In 2011, the Federal Circuit reversed a district court dismissal at the pleading stage of a patent infringement claim for failure to state a claim. The district court held that the claims of the patent were not directed to patentable subject matter. The Supreme Court entered a GVR order (Grant-Vacate-Remand) and sent the case back to the Federal Circuit for reconsideration. Upon reconsideration, the Federal Circuit again reversed the dismissal by the district court. Ultramercial, Inc. v. Hulu, LLC.
The panel, per Chief Judge Rader, held that dismissal for ineligible subject matter at the pleading stage, prior to any discovery or factual development of the case, was particularly inappropriate. Invalidity of a patent must be proven by clear and convincing evidence. In ruling on a motion to dismiss, the court is to take the well-pleaded facts of the non-movant as being true. There must be no plausible reading of the claims that would result in their being upheld.
The legal determination of patentable subject matter includes underlying factual issues. For example, if the moving party suggests that the claims are an abstract concept, are they actually tied to a specific application of the concept?
Finally, while not always required, the panel suggests that cases should not be dismissed on such grounds prior to a claim construction determination by the court. This is especially true given any underlying factual disputes (is this a foreshadowing of the dispute or result in Lightning Ballast?).
The court then performed a similar analysis to its earlier decision in the case, while also reviewing it in light of Mayo v. Prometheus.
The court provided some guidance on assessing these types of claims:
When assessing the abstract idea exception, the § 101 inquiry is a two-step one: first, whether the claim involves an intangible abstract idea; and if so, whether meaningful limitations in the claim make it clear that the claim is not to the abstract idea itself, but to a nonroutine and specific application of that idea.
Against this backdrop, the court focused on the use of specifically programmed computers and the internet to perform the method that requires 10 specific steps. The patent claims “a practical application of the general concept of advertising as currency and an improvement to prior art technology,” and does not claim merely an abstract concept.
Judge Lourie concurred in the court’s result, but wrote separately to caution that the panel should closely follow Mayo v. Prometheus and the plurality opinion in CLS Bank. The court must determine whether the claims would preempt and abstract idea. In this case, he focused on the additional limitations to the claims to determine that the claim does not preempt the abstract idea of using advertising as an exchange or currency. Thus, he would also find the claims in this case to be patent eligible.