moreover, several amici recognized the impact that the case could
have on the patentability of computer-related processes. See, e.g.,
Br. of Microsoft Corp., et al. as Amici Curiae in Support of
Neither Party 1-2 & n.2, 21-22 & n.6, Mayo, 2011 WL 4040399
(Sept. 9, 2011) (“Microsoft Br.”); Br. of SAP Am., Inc. as Amicus
Curiae in Support of Affirming the Federal Circuit’s Opinion 2,
Mayo, 2011 WL 5373696 (Nov. 7, 2011). And some amici
expressly acknowledged that the Federal Circuit’s § 101
jurisprudence has taken conflicting approaches in the wake of
Bilski. Microsoft Br. at 10 & n.3.
  5 See, e.g., Transcript of Oral Argument at 41, Mayo, No. 10-
1150 (Dec. 7, 2011) (“[W]hat has to be added to a law of nature to
make it a patentable process?”) (Breyer, J.); id. at 45-47
(distinguishing unpatentable abstractions in Benson and Bilski
from patentable applications of natural laws) (counsel).
                                24

including the role of the machine-or-transformation
test in that inquiry and the framework for assessing
whether a process claim is impermissibly abstract.
    Accordingly, at a minimum, the petition should be
held pending the Court’s disposition in Mayo. In the
event that this Court’s decision in Mayo bears on the
validity of the § 101 analysis applied in this case, it
would be appropriate to grant the petition, vacate the
decision, and remand for further consideration in light
of Mayo.       Alternatively, given the exceptional
importance of the question presented and the rapidly-
developing and already conflicting Federal Circuit
jurisprudence on the application of § 101 to Internet- or
computer-related process patents, the Court should
grant the petition and proceed with plenary review.6




  6 WildTangent argued below that this Court’s grant of
certiorari in Mayo underscored the importance of the § 101
inquiry, but did not provide a basis for denying rehearing given
that Mayo involves medical diagnostic testing rather than a
computer- or Internet-related patent. See WildTangent Pet. for
Reh’g 15 n.5. The most direct conflict exacerbated by the decision
below within the Federal Circuit’s own case law concerns the
application of § 101 to computer- or Internet-related patents;
Mayo could not resolve that conflict. The Federal Circuit,
however, denied rehearing. And while Mayo arises in a different
factual context, the Court’s decision might well shed light on the
propriety of the § 101 analysis that the Federal Circuit undertook
in this case, as discussed above. Moreover, at this point, the only
way for the Federal Circuit to consider the impact of this Court’s
decision in Mayo on this case would be a GVR.
                          25

                   CONCLUSION
   The petition for writ of certiorari should be held
pending the Court’s decision in Mayo Collaborative
Services v. Prometheus Laboratories, Inc., No. 10-1150.
The Court then should determine whether to grant
certiorari, vacate the decision below, and remand the
case for further consideration in light of this Court’s
decision in Mayo, or instead to grant certiorari and
proceed with plenary review.
                               Respectfully submitted,

RICHARD G. FRENKEL             GREGORY G. GARRE
LISA K. NGUYEN                  Counsel of Record
LATHAM & WATKINS LLP           LATHAM & WATKINS LLP
140 Scott Drive                555 11th Street, NW
Menlo Park, CA 94025           Suite 1000
(650) 328-4600                 Washington, DC 20004
                               (202) 637-2207
                               gregory.garre@lw.com
                               Counsel for Petitioner
FEBRUARY 6, 2012
APPENDIX
           APPENDIX TABLE OF CONTENTS

                                                                               Page
Opinion of the United States Court of Appeals
   for the Federal Circuit, Ultamercial, LLC,
   et al. v. Hulu, LLC, et al. (Fed. Cir. Sept. 15,
   2011) .............................................................................1a

Order of the United States District Court for
   the Central District of California,
   Ultamercial, LLC et al. v. Hulu, LLC, et al.
   (C.D. Cal. Aug. 13, 2010) .........................................15a

Order of the United States Court of Appeals for
   the Federal Circuit Denying Rehearing and
   Rehearing En Banc, Ultamercial, LLC et
   al. v. Hulu, LLC, et al. (Fed. Cir. Nov. 18,
   2011) ...........................................................................30a

35 U.S.C. § 100(b) ............................................................32a

35 U.S.C. § 101 .................................................................33a
                          1a

     UNITED STATES COURT OF APPEALS
        FOR THE FEDERAL CIRCUIT


ULTRAMERCIAL, LLC AND ULTRAMERCIAL,
                 INC.,
         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 case No. 09-CV-
6918, Judge R. Gary Klausner.

