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Surviving the Judicial War on Patents: Strategies after Alice and Ultramercial

Bruce D. Sunstein

Bruce D. Sunstein | Founder, Partner View more articles

Bruce is a member of our Litigation Practice Group, Patent Practice Group, Trademark Practice Group and Business Practice Group

On November 14, the Federal Circuit Court of Appeals rendered an unsettling decision in Ultramercial Inc. v. Hulu, Inc. The patent claims were directed to a method of distributing copyrighted media products over the Internet free to consumers. The consumer would be presented with an advertisement as well as the desired content and the advertiser would pay for the ad placement, thereby underwriting the consumer’s enjoyment of the copyrighted content.

The opinion was written by Judge Lourie, who is something of an expert on patent eligibility, since his opinion in the Federal Circuit’s decision in CLS Bank v. Alice Corp. formed the basis for the Supreme Court’s decision in Alice Corp. v. CLS Bank.

Alice is one of three recent cases in which the Supreme Court has run amok seeking to rein in the patent system. This unholy triad includes Mayo v. Prometheus, about which we wrote here and Ass’n for Molecular Pathology v. Myriad (our article here), as well as Alice Corp. v. CLS Bank (our article here). These cases make it possible to challenge any patent on the theory that what it covers is not, in fact, eligible to be protected by a patent. It does not matter that the patent has been approved and issued by the Patent and Trademark Office. Nor does the presumption of validity, which normally applies to patents, help much to protect a patent from assault based on ineligible subject matter.

Although these Supreme Court decisions relate to patents in the fields of diagnostics (Mayo), biotechnology (Myriad), and computer-related inventions (Alice), their logic can be used to invalidate any patent, as Ultramercial shows. Furthermore, this invalidation can be achieved without a trial and without the formal exercise of determining what the claims in the patent actually mean.

According to these cases, even though the subject matter claimed appears to fit within a category of items that the Patent Act says can be patented (in this case a process carried out by a computer), the claims are not eligible for patent protection if they are directed to laws of nature, natural phenomena, or abstract ideas.

The Supreme Court’s methodology for determining whether to apply one of these exceptions to patent eligibility (and therefore to invalidate a patent) involves two steps, summarized by Judge Lourie in Ultramercial as follows: “First, we determine whether the claims at issue are directed to one of those three patent-ineligible concepts. If not, the claims pass muster under § 101. Then, in the second step, if we determine that the claims at issue are directed to one of those patent-ineligible concepts, we must determine whether the claims contain ‘an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.’”[i]

Following this methodology, Judge Lourie states that the 11 steps— a large number of limitations in patent claim—recited in the claimed method recite an abstract idea. His rationale? “The process of receiving copyrighted media, selecting an ad, offering the media in exchange for watching the selected ad, displaying the ad, allowing the consumer access to the media, and receiving payment from the sponsor of the ad all describe an abstract idea, devoid of a concrete or tangible application.”[ii]

“How is the presence of an abstract idea determined?” the reader might ask. Judge Lourie does not say. However, in this respect, Judge Lourie is in good company, because the Supreme Court in Alice does not say either. However, what is unequivocally clear about the process is that determining whether an abstract idea is recited by the claim requires a generalization of the claim. The patent claim in Ultramercial was specific.[iii] In other words, to determine whether an abstract idea is recited by a claim, the claim is generalized, and then evaluated to determine whether an abstract idea is present in the generalization.

“With a so-called methodology such as this,” the reader might ask, “could not an abstract idea be found in any patent claim?” Precisely. The Supreme Court’s methodology is circular reasoning. The Supreme Court in Alice states that “we tread carefully in construing this exclusionary principle lest it swallow all of patent law. At some level, all inventions … embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.”[iv] Yet the circular reasoning in the first leg of its methodology shows that the Supreme Court is not treading carefully.

The Court’s methodology supposedly distinguishes “between patents that claim the building blocks of human ingenuity and those that integrate the building blocks into something more”.[v] The Supreme Court’s justification for its judge-made exclusion of subject matter from eligibility for a patent is that “laws of nature, natural phenomena, and abstract ideas are the basic tools of scientific and technological work. Monopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it, thereby thwarting the primary object of the patent laws.”[vi]

To this author, and to numbers of patent attorneys, this reasoning is specious. The scientific ideas and principles disclosed in patents are available to all, and patents, during the limited period of time when they are in force, restrict only making, using, and selling the particular subject matter that is defined in patent claims. Identifying the supposedly “abstract idea” that a patent claim supposedly encompasses by generalizing the claim and then invalidating the claim because of its abstract nature borders on ludicrous, since what the claim covers is not the generalization but rather only the particular configuration that is delimited by the claim.

