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`ULTRAMERCIAL, INC., AND ULTRAMERCIAL, LLC, Plaintiffs-Appellants, v.
`HULU, LLC, Defendant, AND WILDTANGENT, INC., Defendant-Appellee.
`
`2010-1544
`
`UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
`
`2013 U.S. App. LEXIS 12715; 107 U.S.P.Q.2D (BNA) 1193
`
`June 21, 2013, Decided
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`
`PRIOR HISTORY: [*1]
` Appeal from the United States District Court for the
`Central District of California in No. 09-CV-6918, Judge
`R.Gary Klausner.
`WildTangent, Inc. v. Ultramercial, LLC, 132 S. Ct. 2431,
`182 L. Ed. 2d 1059, 2012 U.S. LEXIS 3890 (U.S., 2012)
`Ultramercial, LLC v. Hulu, LLC, 413 Fed. Appx. 276,
`2011 U.S. App. LEXIS 5470 (Fed. Cir., 2011)
`
`CASE SUMMARY:
`
`
`PROCEDURAL POSTURE: The United States District
`Court for the Central District of California dismissed this
`patent suit by holding that the patent in suit did not claim
`patent-eligible subject matter under 35 U.S.C.S. § 101. In
`an earlier decision, the court reversed the district court's
`holding and remanded. On appeal to the Supreme Court,
`that decision was vacated and remanded.
`
`OVERVIEW: The patent claimed a method for distrib-
`uting copyrighted products (e.g., songs, movies, books)
`over the Internet where the consumer received a copy-
`righted product for free in exchange for viewing an ad-
`vertisement, and the advertiser paid for the copyrighted
`content. The district court held the asserted claim to be
`ineligible because it was abstract. On review, the court
`concluded that the patent did not simply claim the
`age-old idea that advertising could serve as currency.
`The claim did not cover the use of advertising as curren-
`cy disassociated with any specific application of that
`activity. Instead, the claim was a specific application of a
`method implemented by several computer systems, oper-
`ating in tandem, over a communications network. The
`patent here required, among other things, controlled in-
`teraction with a consumer over an Internet website,
`
`something far removed from purely mental steps. As a
`practical application of the general concept of advertising
`as currency and an improvement to prior art technology,
`the claimed invention was not so manifestly abstract as
`to override the statutory language of 35 U.S.C.S. § 101.
`
`OUTCOME: The court reversed the district court's dis-
`missal of the patentee's patent claims for lack of subject
`matter eligibility and remanded for further proceedings.
`
`LexisNexis(R) Headnotes
`
`
`
`Civil Procedure > Pleading & Practice > Defenses,
`Demurrers & Objections > Failures to State Claims
`Civil Procedure > Appeals > Standards of Review > De
`Novo Review
`Patent Law > Subject Matter > General Overview
`[HN1] The United States Court of Appeals for the Fed-
`eral Circuit reviews a district court's dismissal for failure
`to state a claim under the law of the regional circuit. The
`United States Court of Appeals for the Ninth Circuit re-
`views de novo challenges to a dismissal for failure to
`state a claim under Fed. R. Civ. P. 12(b)(6). The Federal
`Circuit also reviews the ultimate determination regarding
`patent-eligible subject matter under 35 U.S.C.S. § 101
`without deference.
`
`
`Civil Procedure > Pleading & Practice > Defenses,
`Demurrers & Objections > Failures to State Claims
`Patent Law > Infringement Actions > Defenses > Pa-
`tent Invalidity > Validity Presumption
`Patent Law > Subject Matter > General Overview
`
`

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`2013 U.S. App. LEXIS 12715, *; 107 U.S.P.Q.2D (BNA) 1193
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`Page 2
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`[HN2] It will be rare that a patent infringement suit can
`be dismissed at the pleading stage for lack of patentable
`subject matter. This is so because every issued patent is
`presumed to have been issued properly, absent clear and
`convincing evidence to the contrary. Further, if Fed. R.