             Decided: September 15, 2011


 Before RADER, Chief Judge, LOURIE and O’MALLEY,
                     Circuit Judges.
RADER, Chief Judge.
    The United States District Court for the Central
District of California dismissed Ultramercial, LLC and
Ultramercial, Inc.’s (collectively, “Ultramercial”)
patent infringement claims, finding that U.S. Patent
No. 7,346,545 (“the ’545 patent”) does not claim patent-
eligible subject matter. Because the ’545 patent claims
a “process” within the language and meaning of 35
U.S.C. § 101, this court reverses and remands.
                           2a

                             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 advertisement, and the advertiser pays for the
copyrighted content. Claim 1 of the ’545 patent reads:
   A method for distribution of products over the
   Internet 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 message to be
         associated with the media product, said
         sponsor message being selected from a
         plurality of sponsor messages, 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 product 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 access to the
         media product without charge to the
         consumer on the precondition that the
         consumer views the sponsor message;
                           3a

      a sixth step of receiving from the consumer a
          request to view the sponsor message, wherein
          the consumer submits said request in
          response to being offered access to the media
          product;
      a seventh step of, in response to receiving the
          request from the consumer, facilitating 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 after 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 allowing 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 presented; and
      an eleventh step of receiving payment from the
          sponsor of the sponsor message displayed.
’545 patent col.8 ll.5-48.
    Ultramercial filed suit against 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. WildTangent filed a motion 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 motion to dismiss.
                           4a

Ultramercial appeals. This court has jurisdiction under
28 U.S.C. § 1295(a)(1).
    This court reviews a district court’s dismissal for
failure to state a claim without deference. Gillig v.
Nike, Inc., 602 F.3d 1354, 1358 (Fed. Cir. 2010). This
court also reviews determinations 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. This court has never
set forth a bright line rule requiring 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).     On many occasions, however, a
definition of the invention via 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
enlighten, or even answer, questions about subject
matter abstractness. In this case, the subject matter at
stake and its eligibility does not require claim
construction.
                           5a

                           III
   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
process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof,
may obtain a patent therefor, subject to the conditions
and requirements of this title” (emphasis added). In
Bilski, the Supreme Court explained 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)). After all, the purpose of the
Patent Act is to encourage innovation, and the use of
broadly inclusive categories of statutory subject
matter ensures that “ingenuity . . . receive[s] a liberal
encouragement.” Chakrabarty, 447 U.S. at 308.
   More importantly, as § 101 itself expresses, subject
matter eligibility is merely a threshold check; claim
patentability ultimately depends on “the conditions and
requirements of this title,” such as novelty, non-
obviousness, and adequate disclosure. 35 U.S.C. § 101;
see Classen Immunotherapies, Inc. v. Biogen IDEC,
Nos. 2006-1634, 2006-1649, 2011 WL 3835409, at *6
(Fed. Cir. Aug. 31, 2011) (pointing out the difference
between “the threshold inquiry of patent-eligibility,
and the substantive conditions of patentability”). By
directing attention to these substantive criteria for
patentability, the language of § 101 makes clear that
the categories of patent-eligible subject matter are no
more than a “coarse eligibility filter.” Research Corp.,
627 F.3d at 869. In other words, the expansive
categories—process, machine, article of manufacture,
                           6a

and composition of matter—are certainly not
substitutes     for   the    substantive    patentability
requirements set forth in § 102, § 103, and § 112 and
invoked expressly by § 101 itself. Moreover, title 35
does not list a single ineligible category, suggesting
that any new, non-obvious, and fully disclosed technical
advance is eligible for protection, subject to the
following limited judicially created exceptions.
    In line with the broadly permissive nature of § 101’s
subject matter eligibility principles, judicial case law
has created only three categories of subject matter
outside the eligibility bounds of § 101—laws of nature,
physical phenomena, and abstract ideas. Bilski, 130 S.
Ct. at 3225. Indeed, laws of nature and physical
phenomena cannot be invented.              Abstractness,
however, has presented a different set of interpretive
problems, particularly for the § 101 “process” category.
Actually, the term “process” has a statutory definition
that, again, admits of no express subject matter
limitation: a title 35 “process” is a “process, art or
method, and includes a new use of a known process,
machine, manufacture, composition of matter, or
material.” 35 U.S.C. § 100(b). Indeed, the Supreme
Court recently examined this definition and found 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
legislature has not expressed.” Id. at 3226 (quoting
Diamond v. Diehr, 450 U.S. 175, 182 (1981)). And this
court detects no limitations or conditions on subject
matter eligibility expressed in statutory language. See,
                           7a

e.g., Ass’n for Molecular Pathology v. U.S. Patent &
Trademark Office, No. 2010-1406, 2011 WL 3211513, at
*14 (Fed. Cir. July 29, 2011) (patent-ineligible
categories of subject matter are “judicially created
exceptions”); Prometheus Labs., Inc. v. Mayo
Collaborative Servs., 628 F.3d 1347, 1353 (Fed. Cir.
2010), cert. granted, 130 S.Ct. 3543 (2010) (patent-
ineligible categories are “not compelled by the
statutory text”); see also Bilski, 130 S. Ct. at 3225
(Supreme Court acknowledging that judge-created
“exceptions are not required by the statutory text”).
    In an effort to grapple with the non-statutory
“abstractness” limit, this court at one point set forth a
machine-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 questions posed by the machine-or-
transformation test. Section 101’s terms suggest that
new technologies may call for new inquiries.”).
                          8a