Returning now to Judge Lourie’s dutiful following of the Supreme Court’s methodology, since he found an abstract idea to be recited by the claim, he turned to the second leg of the methodology, recounted as follows: “The second step in the analysis requires us to determine whether the claims do significantly more than simply describe that abstract method. We must examine the limitations of the claims to determine whether the claims contain an ‘inventive concept’ to ‘transform’ the claimed abstract idea into patent-eligible subject matter. The transformation of an abstract idea into patent-eligible subject matter requires more than simply stating the abstract idea while adding the words ‘apply it.’”

A claim that recites an abstract idea must include ‘additional features’ to ensure that the claim is more than a drafting effort designed to monopolize the abstract idea. Those ‘additional features’ must be more than ‘well-understood, routine, conventional activity.’”[vii]

In other words, the second leg of the methodology involves another generalization to identify an “inventive concept”. If there is only “‘well-understood, routine, conventional activity” in the claim beyond the generalized abstract idea resulting from the first let of the test, then the claim is deemed directed to an abstract idea and is not directed to eligible subject matter.

Judge Lourie concludes that “the limitations of the ’545 claims do not transform the abstract idea that they recite into patent-eligible subject matter because the claims simply instruct the practitioner to implement the abstract idea with routine, conventional activity. None of these eleven individual steps, viewed both individually and as an ordered combination, transform the nature of the claim into patent-eligible subject matter. The majority of those steps comprise the abstract concept of offering media content in exchange for viewing an advertisement. Adding routine additional steps such as updating an activity log, requiring a request from the consumer to view the ad, restrictions on public access, and use of the Internet does not transform an otherwise abstract idea into patent-eligible subject matter.”[viii]

Accordingly, the patent was deemed directed to subject matter that is not eligible to be patented, and the patent was invalidated.

However, this is not the first time Judge Lourie wrote an opinion in this case. In 2013, he wrote a concurring opinion in Ultramercial v. Hulu, agreeing with the majority that the patent claims were indeed patent-eligible subject matter. In that decision, Judge Lourie wrote that he believed the Federal Circuit, in evaluating patent eligibility, should follow the methodology he articulated in his opinion in CLS Bank v. Alice Corp, which, as mentioned above, formed the basis for the Supreme Court’s opinion in Alice Corp. v. CLS Bank.

Accordingly, in his 2013 Ultramercial opinion, Judge Lourie followed his two-step methodology. Under the first leg of the test, he finds that an abstract idea is recited in the claims. “The abstract idea at the heart of the ‘545 patent, which the district court properly identified, is using advertising as an exchange or currency.” Under the second leg of the test, however, he finds that there is “signicantly more” than the abstract idea itself. “The additional claim limitations reciting how that idea is implemented narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself.” Moreover, “unlike the method claims in CLS Bank, in my view, the added limitations in these claims represent significantly more than the underlying abstract idea of using advertising as an exchange or currency and, as a consequence, do not preempt the use of that idea in all fields.”

In other words, on June 21, 2013, when Judge Lourie applied the two-step methodology, the claims were patent eligible, and on November 14, 2014, when Judge Lourie applied the same two-step methodology, the same claims were not patent eligible. That an experienced jurist could change his mind applying the same legal test to the same facts provides important evidence of the deficiencies of the legal test and ultimately, of its subjectivity.

Judge Mayer’s concurring opinion in Ultramercial emphasized three points. First, he said that defenses based on ineligible subject matter should be addressed at the outset of a litigation. He advocated resolving the question of patent eligibility on the basis of only the pleadings. In his view, this summary disposition would protect the public against vexatious litigation and worthless patents.[ix] Second, he says that no presumption of patent eligibility should attend the section 101 inquiry.[x] Finally, Judge Mayer says that the Supreme Court’s decision in Alice, for all intents and purposes, sets out a “technological arts” test for patent eligibility (as opposed to a determination that the subject is fundamentally “entrepreneurial” in nature).[xi]

In other words, to protect against “vexatious litigation” and “worthless patents,” every litigation and every litigated patent will be subjected to the circular reasoning of Alice and Prometheus at the outset of litigation and before a full understanding of the patent claims has been developed. This Star Chamber inquiry will determine if an abstract idea, or law of nature, or natural phenomenon is recited in the claim as generalized by the court, and, if so, whether the remainder of the claim, as additionally generalized by the court, adds “substantially more” than the court’s initial generalization, disregarding steps in the claims that are deemed to be “routine, conventional activity”.