`Civ. P. 12(b)(6) is used to assert an affirmative defense,
`dismissal is appropriate only if the well-pleaded factual
`allegations in the complaint, construed in the light most
`favorable to the plaintiff, suffice to establish the defense.
`Thus, the only plausible reading of the patent must be
`that there is clear and convincing evidence of ineligibil-
`ity. For those reasons, Rule 12(b)(6) dismissal for lack of
`eligible subject matter will be the exception, not the rule.
`
`
`Civil Procedure > Pleading & Practice > Defenses,
`Demurrers & Objections > Failures to State Claims
`Patent Law > Subject Matter > General Overview
`[HN3] The analysis under 35 U.S.C.S. § 101, while ulti-
`mately a legal determination, is rife with underlying fac-
`tual issues. For example, there is no doubt the § 101 in-
`quiry requires a search for limitations in the claims that
`narrow or tie the claims to specific applications of an
`otherwise abstract concept. Further, factual issues may
`underlie determining whether the patent embraces a sci-
`entific principle or abstract idea. If the question is
`whether genuine human contribution is required, and that
`requires more than a trivial appendix to the underlying
`abstract idea, and were not at the time of filing routine,
`well-understood, or conventional, factual inquiries likely
`abound. Almost by definition, analyzing whether some-
`thing was "conventional" or "routine" involves analyzing
`facts. Likewise, any inquiry into the scope of preemp-
`tion--how much of the field is "tied up" by the claim--by
`definition will involve historic facts: identifying the
`"field," the available alternatives, and preemptive impact
`of the claims in that field. The presence of factual issues
`coupled with the requirement for clear and convincing
`evidence normally will render dismissal under Fed. R.
`Civ. P. 12(b)(6) improper.
`
`
`Patent Law > Infringement Actions > Claim Interpreta-
`tion > General Overview
`Patent Law > Infringement Actions > Defenses > Pa-
`tent Invalidity > General Overview
`[HN4] The United States Court of Appeals for the Fed-
`eral Circuit 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, claim construction may
`not always be necessary for a 35 U.S.C.S. § 101 analysis.
`On the other hand, if there are factual disputes, claim
`construction should be required. The procedural posture
`
`of the case may indicate whether claim construction is
`required.
`
`
`Patent Law > Infringement Actions > Claim Interpreta-
`tion > General Overview
`Patent Law > Subject Matter > General Overview
`[HN5] The question of eligible subject matter under 35
`U.S.C.S. § 101 must be determined on a claim-by-claim
`basis. Construing every asserted claim and then con-
`ducting a § 101 analysis may not be a wise use of judi-
`cial resources.
`
`
`Patent Law > Subject Matter > General Overview
`[HN6] 35 U.S.C.S. § 101 controls the inquiry into pa-
`tentable subject matter. Section 101 sets forth the catego-
`ries of subject matter that are eligible for patent protec-
`tion: whoever invents or discovers any new and useful
`process, machine, manufacture, or composition of mat-
`ter, or any new and useful improvement thereof, may
`obtain a patent therefor, subject to the conditions and
`requirements of this title. Underscoring its breadth, § 101
`both uses expansive categories and modifies them with
`the word "any." In Bilski, the Supreme Court emphasized
`that in choosing such expansive terms modified by the
`comprehensive any, Congress plainly contemplated that
`the patent laws would be given wide scope.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN7] The pertinent, expansive definition of "process" in
`35 U.S.C.S. § 100(b) confirms the statute's intended
`breadth. Not only did Congress expand the definition of
`"process" in 1952, Title 35 does not list a single ineligi-
`ble category. At a time when Congress considered 35
`U.S.C.S. § 101, it broadened the statute and certainly did
`not place any specific limits on it.