Technology without anchors in physical structures and
mechanical steps simply defy easy classification 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
transgressing the public domain.” Id. at 3228.
    Both 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. 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. In sum, § 101 is a “dynamic
provision designed to encompass new and unforeseen
inventions.” J.E.M. Ag Supply, Inc. v. Pioneer Hi-
Bred Int’l, Inc., 534 U.S. 124, 135 (2001). With this in
mind, this court does “not presume to define ‘abstract’
beyond the recognition that this disqualifying
characteristic should exhibit itself so manifestly as to
override the broad statutory categories of eligible
subject matter and the statutory context that directs
primary attention on the patentability criteria of the
rest of the Patent Act.” Research Corp., 627 F.3d at
868.
    Although abstract principles are not eligible for
patent protection, an application of an abstract idea
may well be deserving of patent protection. See Diehr,
450 U.S. at 187 (“an application of a law of nature or
                           9a

mathematical formula to a known structure or process
may well be deserving of patent protection”); Parker v.
Flook, 437 U.S. 584, 591 (1978) (“While a scientific
truth, or the mathematical expression of it, is not a
patentable invention, a novel and useful structure
created with the aid of knowledge of scientific truth
may be.”). The application of an abstract idea to a “new
and useful end” is the type of invention that the
Supreme Court has described as deserving of patent
protection. Gottschalk v. Benson, 409 U.S. 63, 67
(1972). After all, unlike the Copyright Act which
divides idea from expression, the Patent Act covers
and protects any new and useful technical advance,
including applied ideas.
    Turning to the ’545 patent, the claimed invention is
a method for monetizing and distributing copyrighted
products over the Internet. As a method, it satisfies
§ 100’s definition of “process” and thus falls within a
§ 101 category of patent-eligible subject matter. Thus,
this court focuses its inquiry on the abstractness of the
subject matter claimed by the ’545 patent.
    “[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.”
Research Corp., 627 F.3d at 869. The ’545 patent seeks
to remedy problems with prior art banner advertising,
such as declining click-through rates, by introducing a
method of product distribution that forces consumers
to view and possibly even interact with advertisements
before permitting access to the desired media product.
’545 patent col.2 ll.14-18. By its terms, the claimed
invention purports to improve existing technology in
the marketplace. By its terms, the claimed invention
                          10a

invokes computers and applications of computer
technology. Of course, the patentability of the ’545
patent, though acknowledged by the U.S. Patent
Office, would still need to withstand challenges that the
claimed invention does not advance technology
(novelty), does not advance technology sufficiently to
warrant patent protection (obviousness), or does not
sufficiently enable, describe, and disclose the limits of
the invention (adequate disclosure).
    Returning to the subject matter of the ’545 patent,
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 advertising can serve as currency.
Instead the ’545 patent discloses a practical application
of this idea. The ’545 patent claims a particular method
for monetizing copyrighted 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
advertising, (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. Many of these steps are likely to require
intricate and complex computer programming. In
                          11a

addition, certain of these steps clearly require specific
application to the Internet and 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 must
be “restricted”—step four—by complex computer
programming as well. Viewing the subject matter as a
whole, the invention involves an extensive computer
interface. 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 find
the claims here to be patent-eligible, in part because of
these factors.
    In this context, this court examines as well the
contention 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 the en banc case
of In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994). At that
time, this court observed that “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.” Id. at 1545.
As computer scientists understand:
    the inventor can describe the invention in terms
    of a dedicated circuit or a process that emulates
                           12a

    that circuit. Indeed, the line of demarcation
    between a dedicated circuit and a computer
    algorithm accomplishing the identical task is
    frequently blurred and is becoming increasingly
    so as the technology develops. In this field, a
    software process is often interchangeable with a
    hardware circuit.
Id. at 1583 (J. Rader, 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 efficiently, in terms of the programming that
facilitates a unique function. The digital computer may
be considered by some the greatest invention of the
twentieth century, and both this court and the Patent
Office have long acknowledged that “improvements
thereof” through inter-changeable 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 endeavor.
    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 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.
                          13a

