Every now and then, we take time from our primary function – entertaining our readers – to write about something of legal significance. This is one such instance.
Since the Supreme Court handed down its decision in the Bilski case, side-stepping the issue everyone hoped they would resolve, a question has remained as to what is the proper test for statutory subject matter. They did repeat that “laws of nature, physical phenomena and abstract ideas” are not patentable subject matter; but what, exactly, does that mean? Well, a recent case from California may shed some light on the subject. (Ultramercial, LLC et al. v. Hulu LLC, et al.)
Ultramercial sued Hulu, alleging infringement of a patent directed to a method of distributing copyrighted materials over the internet. In essence, a user can only download the copyrighted material after having viewed an advertisement posted by a sponsor. The user cannot view the copyrighted material until after the advertisement has been fully displayed. Hulu moved to dismiss the case, on the grounds that the claimed invention was not statutory subject matter for a patent. In a brief (7 pages) but surprisingly lucid opinion, the Court agreed.
First, the Court noted that “even after the Supreme Court’s decision … the machine or transformation test (MORT) appears to have a major screening function – albeit not perfect – that separates unpatentable ideas from patentable ones. Indeed, four of the Justices … would have taken the machine or transformation test to its logical limit to hold that business methods are categorically unpatentable.” Although “the Supreme Court did not 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 … at least five (and maybe all) Justices seem to agree that the machine or transformation test should retain much of its utility … [t]herefore, 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.”
Having disposed of the indecisiveness of the Supreme Court and returned us to the clear test established by the wise judges of the C.A.F.C., the trial judge went on to decide that the claimed invention was not tied to a machine.
The Court began by holding that a “mere recitation of a machine or transformation in the claim will not suffice because ‘insignificant postsolution activity will not transform an unpatentable principle into a patentable process’ … [t]he machine or transformation ‘must impose meaningful limits on the claim’s scope to impart patent-eligibility’.” It then found that, “[t]he specification makes it clear … that the … patent is not aimed at a computer-specific application; it is a broad claim to the concept of exchanging media for advertisement viewing.”
Although the patent claims recited use of the internet, the Court quickly disposed of this point, citing precedent that “the internet is not a machine … recitation [of the internet] does not make an otherwise unpatentable idea patentable.” Similarly, “the mere act of storing media on computer memory does not tie the … invention to a machine in a meaningful way.”
In its brief, Ultramercial had argued that several steps in the claimed process involved computer-specific functions, such as issuing and verifying passwords, transmitting an advertisement until it timed out and making content physically available to the user. In a highly illustrative portion of its decision, the Court found this argument 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.”
The Court went on, “[t]hat the disclosed invention is only used on computers or computer networks cannot alone satisfy the machine test without rendering the test completely toothless … 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.”
Having disposed of the argument that the patented invention was a machine, the Court next concluded that it did not effect a “transformation.” “[T]he mere transfer of data from one memory disk, on one computer to another memory space in a second computer is not ‘transformation of an article’” and, even if it were, Ultramercial’s “argument would still fail because such ‘transformation is merely incidental to the … patent claims’. What [Ultramercial] claims is the process of trading viewing of the advertisements for free access to media.”
So, what was the invention? The Court held that it was an abstract idea. Comparing the invention to the Bilski invention, the Court found them “very similar. At the core of the [subject] patent is the basic idea that one can use advertisement as an exchange or currency.”
While we still don’t know what business methods are patentable, the trial judge in California has given us the clearest indication to date of what is not patentable; and the test is still “machine or transformation.”
I'm glad the court ruled the way it did. This seems to be exactly the kind of so-called "business method" patent that is nothing more than a means of "organizing human behavior," which is not patent-eligible. Vague though Bilski may have been, at least it drew a clear enough line that the courts should no longer be tied up with patent litigation over non-inventions such as this one.