`
`
`Patent Law > Subject Matter > General Overview
`[HN8] The limited role of 35 U.S.C.S. § 101 even in pa-
`tentability is confirmed by other aspects of the Patent
`Act. As § 101 itself expresses, subject matter eligibility
`is merely a threshold check; patentability of a claim ul-
`timately depends on the conditions and requirements of
`title 35, such as novelty, non-obviousness, and adequate
`disclosure. 35 U.S.C.S. § 101. By directing attention to
`the substantive criteria for patentability, Congress made
`it clear that the categories of patent-eligible subject mat-
`ter are no more than a coarse eligibility filter. In other
`words, Congress made it clear that the expansive catego-
`ries--process, machine, article of manufacture, and com-
`position of matter--are not substitutes for the substantive
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`2013 U.S. App. LEXIS 12715, *; 107 U.S.P.Q.2D (BNA) 1193
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`Page 3
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`patentability requirements set forth in 35 U.S.C.S. §§
`102, 103, and 112 and invoked expressly by § 101 itself.
`After all, the purpose of the Patent Act is to encourage
`innovation, and the use of broadly inclusive categories of
`statutory subject matter ensures that ingenuity receives a
`liberal encouragement. The plain language of the statute
`provides that any new, non-obvious, and fully disclosed
`technical advance is eligible for protection.
`
`
`Patent Law > Subject Matter > General Overview
`[HN9] In line with the broadly permissive nature of 35
`U.S.C.S. § 101's subject matter eligibility principles and
`the structure of the Patent Act, case law has recognized
`only three narrow categories of subject matter outside the
`eligibility bounds of § 101--laws of nature, physical
`phenomena, and abstract ideas. The Supreme Court's
`motivation for recognizing exceptions to this broad stat-
`utory grant was its desire to prevent the "monopoliza-
`tion" of the basic tools of scientific and technological
`work, which might tend to impede innovation more than
`it would tend to promote it. Though recognizing these
`exceptions, the Court has also recognized that these im-
`plied exceptions are in obvious tension with the plain
`language of the statute, its history, and its purpose. As
`the Supreme Court has made clear, too broad an inter-
`pretation of these exclusions from the grant in § 101
`could eviscerate patent law.
`
`
`Patent Law > Subject Matter > General Overview
`[HN10] The United States Court of Appeals for the Fed-
`eral Circuit must not read 35 U.S.C.S. § 101 so restric-
`tively as to exclude unanticipated inventions because the
`most beneficial inventions are often unforeseeable.
`Broad inclusivity is the Congressional goal of § 101, not
`a flaw.
`
`
`Patent Law > Subject Matter > General Overview
`[HN11] Because patent eligibility requires assessing ju-
`dicially recognized exceptions against a broad and delib-
`erately expanded statutory grant, one of the principles
`that must guide an eligibility inquiry is the exceptions
`should apply narrowly. Indeed, the Supreme Court has
`cautioned that, to avoid improper restraints on statutory
`language, acknowledged exceptions thereto must be rare.
`
`
`Patent Law > Infringement Actions > Defenses > Pa-
`tent Invalidity > Validity Presumption
`Patent Law > Subject Matter > General Overview
`[HN12] The presumption of proper issuance applies to a
`granted patent. As a practical matter, because judicially
`acknowledged exceptions could eviscerate the statute,
`
`application of this presumption and its attendant eviden-
`tiary burden is consistent with the Supreme Court's ad-
`monition to cabin exceptions to 35 U.S.C.S. § 101. Fur-
`ther, applying the presumption is consistent with patent
`office practice. Before issuing a patent, the Patent Office
`rejects claims if they are drawn to ineligible subject mat-
`ter, just as it rejects claims if not compliant with 35
`U.S.C.S. §§ 102, 103, or 112. With one exception, the
`Supreme Court's decisions since 1952 have addressed the
`propriety of those decisions. Thus, when a patent issues,
`it does so after the Patent Office assesses and endorses
`its eligibility under § 101, just as it assesses and endorses
`its patentability under the other provisions of Title 35.