    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 instrument or machinery is used to effect
    that object, 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 should not be used to
invalidate patents based on concerns about vagueness,
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 section 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
mathematical 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., No. 2009-
1358, 2011 WL 3584472, at *3 (Fed. Cir. Aug. 16, 2011).
The eligibility exclusion for purely mental steps is
particularly narrow. See Prometheus Labs., 628 F.3d
                           14a

at 1358 (noting that claims must be considered as a
whole and that “the presence of mental steps [in a
claim] does not detract from the patentability of [other]
steps”). Unlike the claims in CyberSource, the claims
here require, among other things, controlled
interaction with a consumer via an Internet website,
something far removed from purely mental steps.
    In sum, as a practical application of the general
concept 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. Accordingly, 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
                             15a

       UNITED STATES DISTRICT COURT
      CENTRAL DISTRICT OF CALIFORNIA

          CIVIL MINUTES – GENERAL
Case No. CV 09-06918 RGK (PLAx) Date August 13,
2010
Title ULTRAMERCIAL, LLC et al. v. HULU,
LLC, et al.


Present: The       R. GARY KLAUSNER, U.S.
Honorable          DISTRICT JUDGE

    Sharon L. Williams                 Not Reported
      Deputy Clerk               Court Reporter/Recorder
  Attorneys Present for            Attorneys Present for
       Plaintiffs:                     Defendants:
      Not Present                      Not Present

Proceedings:      (IN    CHAMBERS)           Order   re:
Defendants’ Motion to Dismiss (DE 26 and 29)
I.      INTRODUCTION
     This is a patent infringement suit brought by
Plaintiff Ultramercial, LLC (“Plaintiff”) against
Defendants Hulu, LLC and Wildtangent, Inc.
(collectively, “Defendants”) for alleged infringement of
U.S. Patent No. 7,346,545 (the ‘545 patent).1 Because
the Court finds that the ‘545 patent does not cover

    1 The Complaint originally named Youtube, LLC, as the third
defendant. The parties, however, have already stipulated to
Youtube, LLC’s dismissal.
                          16a

patentable subject matter, it GRANTS Wildtangent,
Inc.’s Motion to Dismiss (DE 29). Hulu, LLC’s Motion
to Dismiss (DE 26) is DENIED as moot.
II.    BACKGROUND
    The ‘545 patent claims an invention for distributing
copyrighted products over the Internet (or other
networks). In particular, the ‘545 patent discloses a
method for allowing Internet users to view copyrighted
material free of charge in exchange for watching
certain advertisements. A computer or a server acts as
a gateway between the Internet user and the
copyrighted material. An advertisement sponsor may
purchase advertising space for a particular copyrighted
material (a television show episode for example). Upon
attempting to stream a “free” television show episode,
for example, the Internet user will be presented with
advertisement. The user cannot view the copyrighted
material until the ad is fully displayed. The result is
that the viewer gets to watch what he wants for free,
and the sponsor gets to deliver its advertisement to the
intended audience.
    The two independent claims of the ‘545 patent are
claims 1 and 8. Claim 1, in its entirety, discloses a
number of steps that comprise the process of
displaying advertisement in exchange for access to
copyrighted media. The steps are 1) receiving media
from content provider, 2) selecting an ad after
consulting an activity log to determine how many times
the ad has been played and how many more times it
need be played, 3) offering media products on the
Internet, 4) restricting general public access to the
media, 5) offering various media to customers for free
in exchange for their watching the selected ad, 6)
receiving a request to view the media from the
                          17a

Internet user, 7) facilitating the display of the ad, 8)
allowing the Internet user access to the media, 9) same
as 8 but for interactive media, 10) recording the
transaction in the activity log, and 11) receiving
payment from sponsor for the ad.
    The second independent claim (claim 8) is almost
identical to claim 1. The differences between the two
independent claims are not material for the purpose of
this Order. The remaining (dependent) claims add
more “steps” to those in the independent claims. For
example, claim 2 discloses “the step of paying royalties
to the content provider.” Claim 3 discloses “the step of
entering into a licensing agreement with the owner of
the intellectual property.” Claim 4 discloses “the step
of barring the content provider from pretending to be a
customer” [to make sure the content provider cannot
artificially inflate the view count]. Claim 5 discloses
“the step of tendering payment to the content
provider.” Claim 6 discloses “the step of issuing [] a
password” to the Internet user.” Claim 7 discloses “the
step of verifying a submitted password.” And so on.
III. JUDICIAL STANDARD
    A party may move to dismiss for failure to state a
claim upon which relief can be granted under Federal
Rule of Civil Procedure 12(b)(6). Fed. R. Civ. P.
12(b)(6). In deciding a Rule 12(b)(6) motion, the Court
must assume that the plaintiff’s allegations are true
and construe the complaint in the light most favorable
to the non-moving party. Cahill v. Liberty Mut. Ins.
Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Dismissal is
appropriate only where the complaint lacks a
cognizable legal theory or sufficient facts to support a
cognizable legal theory. Mendiondo v. Centinela Hosp.
Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). “While a
                           18a

complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s
obligation to provide the ‘grounds’ of his ‘entitlement to
relief’ requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action
will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007) (quoting Papasan v. Allain, 478 U.S.
265, 286 (1986)). The court need not accept as true
unreasonable inferences, unwarranted deductions of
fact, or conclusory legal allegations cast in the form of
factual allegations. W. Mining Council v. Watt, 643
F.2d 618, 624 (9th Cir. 1981).
IV. DISCUSSION
     Under the Patent Act of 1952, subject matter
patentability is a threshold requirement. 35 U.S.C
§ 101. “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, subject to the conditions
and requirements of this title.” Id. Recently in Bilski
v. Kappos, __ U.S. __, 130 S.Ct. 3218, 3225 (2010), the
Supreme Court emphasized again that excluded from
the patentable subject matter are “laws of nature,
natural phenomena, and abstract ideas.”
     Here, Defendants argue that Plaintiff’s ‘545 patent
does not disclose patentable subject matter. Originally,
this Motion was filed before the Supreme Court handed
down the decision in Bilski, 130 S.Ct. at 3218. In order
to benefit from the Supreme Court’s guidance on the
law regarding patentable subject matter and because
of similarities between the case at hand and Bilski, this
Court stayed the case until the Supreme Court issued
its opinion. Thereafter the parties filed supplemental
briefings, in which they each provide their account of
                          19a

how the Supreme Court’s decision helps their case.
After having reviewed the filings and the relevant case
law in full, this Court finds that the ‘545 patent does
not disclose patentable subject matter. Not only does
the patent fail the machine or transformation test, it
claims an abstract idea.          Therefore, Plaintiff’s
Complaint should be dismissed.
    A. The ‘545 Patent Does Not Satisfy the
        Machine or Transformation Test
    In In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), the
Federal Circuit held that a process is not patentable
unless it is “tied to a particular machine,” or
“transforms an article.” The en banc decision produced
various concurring and dissenting opinions, all of which
need not be discussed here. It suffices to mention that
the so called “machine or transformation test,”
according to the majority, was the sole test for
patentability of processes, including business method
and software patents. Id. And since the invention at
issue in Bilski—a method for hedging investments—
did not meet the test, it was held to be invalid. Id.
    On Supreme Court review, all Justice agreed that
the Bilski patent was not covered by patentable
subject matter. 130 S.t at 3218. How one gets to that
conclusion, however, the Justices did not agree. The
majority opinion thought it too broad to categorically
invalidate all patents that do not meet the machine or
transformation test. Id. at 3226. The machine or
transformation test, according to the Supreme Court,
provided a “useful and important clue,” but it was not
determinative in all situations. Id. at 3227. Instead,
the inquiry should be whether the claimed invention is
a “law of nature, physical phenomena,” or an “abstract
idea[].” Id. at 3226. Yet the Supreme Court did not
                          20a

offer an example of an invention that would not be tied
to a machine or transform an article and still pass the
subject matter test. The Court stopped at holding that
the Bilski patent disclosed an abstract idea—the idea
of hedging investments—and therefore, regardless of
the machine or transformation test, it was invalid. Id.
at 3230-31.
    It is important to note, however, that even after the
Supreme Court’s decision in Bilski, the machine or
transformation test appears to have a major screening
function—albeit       not     perfect—that     separates
unpatentable ideas from patentable ones. Indeed, four
of the Justices, listed on Justice Stevens’s concurring
opinion, would have taken the machine or
transformation test to its logical limit to hold that
business methods are categorically unpatentable. Id.
at 3257 (Stevens, J., concurring). Joining a concurring
opinion, Justice Scalia, who signed on to parts of the
plurality opinion as well, would not hold all business
methods unpatentable, but would agree with Justice
Breyer that “not [] many patentable processes lie
beyond [the] reach [of the machine or transformation
test].” Id. at 3258 (Breyer, J., concurring). In sum, at
least five (and maybe all) Justices seem to agree that
the machine or transformation test should retain much
of its utility after the Supreme Court’s decision in
Bilski.     Therefore, even though the machine or
transformation is no longer the litmus test for
patentability, the Court will use it here as a key
indicator of patentability.
    Turning to the mechanics of the test itself, the
Court notes that not every patent that recites a
machine or transformation of an article passes the
machine or transformation test. Bilski, 545 F.3d at
961. A mere recitation of a machine or transformation
                              21a

