The Federal Circuit recently applied Alice Corp. v. CLS Bank to invalidate all claims of a patented method for advertising over the Internet in Ultramercial, Inc. v. Hulu, LLC (Fed. Cir. November 14, 2014). Like the Supreme Court’s Alice decision, Ultramercial provides little guidance for identifying patent-eligible subject matter and only provides examples of subject matter failing to meet the statutory threshold for patent eligibility.

The patent at issue in Ultramercial was US Patent 7,346,545 (‘545 Patent). The court, relying on the framework set forth in Alice, applied a two-step analysis to find the claims of the ‘545 Patent invalid.

First, the court determined whether the claims were directed to a patent-ineligible concept, specifically an abstract idea. The court explained that the recited ordered combination of eleven steps had no particular concrete or tangible form. Although particular limitations were found to add “a degree of particularity,” the subject matter of the claim was still abstract as a “majority of the limitations” were held to describe only the abstract idea of showing an advertisement before delivering free content.

Second, having found the claims directed to an abstract idea, the court determined whether the claims “do significantly more” than simply describe the abstraction. The court found that the limitations of the claims comprised only conventional steps specified at a high level of generality that “add nothing of practical significance to the underlying abstract idea” and were insufficient to supply an inventive concept.

Like many of the recent decisions concerning patent eligibility, Ultramercial does not provide explicit guidance in defining patent-eligible subject matter, but does provide examples of patent-ineligible subject matter. These include routine steps such as updating an activity log, requiring a request from the consumer to view the ad, and restrictions on public access. Reciting use of the Internet is also not sufficient to transform an abstract idea into patent-eligible subject matter.

On a deeper look, the holding seems to suggest that patent-eligibility is somewhat defined by the “thrust” of a claim. For example, in each step of the Alice analysis, the court focuses on those limitations directly pertaining to the identified claimed idea, and is relatively dismissive of other “additional limitations.” Until a clearer standard emerges, patent applicants may consider claiming additional detail such that the “high level[s] of generality” leading to abstract characterizations may be avoided.

Moreover, although the court recognized the claims as including novel or non-routine components, the court also recognized that the claims are directed to a previously known advertising practice in combination with a technological environment. Prior to Alice, these claims, and others like them, may have been scrutinized with respect to obviousness instead of patent-eligibility. It may be that courts now look to utilize patent-eligibility as a more efficient means to dispose of potentially weak patents. As stated in Judge Mayer’s concurring opinion, patent-eligibility “is the primal inquiry, one that must be addressed at the outset of litigation.”

In the concurring opinion, Judge Mayer additionally asserts that the claims of the ‘545 Patent are patent-ineligible as the innovative concept of the claimed invention is entrepreneurial, not technological. Because generic computers and the Internet are “indispensable staples of contemporary life,” Judge Mayer argues, use of the same is not sufficient to satisfy the statutory patent-eligibility threshold. While not controlling, these comments may potentially indicate a developing trend toward heightened scrutiny of patent-eligibility in both the United States Patent and Trademark Office and the courts.

While Ultramercial is yet another decision resulting in patent invalidation, the Federal Circuit “do[es] not purport to state that all claims in software-based patents will necessarily be directed to an abstract idea. Future cases may turn out differently.” Software innovators and those that support software innovation remain anxious to learn what software-based patents the Federal Circuit views as patent-eligible.

Dorsey Partners Stuart Hemphill and Thomas Vitt provided valuable insights in the preparation of this eUpdate.