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11 Step Computer Method Patent Defines Patent Eligible Subject Matter

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The Federal Circuit Court of Appeals (“Federal Circuit”) reversed the trial court’s decision that the process – a computer method claim – was not statutory subject matter under 35 U.S.C. § 101. Ultramercial, LLC v. Hulu, LLC, Case No. 2010-1544 (Fed. Cir. Sept. 15, 2011) (available here). The 11 step computer program method patent claim was held to be a machine under the “machine or transformation” (MOT) test. Earlier, the District Court had dismissed the patent owner’s case without formally construing the 11 elements in the method patent claim and this failure to properly construe the claim elements in a Markman ruling was a factor in the reversal.

“This court has never set forth a bright line rule requiring district courts to construe claims before determining subject matter eligibility. Indeed, because eligibility is a ‘coarse’ gauge of the suitability of broad subject matter categories for patent protection, Research Corp. Techs., Inc. v. Microsoft Corp., 627 F.3d 859, 869 (Fed. Cir. 2010), claim construction may not always be necessary for a § 101 analysis. See, e.g., Bilski v. Kappos, 130 S. Ct. 3218, 3231 (2010) (finding subject matter ineligible for patent protection without claim construction).” Slip opn. p. 5.

The § 101 subject matter eligibility analysis is merely a threshold check. Claim patentability ultimately depends on “the statutory conditions the patent statute such as novelty, nonobviousness, and adequate disclosure.” See Ultramercial, p. 6; Classen Immunotherapies, Inc. v. Biogen IDEC, Nos. 2006-1634, 2006-1649, 2011 WL 3835409, at *6 (Fed. Cir. Aug. 31, 2011) (pointing out the difference between “the threshold inquiry of patent-eligibility, and the substantive conditions of patentability”).

Per the Federal Circuit, the claimed invention in this case was a method for monetizing and distributing copyrighted products over the Internet. “As a method, it satisfies § 100’s definition of ‘process’ and thus falls within a § 101 category of patent-eligible subject matter. Thus, this court focuses its inquiry on the abstractness of the subject matter claimed by the ’545 patent.” p. 9.

“‘[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.’ Research Corp., 627 F.3d at 869. The ’545 patent [in suit] seeks to remedy problems with prior art banner advertising, such as declining clickthrough rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product. By its terms, the claimed invention purports to improve existing technology in the marketplace. By its terms, the claimed invention invokes computers and applications of computer technology.” P. 9-10 (emphasis added).

The ’545 patent claims a particular method for monetizing copyrighted products, consisting of the following steps: (1) receiving media products from a copyright holder, (2) selecting an advertisement to be associated with each media product, (3) providing said media products for sale on an Internet website, (4) restricting general public access to the media products, (5) offering free access to said media products on the condition that the consumer view the advertising, (6) receiving a request from a consumer to view the advertising, (7) facilitating the display of advertising and any required interaction with the advertising, (8) allowing the consumer access to the associated media product after such display and interaction, if any, (9) recording this transaction in an activity log, and (10) receiving payment from the advertiser. ’545 patent col.8 ll.5-48. Many of these steps are likely to require intricate and complex computer programming. In addition, certain of these steps clearly require specific application to the Internet and a cyber-market environment.

In conclusion, the many claim elements, which constitute the claimed process restrictions of: viewing, restricting, limiting access, displaying and processing payments, satisfy the “machine” portion of the “machine or transformation” (MOT) test.

Method Patent Claims: What Result with Multiple Party Performance

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The Federal Circuit Court of Appeals announced in April 2011 that it will consider en banc the following question: “If separate entities each perform separate steps of a method claim, under what circumstances would that claim be directly infringed and to what extent would each of the parties be liable?” Akamai Technologies, Inc. v. Limelight Networks, Inc., Fed. Cir., No. 2009-1372 (Ap. 21, 2011) (available here). The Federal Circuit will reconsider its earlier three judge panel decision of Akamai Tech. Inc. v. Limelight Networks, Inc., Case No. 2009-1372 (Fed. Cir. Dec. 20, 2010) (available here).

 It is well settled that direct infringement requires a single party to perform every step of a claimed method. BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 78-79 (Fed. Cir. 2007) (citing Warner-Jenkinson Co., Inc. v. Hilton Davis Corp., 520 U.S. 17, 40 (1997)). The trial court in Akamai overruled a jury verdict of $41M finding that defendant Limelight did not perform the “tagging” method step in the patent claim.

BMC Resources held that while “[i]nfringement requires, as it always has, a showing that a defendant has practiced each and every element of the claimed invention,” joint liability may be found when one party “control[s] or direct[s]” the activities of another party. BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 1380 (Fed. Cir. 2007). Later, the Court in Muniauction concluded that there can be no infringement unless “one party exercises ‘control or direction’ over the entire process such that every step is attributable to the controlling party.” Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) (citing BMC Resources, 498 F.3d at 1380-81). In assessing whether “control or direction” is present, the Court in BMC Resources made reference to the legal principle that imposed “vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party.” BMC Resources, 489 F.3d at 1379 (citing Engle v. Dinehart, 213 F.3d 639 (5th Cir. 2000) (unpublished decision); Restatement (Second) of Agency § 220 cmt. d).