in the claim will not suffice because “[i]nsignificant
postsolution activity will not transform an
unpatentable principle into a patentable process.” Id.
The machine or transformation “must impose
meaningful limits on the claim’s scope to impart patent-
eligibility.” Id. (citation omitted). Below, the Court
finds that the ‘545 patent does not satisfy the machine
or transformation test.
      1. The ‘545 Patent Is Not Tied to a Machine
    A machine is a “concrete thing, consisting of parts
or of certain devices and combination of devices.” In re
Ferguson, 558 F.3d 1359, 1364 (Fed. Cir. 2009).2 Yet,
physical steps are not needed to allow a process claim
to be patentable. In re Bilski, 545 F.3d at 961. As long
as the invention is tied to a machine or transforms an
article, it may be patentable notwithstanding its lack of
physical steps. Id.
    The two independent claims of the ‘545 patent
recite the steps of exchanging media for advertisement
viewing. There are only three points in the ‘545 patent
that the parties have identified as a possible reference
to a machine.        The first two (“facilitator” and
“Internet”) appear in the independent claims (1 and 8):
“A method for distribution of products over the
Internet via a facilitator.” The third appears in
dependent claim 16: “The method . . . wherein media
product accessed by the consumer is downloaded to a
memory of a personal computer of the consumer.” The


    2 It was undisputed in Bilski that the machine part of the
machine or transformation test was not satisfied. 545 F.3d at 962.
Therefore, Bilski does not provide much guidance on how to apply
the machine prong of the test.
                           22a

Court finds that none of the three satisfy the machine
prong of the test.
    Despite Plaintiff’s argument, the “facilitator”
recitation does not meet the machine requirement.
First, there is no reason to read “facilitator” as a
machine such as a computer. Indeed, the patent
specification suggests the contrary: the schematics in
the patent specification depict the facilitator as a
person. Moreover, the ‘545 patent explains that the
facilitator may “communicate through . . . telephony,
facsimile, courier, mail or even person-to-person
meeting.” The specification makes it clear, therefore,
that the ‘545 patent is not aimed at a computer-specific
application; it is a broad claim to the concept of
exchanging media for advertisement viewing.
    Neither does the “Internet” recitation save the
patent. First, this Court agrees with the District
Court in the Northern District of California that held
the Internet is not a machine. CyberSource Corp. v.
Retail Decisions, Inc., 620 F. Supp. 2d 1068 (N.D. Cal.
2009) (“[T]he Internet is an abstraction.” “One can
touch a computer or a network cable, but one cannot
touch ‘the internet.’”). In CyberSource, the court held
that methods for “detecting fraud in credit card
transaction between consumer and merchant over the
Internet were not tied to a specific machine.” Id. at
1077-78 (emphasis added). This Court agrees in full
with the court’s reasoning in CyberSource to the effect
that the “over the Internet” recitation does not make
an otherwise unpatentable idea patentable. Id.
    Finally, the mere act of storing media on computer
memory does not tie the ‘545 invention to a machine in
any meaningful way. Since Plaintiff does not argue this
point, the Court will not address it in detail. It suffices
                              23a

to say, however, that the argument would have been
too farfetched and hence futile.
    Plaintiff makes two counter arguments that need be
addressed. First, Plaintiff points to many steps in the
‘545 patent that, according to Plaintiff, address
computer-specific functions (such as issuing and
verifying passwords, transmitting an ad until it is
timed out, making content physically available to the
consumer, etc.). (Pl. Opp., at 16.) Second, Plaintiff
argues that the segments of the patent specification
quoted here only says that “some communication [may]
take place without a programmed machine (e.g.,
communication between a IP rights holder and
interposed sponsor),” but “all communication between
the consumer and facilitator take place utilizing a
specifically-programmed computer.”3 (Pl. Opp., at
17:25-18:15.) In sum, Plaintiff argues that the ‘545
patent is computer-specific and not a broad invention
that may be performed by a person. As a result,



   3 The preferred embodiment specification states in pertinent
part,
    In accordance with the preferred embodiment, four principals
    are preferably present: a facilitator, a consumer, an
    intellectual property (IP) rights holder, and an interposed
    sponsor. All of the principals preferably communicate over a
    telecommunications network such as the Internet, using their
    respective computers: facilitator’s computer, consumer’s
    computer, IP rights holder’s computer 30A and interposed
    sponsor’s computer. Three of the principals (facilitator, IP
    rights holder and interposed sponsor) may also communicate
    through a twoway communications path, which may include
    telephony, facsimile, courier, mail or even person-to-person
    meetings.
                               24a