To this author, the cure posited by Judge Mayer is far worse than the disease, and in fact Judge Mayer’s position stakes out new turf that is not expressed in the methodology of the Supreme Court’s Alice decision. The Ultramercial decision makes every patent asserted in litigation subject to the risk of imminent invalidation for failure to recite patent-eligible subject matter. Furthermore, Alice is already cutting back the availability of patent protection in key industries. In prosecution of patent applications involving computer-related inventions and various classes of inventions in the life sciences, such as diagnostic methods, it is now the norm to receive rejections from the Patent and Trademark Office based on patent eligibility.

What can be done to respond to the current state of affairs? We focus first on prosecution of patents. Where it is possible to do so, it would be advantageous for a patent application to demonstrate that:

  • No business method is involved (since Alice and Ultramercial[xii] involved business methods)
  • The invention involves “technological arts” as opposed to an invention that is fundamentally “entrepreneurial” in nature.
    • In this respect, for computer-related inventions, one might argue, for example, that the claims define new paths for gathering, handling, or organizing data.
  • The invention performs a physical function and interacts with the physical world.[xiii]
  • The invention provides a novel user interface for achieving a result. A user interface is something that may well inherently involve a solution in the technological arts.
  • The procedures carried out by the invention are not routine and instead are new and nonobvious.

More generally, it should be borne in mind that the driving force behind Prometheus, Myriad, and Alice is the concern that the patent claim defines subject matter that would pre-empt the field and therefore tie up “the building blocks of human ingenuity.” Consequently, it should be argued that the claim in no way ties up the field, and that there are numerous methods by which one can carry out the purpose of the method that do not infringe the claims. A recitation of these non-infringing alternatives can provide concrete evidence in the record that there is no preemption.

In litigation, arguments similar to these can be made, although the challenge is that determinations of patent ineligibility can be made, as in Ultramercial, before an evidentiary record is developed. In general, a patent issuing from the Patent and Trademark Office after Alice and after Ultramercial should be in better condition than a patent issuing prior to those decisions, although there is still the risk of invalidation in court since Judge Mayer says there is no presumption of patent-eligible subject matter.

In the end, however, the gaping holes in the patent system created by Prometheus, Myriad, and Alice can likely be repaired only by legislation passed by Congress. The rash of poorly conceived Supreme Court opinions results in part from a backlash against perceived abuses of the patent system, abuses that could have been addressed in a manner less likely to stifle innovation in medical diagnosis, biotechnology and software.

In 1952, Congress reined in another Supreme Court doctrine – the “flash of genius” test—when it amended the patent act to overrule that judge-made law. It is time to do so again. I have been advocating a change to section 101 of the Patent Act that would add the following sentence:

Claimed subject matter, in any of these classes, that is useful shall not be denied eligibility for a patent on the ground that it is directed to a law of nature, natural phenomenon, or abstract idea, and shall be evaluated in accordance with the other provisions of this title.

Congress has the power to reject the recent unfortunate rulings of the Supreme Court. It should do so before too much additional harm is done to innovation.

[i] Slip opinion, pp. 7-8, quoting Alice, which in turn references Prometheus.

[ii] Slip opinion, p. 9.

[iii] See slip opinion, pp. 3-5: 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;

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.

[iv]Alice Corp. v. CLS Bank., 134 S.Ct. 234, 2354 (2014). Internal quotations, ellipses, brackets, and internal citations omitted for clarity in this and subsequent quotations.[v] Id.[vi] Id.[vii] Slip opinion, p. 10.[viii] Slip opinion, p. 11.[ix] Concurring opinion, pp. 1 and 4-5 (vexatious litigation and worthless patents); see majority opinion, p. 5 (decision on appeal from ruling on motion to dismiss for failure to state a cause of action).[x] Concurring opinion, pp. 1 and 7.[xi] Concurring opinion, pp. 1 and 9. Judge Mayer made similar remarks in a concurring opinion in an unpublished Federal Circuit decision, I/P Engine, Inc. v. AOL Inc., August 15, 2014.[xii] The author had previously suggested, in his article on Alice, that a long patent claim such as presented in Ultramercial would be useful, but the remarkable reversal of position by Judge Lourie in Ultramercial 2014 has mooted such an approach.[xiii] Such an approach corresponds to the notion in the law of the European Patent Office of a “technical effect”. See, for example, decision T 208/84 “VICOM”.

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