Applying agency theories, the Federal Circuit in Akamai I found no control by Limelight over content providers which “tagged” their own content. Limelight only posted the tagged content on its website. “[P]erformance of a method step may be attributed to an accused infringer when the relationship between the accused infringer and another party performing a method step is that of principal and agent, applying generally accepted principles of the law of agency as explicated by the Supreme Court and the Restatement of Agency. The Restatement defines agency as the fiduciary relationship that arise when one person (a ‘principal’ manifests assent to another person (an ‘Agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act. Restatement (Third) of Agency § 1.01. For an agency relationship to exist, and thus, for infringement to be found, both parties must consent that the agent is acting on the principal’s behalf and subject to the principal’s control. See Dixon v. United States, 465 U.S. 482, 505 (1984) (citing the Restatement (Second) of Agency § 1 for the rule that an agency relationship [is] created when one person agrees with another that the other shall act on his behalf and subject to his control). Similarly, also implicit in the court’s holdings in BMC Resources and Muniauction, is that joint infringement occurs when a party is contractually obligated to the accused infringer to perform a method step”. Akamai I Slip Opn. pg. 13.

“An essential element of agency is the principal’s right to control the agent’s actions. Control is a concept that embraces a wide spectrum of meanings, but within any relationship of agency the principal initially states what the agent shall and shall not do, in specific or general terms.” Restatement (Third) of Agency § 1.01 cmt. f.; See Akamai I Slip Opn. pg. 15.

The claims 19 and 34 were, as always, critical in defining the Akamai’s rights. Claims 19 and 34 are reproduced below.

Claim 19. A content delivery service, comprising: replicating a set of page objects across a wide area network of content servers managed by a domain other than a content provider domain; for a given page normally served from the content provider domain, tagging the embedded objects of the page so that requests for the page objects resolve to the domain instead of the content provider domain; responsive to a request for the given page received at the content provider domain, serving the given page from the content provider domain; and serving at least one embedded object of the given page from a given content server in the domain instead of from the content provider domain. U.S. Patent No. 6108703 (the ‘703 patent) col.19 ll.6-20 (emphasis added).

Claim 34. A content delivery method, comprising: distributing a set of page objects across a network of content servers managed by a domain other than a content provider domain, wherein the network of content servers are organized into a set of regions; for a given page normally served from the content provider domain, tagging at least some of the embedded objects of the page so that requests for the objects resolve to the domain instead of the content provider domain; in response to a client request for an embedded object of the page: resolving the client request as a function of a location of the client machine making the request and current Internet traffic conditions to identify a given region; and returning to the client an IP address of a given one of the content servers within the given region that is likely to host the embedded object and that is not overloaded. ’703 patent col.20 ll.32-52 (emphasis added).

As stated earlier defendant Limelight did not “tag” content. Its customers tagged their own content.

 A good explanation of web based technology was provided by the Court in Akamai I as follows:

Information is typically delivered over the Internet from websites. Websites are collections of documents written using a standard page description language known as Hypertext Markup Language (“HTML”). Each web page is a separate HTML file with an identifying string of characters known as a Uniform Resource Locator (“URL”). Typically, a full URL (e.g., “http://www.cafc.uscourts.gov/forms”) consists of several elements: a protocol (e.g., “http://”); a domain name (also referred to herein as a “hostname”) (e.g., “www.cafc.uscourts.gov”); and sometimes a path (e.g., “/forms”). A typical web page consists of a base HTML document that includes text interspersed with various types of content such as images, video, and sound-referred to as objects. Most of these objects are not incorporated into the web page in their entirety, but instead are simply included as links, in the form of separate URLs, which reference the actual object stored elsewhere on the same computer or another computer in the same domain (a group of networked computers that share a common domain name). These objects are referred to in the patents as “embedded objects.” An embedded object’s URL is typically the same as that of the web page containing the embedded object, with the object’s name appended thereto (e.g., “http://www.cafc. uscourts.gov/forms/pic.jpg”). Akamai I Slip Opn. pg. 3.

The Internet maintains a Domain Name System (“DNS”), which uses computers, known as domain name servers (“DNS servers”), to convert the hostname of a URL into a numeric Internet Protocol (“IP”) address, which identifies one or more computers that store content (“content servers”). This conversion process is referred to as “resolving.” A user requesting a web page using a web browser (e.g., Netscape Navigator® or Microsoft Internet Explorer®) will receive an IP address from a local DNS server that corresponds to the content server for the requested web page. In response, the user’s computer sends a request for the web page directly to that content server using the IP address. The content server sends the requested web page-the base HTML document and any embedded objects’ URLs-to the user’s computer. The user’s web browser then requests each embedded object from the content provider’s server using that object’s URL in the same manner that it requested the web page until all of the objects have been retrieved and the web page is fully displayed on the user’s computer. Akamai I Slip Opn. pg. 4.

With the en banc rehearing order, the entire Federal Circuit bench will now review, comment on and clarify method claim infringement by multiple parties.

Senate Passes Historic Patent Reform Legislation

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The U.S. Senate has passed a sweeping revision of the U.S. Patent Statute, 35 U.S.C. §1, as S.23.  The bill passed 95-5 on March 8, 2001.  The following changes were made to the Patent Statute, many of which directly apply to computer-based, business method patents.

Third party submissions of prior art for pending applications;
USPTO fee setting authority;
Supplemental examination authority;
Repeal of the residency requirement for Federal Circuit judges;
Micro entity status for reduced fees;
Unpatentability of tax strategies as within the prior art;
Elimination of the best mode defense;
Creation of a special post-grant review for business method patents;
USPTO authority to establish satellite offices;
Creation of a USPTO ombudsman; and
USPTO authority to prioritize examination of inventions of national importance.

Other more controversial issues, such as injunctive relief, damages calculation and willful patent infringement, were dropped from the bill.  Most importantly, the bill permits the USPTO to use all funds it collects which will bring more fiscal stability to the agency.  In years past, the Congress would raid the USPTO funds to support other governmental programs.