Plaintiff suggests that the ‘545 patent meets the
machine prong of the test.
    Plaintiff’s argument is unavailing. There is nothing
inherently computer-specific about receiving media
from a content provider, choosing a sponsor for the
media, selecting an ad for the sponsor, verifying the
viewer’s activity, assigning passwords, charging the
sponsor for the advertisement, or any of the remaining
steps.
    Yet Plaintiff is perhaps still correct to point out that
the only useful application of Plaintiff’s invention is
with relation to the Internet, where the facilitator is a
specifically “programmed computer.”4 That does not
mean, however, that the patent claims are limited to
use on a computer, or, more importantly, that they are
tied to one. That the disclosed invention is only used on
computers or computer networks cannot alone satisfy
the machine test without rendering the test completely
toothless.5 As already stated above, the machine must
limit the invention in a meaningful way. One cannot
circumvent the patentability test by merely limiting
the use of the invention to a computer. The binary
representation, one of the most fundamental concepts

    4 The “programmed computer” argument has its origin in In
re Alappat, 33 F.3d 1526 (Fed. Cir. 1994). That decision
articulated the “useful, concrete, and tangible result” test for
patentable subject matter, which was subsequently abrogated by
the Federal Circuit in Bilski 545 F.3d at 959-60.
    5 The Court is aware that software patents or other method
patents that involve programmed computers have never been
categorically rejected under the patentable subject matter test.
Gottschalk v. Benson, 409 U.S. 63, 71 (1972) (declining to hold that
all patents for any “program servicing a computer” are invalid
under § 101).
                           25a

that has enabled digital computation as we know it
today was not patentable, even though its utility was
linked to “general-purpose digital computers.”
Gottschalk v. Benson, 409 U.S. 63, 64 (1972). Similarly
in the case of the ‘545 patent, the concept of
advertisement-media-exchange does not become
patentable simply because the patentee claims to have
limited its application to the Internet or computers.
Therefore, the ‘545 patent fails the machine test.
      2. The ‘545 Patent Does Not Transform an
          Article
    There can be little dispute that the ‘545 patent does
not transform an article.          “Transformation and
reduction of an article ‘to a different state or thing’ is
the clue to the patentability of a process claim that
does not include particular machines.” Id. at 70. None
of the patent claims disclose a transformation. Plaintiff
points to claim 16, which recites, “The method . . .
wherein media product accessed by the consumer is
downloaded to a memory of a personal computer of the
consumer.” Yet the mere transfer of data from one
memory disk on one computer to another memory
space in a second computer is not “transformation of
article” under § 101. And the parties have not pointed
out a case that held otherwise. That is not surprising:
the nature of the computer memory does not vary
based on what is stored in it. And even if storing
content on a computer memory constituted
transforming an article, Plaintiff’s argument would still
fail because such “transformation” is merely incidental
to the ‘545 patent claims. What Plaintiff claims is the
process of trading viewing of the advertisements for
free access to media.        That the media may be
transferred from one computer (or server) to another is
merely incidental. Cf. Diamond v. Diehr, 450 U.S. 175
                          26a

(1981) (holding that the method of using temperature
readings from a rubber press and inputting the reading
in a well-known mathematical formula to determine
accurately the cure-time was patentable because the
process was meaningfully limited to transformation of
an article). Unlike in Diehr, the ‘545 patent does not
disclose a method for transforming an article, or the
transformation disclosed is not a meaningful limitation
to the claimed invention.               Therefore, the
transformation prong of the test is also not satisfied.
    B. The ‘545 Patent Discloses an Abstract Idea
    In Bilski, the Supreme Court held that a method
for hedging investments was an abstract idea and
hence unpatentable. 130 S.Ct. at 3218. Claim 1 of the
Bilski patent simply disclosed a number of steps in a
particular hedging method: 1) trading commodity with
a buyer at a price based on historical averages and the
buyer’s risk position, 2) finding buyers that have
another type of risk position that counters the first
buyer in step one, and 3) transacting with the second
consumer in a way to balance (hedge) the risk of the
transaction. Id. at 3223-24. The patent then went on to
disclose the application of this method in trading
energy commodities. Id. at 3224.
    In rejecting the patent, the Supreme Court first
noted that “hedging is a fundamental economic
practice.” Id. at 3231. Therefore, the core of the patent
was not patentable because “allowing petitioners to
patent risk hedging would pre-empt use of this
approach in all fields.” Id. Moreover, the remaining
recitations did not rescue the patent because they were
only “broad examples of how hedging can be used in
commodities and energy markets.” Id. Since the core
of the patent was an abstract idea, and the additional
                                27a

