A patent on watching ads online? No problem, says top patent court

Patent used to sue video sites lives on despite skepticism from Supreme Court.

Jon Brodkin – Jun 24, 2013 5:50 PM | 108

Last year, the Supreme Court ordered the US Court of Appeals for the Federal Circuit to reconsider the validity of a patent that broadly covers the concept of Internet users watching advertisements in exchange for accessing copyrighted content.

US patent 7,346,545, titled "Method and system for payment of intellectual property royalties by interposed sponsor on behalf of consumer over a telecommunications network," was granted to a company called Ultramercial and used to sue Hulu, YouTube, and a gaming company called WildTangent. Hulu and YouTube were dismissed from the case, while WildTangent had to fight on. WildTangent challenged Ultramercial's "invention" as being too abstract to qualify for patent protection, and the company won a ruling from US District Court in Central California dismissing the patent lawsuit.

The appeals court reversed the district court decision and remanded the case to that court. But the Supreme Court vacated the appeals court ruling, saying the online ad patent should be re-examined in light of a previous Supreme Court decision, which invalidated a patent that broadly covered a method for determining the proper dose of a drug used to treat autoimmune disorders. So the question of whether the patent was valid went to the appeals court again.

In a decision Friday (PDF), the appeals court recognized that the Ultramercial patent doesn't specify a mechanism for implementing the ad system—but still refused to invalidate the patent on the grounds that it is too abstract. "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, e-mail, or real-time streaming)," the court wrote. "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."

The court further reasoned that "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."

The decision once again remands the case to US District Court in Central California. The district court "erred in holding that the subject matter of the ’545 patent is not a 'process' within the language and meaning" of patent law, the appeals court wrote.

The decision was written by Court of Appeals Chief Judge Randall Rader, who recently co-wrote a New York Times op-ed arguing that the US should "Make patent trolls pay in court." Despite that sentiment, his ruling could make it easier for patent trolls to sue using patents covering broad ideas instead of specific inventions.

The decision hinged on Section 101 of US patent law. According to the Electronic Frontier Foundation (EFF), which blasted the appeals court ruling and urged the Supreme Court to step in again, Section 101 is generally interpreted to mean that "laws of nature, natural phenomena, and abstract ideas" cannot be patented. The appeals court did not offer any opinions on whether the Ultramercial patent is valid under Section 102 (which requires that inventions be novel), Section 103 (which requires non-obvious subject matter), or Section 112 (which requires a written description of the invention and the manner and process of making and using it).

While those sections still leave room to challenge the validity of patents such as Ultramercial's, overturning patents would be easier and cheaper if courts were more willing to invalidate patents on the grounds that they describe abstract concepts.

The Electronic Frontier Foundation started fighting against the Ultramercial patent in 2011, filing a brief with the appeals court stating that "[m]erely filing a patent application covering an idea that takes place on the Internet (especially without explaining any of the programming steps) does not somehow make an abstract idea (which is unpatentable) somehow not abstract (so it is patentable)."

In its reaction to the ruling Friday, the EFF said, "It's time for the Supreme Court to step in and tell the Federal Circuit once and for all that abstract ideas—such as a process for viewing ads before accessing copyrighted content—are unpatentable."