`
`
`Evidence > Procedural Considerations > Burdens of
`Proof > Clear & Convincing Proof
`Patent Law > Subject Matter > General Overview
`[HN13] A high level of proof applies to patent eligibility
`as it does to the separate patentability determinations.
`Accordingly, any attack on an issued patent based on a
`challenge to the eligibility of the subject matter must be
`proven by clear and convincing evidence.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN14] Defining "abstractness" has presented difficult
`problems, particularly for the 35 U.S.C.S. § 101 "pro-
`cess" category. Clearly, a process need not use a com-
`puter, or some machine, in order to avoid "abstractness."
`In this regard, the Supreme Court recently examined the
`statute and found that the ordinary, contemporary, com-
`mon meaning of "method" may include even methods of
`doing business. Accordingly, the Court refused to deem
`business methods ineligible for patent protection and
`cautioned against reading into the patent laws limitations
`and conditions which the legislature has not expressed.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN15] The Supreme Court has rejected using a ma-
`chine-or-transformation test as the exclusive metric for
`determining the subject matter eligibility of processes,
`noting that the machine-or-transformation test is simply a
`useful and important clue, an investigative tool, for de-
`termining whether some claimed inventions are process-
`es under 35 U.S.C.S. § 101 and is not the sole test for
`deciding whether an invention is a patent-eligible pro-
`cess. While machine-or-transformation logic served well
`as a tool to evaluate the subject matter of Industrial Age
`processes, that test has far less application to the inven-
`tions of the Information Age. Technology without an-
`chors in physical structures and mechanical steps simply
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`ma-
`the
`under
`classification
`easy
`defy
`the Supreme
`chine-or-transformation categories. As
`Court suggests, mechanically applying that physical test
`risks obscuring the larger object of securing patents for
`valuable inventions without transgressing the public do-
`main.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN16] Members of both the Supreme Court and the
`United States Court of Appeals for the Federal Circuit
`have recognized the difficulty of providing a precise
`formula or definition for the abstract concept of ab-
`stractness. Because technology is ever-changing and
`evolves in unforeseeable ways, substantial weight is
`given to the statutory reluctance to list any new,
`non-obvious, and fully disclosed subject matter as be-
`yond the reach of Title 35.
`
`
`Patent Law > Subject Matter > General Overview
`[HN17] A patent claim can embrace an abstract idea and
`still be patentable. A claim is not patent eligible only if,
`instead of claiming an application of an abstract idea, the
`claim is instead the abstract idea itself. The inquiry is to
`determine on which side of the line the claim falls: does
`the claim cover only an abstract idea, or instead does the
`claim cover an application of an abstract idea?
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN18] In determining the eligibility of a claimed pro-
`cess for patent protection under 35 U.S.C.S. § 101, the
`claims must be considered as a whole. It is inappropriate
`to dissect the claims into old and new elements and then
`to ignore the presence of the old elements in the analysis.
`This is particularly true in a process claim because a new
`combination of steps in a process may be patentable even
`though all the constituents of the combination were well
`known and in common use before the combination was
`made.
`
`
`Patent Law > Subject Matter > General Overview
`[HN19] It has long been recognized that any patent claim
`can be stripped down, simplified, generalized, or para-
`phrased to remove all of its concrete limitations, until at
`its core, something that could be characterized as an ab-
`stract idea is revealed. A court cannot go hunting for
`abstractions by ignoring the concrete, palpable, tangible
`limitations of the invention the patentee actually claims.