limitations did not meaningfully contain the claimed
invention, the Bilski invention was not patentable.
     The case at hand is very similar. At the core of the
‘545 patent is the basic idea that one can use
advertisement as an exchange or currency.             An
Internet user can pay for copyrighted media by sitting
through a sponsored message instead of paying money
to download the media. This core principle, similar to
the core of the Bilski patent, is an abstract idea.
Indeed, public television channels have used the same
basic idea for years to provide free (or offset the cost
of) media to their viewers.6 At its heart, therefore, the
patent does no more than disclose an abstract idea.
     Also similar to the patent in Bilski, the added
features, examples, or limitations of the ‘545 patent do
not make it patentable.            That the exchange
(advertisement for media) is carried over the Internet,
through a facilitator, using passwords and activity logs,
does not limit the patent in a meaningful way. The
patent still discloses an abstract idea garnished with
accessories.     If the claimed invention here were
patentable, it would “preempt use of this [method] in
all fields.” Id.
     Two points need be made clear at the end. One is
that the Court rejects Plaintiff’s argument that this
Motion should not be decided before claim construction.
While the Court (and the parties) consulted the claims


   6 The Court is cognizant of the difference between patentable
subject matter and obviousness requirements. The point made
here is that the core of the disclosed invention is an abstract
principle similar to the hedging principle in Bilski; lack of novelty
is not the (intended) message. Although the invention here may
obvious, that determination is not before the Court.
                           28a

and the specification, there is no need to formally
construe any of the claims. The patent terms are clear,
and Plaintiff has not brought to the Court’s attention
any reasonable construction that would bring the
patent within patentable subject matter. Moreover,
given the lack of clarity in this area of patent law, it is
perhaps even more appropriate for this Court to
render its decision at the earliest stage so that the
parties may benefit from the Federal Circuit’s
guidance on the issue sooner rather than later, if they
so desire.
    Second, the Court acknowledges that this case calls
for the difficult task of deciphering whether the ‘545
invention falls under the Bilski or Diehr categories. In
both, the claimed invention discloses a real-world
application of a mathematical formula. In both, a well-
known or basic principle is linked to its practical use.
Yet in one (Diehr), the invention is patentable; in the
other (Bilski), not. In deciding which one of the two
categories the ‘545 patent fits, the Court consulted the
machine or transformation test. The Court also noted
that the similarities between the ‘545 patent and the
Bilski patent point toward invalidity. Finally, the
Court noted that the additional limitations beyond the
abstract idea at the core of the ‘545 patent do not limit
the claimed invention in a meaningful way. Therefore,
the Court holds that the ‘545 patent does not cover
patentable subject matter.
                       29a

V.      CONCLUSION
    The Court GRANTS Wildtangent, Inc.’s Motion to
Dismiss (DE 29). Hulu, LLC’s Motion to Dismiss (DE
26) is DENIED as moot.
    IT IS SO ORDERED.
                                          :
            Initials of Preparer slw
                               30a

       UNITED STATES COURT OF APPEALS
          FOR THE FEDERAL CIRCUIT

                           2010-1544

  ULTRAMERCIAL, LLC and ULTRAMERCIAL,
                          INC.,
                            Plaintiffs-Appellants,
                            v.
                     HULU, LLC,
                            Defendant,
                           and
               WILDTANGENT, INC.,
                            Defendant-Appellee.
Appeal from the United States District Court for the
Central District of California in case no. 09-CV-6918,
Judge R. Gary Klausner.
                        ORDER
   A petition for rehearing en banc having been filed
by the Appellee,* and the matter having first been
referred as a petition for rehearing to the panel that
heard the appeal, and thereafter the petition for
rehearing en banc having been referred to the circuit
judges who are in regular active service,
   UPON CONSIDERATION THEREOF, it is
   ORDERED that the petition for rehearing be, and
the same hereby is, DENIED and it is further


    * The court granted Electronic Frontier Foundation, et al.
leave to file a brief amici curiae in support of Appellee’s petition
for rehearing en banc.
                          31a

    ORDERED that the petition for rehearing en banc
be, and the same hereby is, DENIED.
    The mandate of the court will issue on November
28, 2011.
    Circuit Judge Moore did not participate in the vote.


                           FOR THE COURT,
                           s/Jan Horbaly /LB
                           Jan Horbaly
                           Clerk

   Dated: 11/18/2011

   cc: Lawrence M. Hadley
       Darin W. Snyder, Gregory G. Garre
       Julie Samuels
                                 [File stamp omitted]

   ULTRAMERCIAL V HULU, 2010-1544
   (DCT - 09-CV-6918)
                         32a

                   35 U.S.C. § 100

§ 100. Definitions
   When used in this title unless the context otherwise
indicates—
                         ***
  (b) The term “process” means process, art or
method, and includes a new use of a known process,
machine, manufacture, composition of matter, or
material.
                         ***
                         33a

                   35 U.S.C. § 101

§ 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, subject to the conditions
and requirements of this title.

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:3367
posted:3/10/2012
language:English
pages:69