Third Time's A Charm: CAFC Finally Says You Can't Just Add 'On The Internet' And Get A Patent

from the took-'em-long-enough dept

It looks like the Ultramercial saga may finally be ending. As we’ve been covering for many years, Ultramercial held a patent (7,346,545) on watching an ad to get access to content, and it sued lots of companies. While a lower court rejected the patent, CAFC (the appeals court for the Federal Circuit, which handles all patent cases) overturned that ruling. The key issue: is something patentable if you take a common idea and just add “on the internet.” CAFC said yes. The Supreme Court asked CAFC to try again following its own ruling in the Mayo case (which said you couldn’t patent medical diagnostics). But CAFC still found the patent to be valid. Finally, earlier this year, following the Alice ruling, the Supreme Court gave CAFC a third try to get it right.

It seemed rather obvious to us that it was the Supreme Court saying, “Hey, would you reject this patent already?” and finally, CAFC got the message. On the third try, CAFC dumped the patent as invalid. More specifically, it goes all the way back to the original district court ruling, allowing the patent to be declared invalid on a motion to dismiss (i.e., before going through the massive expense of a big trial). This is very helpful, since it gives people sued for patents a path to success that won’t put them too deep in the hole financially. Traditionally, courts were reluctant to toss out patents that early in the process, and patent holders relied on that fact, knowing that the legal bills for anyone they sue will be astronomical, even on a bogus patent. Now, however, courts can toss out those patents much more quickly. CAFC says so. Check out the full ruling:

We conclude 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. See Alice, 134 S. Ct. at 2355 (quoting Mayo, 132 S. Ct. at 1297, 1298). 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. Instead, the claimed sequence of steps comprises only ?conventional steps, specified at a high level of generality,? which is insufficient to supply an ?inventive concept.?

There’s an even more interesting concurring opinion from Judge Haldane Mayer, that I kind of wish was the full opinion. It points out that patents that don’t “promote the progress” are unconstitutional.

The Constitution?s Intellectual Property Clause is at once a grant of power and a restriction on that power…. Unless we are to assume that the constraints explicit in the Intellectual Property Clause are mere surplusage, we are bound to ensure that the patent monopoly serves ?[t]o promote the Progress of Science and useful Arts,?… ?This is the standard expressed in the Constitution and it may not be ignored.?

Mayer’s ruling is the one that also clearly lays out why letting courts invalidate patents so early on is so important.

From a practical perspective, addressing section 101 at the outset of litigation will have a number of salutary effects. First, it will conserve scarce judicial resources. Failure to recite statutory subject matter is the sort of ?basic deficiency,? that can, and should, ?be exposed at the point of minimum expenditure of time and money by the parties and the court,?….

Second, resolving subject matter eligibility at the outset provides a bulwark against vexatious infringement suits. The scourge of meritless infringement claims has continued unabated for decades due, in no small measure, to the ease of asserting such claims and the enormous sums required to defend against them….

Finally, and most importantly, turning to section 101 at the outset protects the public. See Cardinal Chem., 508 U.S. at 101 (emphasizing the public interest in preventing the ?grant [of] monopoly privileges to the holders of invalid patents? (footnote omitted)). Subject matter eligibility challenges provide the most efficient and effective tool for clearing the patent thicket, weeding out those patents that stifle innovation and transgress the public domain. As a general matter, trial courts have broad discretion in controlling their dockets and in determining the order in which issues are to be adjudicated. But the public interest in eliminating defective patents is an ?even more important countervailing concern[],? Cardinal Chem., 508 U.S. at 99, which counsels strongly in favor of resolving subject matter eligibility at the threshold of litigation.

Furthermore, the opinion notes that courts should get away from simply presuming patents are valid:

Indeed, applying a presumption of eligibility is particularly unwarranted given that the expansionist approach to section 101 is predicated upon a misapprehension of the legislative history of the 1952 Patent Act. Those who support a ?coarse filter? approach to section 101 often argue that the Act?s legislative history demonstrates that Congress intended statutory subject matter to ?include anything under the sun that is made by man.? See, e.g., AT&T Corp. v. Excel Commc?ns, Inc., 172 F.3d 1352, 1355 (Fed. Cir. 1999). Read in context, however, the legislative history says no such thing. See Mayo, 132 S. Ct. at 1303?04. The full statement from the committee report reads: ?A person may have ?invented? a machine or a manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled.? H.R. Rep. No. 1923, 82d Cong., 2d Sess., at 6 (1952) (emphasis added). Thus, far from supporting an expansive approach to section 101, the relevant legislative history makes clear that while a person may have ?invented? something under the sun, it does not qualify for patent protection unless the Patent Act?s statutory requirements have been satisfied.

Good stuff all around… and very different from the CAFC of the past.

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Companies: alice, cls, ultramercial, wild tangent

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Comments on “Third Time's A Charm: CAFC Finally Says You Can't Just Add 'On The Internet' And Get A Patent”

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14 Comments
Anonymous Coward says:

Mayer did not issue a “ruling” (note your sentence that begins “Mayer’s ruling…”), a word that has the connotation of somehow controlling the outcome of a legal dispute. He wrote a concurring opinion (which you did note elsewhere), which is another way of saying he agreed with the outcome, but wanted to toss in some of his personal views. While they may make interesting reading that encourage some and discourage others, they have zero precedential value.

J says:

Re: Re: OMG NOOOOOOOO

It was already the case that big companies could steal from start-ups. If you are a start-up suing a big company then the big company can just file counter-suits using their massive patent portfolio (e.g. alleging the start-up was actually infringing THEIR patents, even if they weren’t infringing or if the patent was invalid) and keep things running for years, running the start-up into bankruptcy. Patents are a barrier to entry, so tech start-ups would have a much easier time if they could focus on making great products rather than trying to avoid inescapable legal minefields.

royleith (profile) says:

A gesture to the Law, the Constitution and Common Sense

At last the CAFC puts front an centre the law that says a patent is invalid if it fails to fall into the four classes of invention permitted by §101.

It also concedes what the Supreme Court has long impressed on them that there are judicial exclusions.

In O’Reilly V. Morse (Supreme Court 1853) the court said “The mere discovery of a new element, or law, or principle of nature, without any valuable application of it to the arts, is not the subject of a patent. But he who takes this new element or power, as yet useless, from the laboratory of the philosopher, and makes it the servant of man; who applies it to the perfecting of a new and useful art, or to the improvement of one already known, is the benefactor to whom the patent law tenders its protection.”

They intended ‘philosopher’ to encompass scientists, mathematicians, engineers, computer programmers, pharmacists, chemists etc. as we see in Bilski, Benson, Mayo, Flook, Diehr and so on.

“Those who cannot remember the past are condemned to repeat it.”

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