`Instead, the relevant inquiry is whether a claim, as a
`whole, includes meaningful limitations restricting it to an
`
`application, rather than merely an abstract idea. For these
`reasons, a claim may be premised on an abstract idea
`and, indeed, the abstract idea may be of central im-
`portance to the invention--the question for patent eligi-
`bility is whether the claim contains limitations that
`meaningfully tie that abstract idea to an actual applica-
`tion of that idea through meaningful limitations.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN20] The Supreme Court has stated that a patent claim
`is not meaningfully limited if it merely describes an ab-
`stract idea or simply adds "apply it." If a claim covers all
`practical applications of an abstract idea, it is not mean-
`ingfully limited. For example, allowing petitioners to
`patent risk hedging would pre-empt use of this approach
`in all fields, and would effectively grant a monopoly
`over an abstract idea. While this concept is frequently
`referred to as "pre-emption," it is important to remember
`that all patents "pre-empt" some future innovation in the
`sense that they preclude others from commercializing the
`invention without the patentee's permission. Pre-emption
`is only a subject matter eligibility problem when a claim
`pre-empts all practical uses of an abstract idea.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN21] When the steps of the patent claim must be taken
`in order to apply the abstract idea in question, the claim
`is essentially no different from saying apply the abstract
`idea. It is not the breadth or narrowness of the abstract
`idea that is relevant, but whether the claim covers every
`practical application of that abstract idea.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN22] Even if a patent claim does not wholly pre-empt
`an abstract idea, it still will not be limited meaningfully
`if it contains only insignificant or token pre- or
`post-solution activity--such as identifying a relevant au-
`dience, a category of use, field of use, or technological
`environment. These may involve factual inquiries.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN23] The Supreme Court has stated that a patent claim
`is not meaningfully limited if its purported limitations
`provide no real direction, cover all possible ways to
`achieve the provided result, or are overly-generalized.
`Just as the Supreme Court has indicated when a claim
`likely should not be deemed meaningfully limited, it has
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`also given examples of meaningful limitations which
`likely remove claims from the scope of the Court's judi-
`cially created exceptions to 35 U.S.C.S. § 101. Thus, a
`claim is meaningfully limited if it requires a particular
`machine implementing a process or a particular trans-
`formation of matter. A claim also will be limited mean-
`ingfully when, in addition to the abstract idea, the claim
`recites added limitations which are essential to the inven-
`tion. In those instances, the added limitations do more
`than recite pre- or post-solution activity, they are central
`to the solution itself. And, in such circumstances, the
`abstract idea is not wholly pre-empted; it is only
`preempted when practiced in conjunction with the other
`necessary elements of the claimed invention.
`
`
`Patent Law > Subject Matter > General Overview
`[HN24] In specifying what the scope of the abstract idea
`exception to patent eligibility is, it is also important to
`specify what the analysis is not. Principles of patent eli-
`gibility must not be conflated with those of validity. The
`Supreme Court repeatedly has cautioned against conflat-
`ing the analysis of the conditions of patentability in the
`Patent Act with inquiries into patent eligibility. Because
`a new combination of old steps is patentable, as is a new
`process using an old machine or composition, subject
`matter eligibility must exist even if it was obvious to use
`the old steps with the new machine or composition. Oth-
`erwise the eligibility analysis ignores the text of 35
`U.S.C.S. §§ 101 and 100(b), and reads 35 U.S.C.S. § 103
`out of the Patent Act.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN25] The Supreme Court's reference to "inventive-
`ness" in Prometheus can be read as shorthand for its in-
`quiry into whether implementing the abstract idea in the
`context of the claimed invention inherently requires the
`recited steps. Thus, in Prometheus, the Supreme Court
`recognized that the additional steps were those that any-
`one wanting to use the natural law would necessarily use.
`If, to implement the abstract concept, one must perform
`the additional step, or the step is a routine and conven-
`tional aspect of the abstract idea, then the step merely
`separately restates an element of the abstract idea, and
`thus does not further limit the abstract concept to a prac-
`tical application.
`
`
`Patent Law > Subject Matter > Processes > Computer
`Software & Mental Steps
`[HN26] When assessing computer implemented claims,
`while the mere reference to a general purpose computer
`will not save a method claim from being deemed too
`
`abstract to be patent eligible, the fact that a claim is lim-
`ited by a tie to a computer is an important indication of
`patent eligibility. This tie to a machine moves it farther
`away from a claim to the abstract idea itself. Moreover,
`that same tie makes it less likely that the claims will
`pre-empt all practical applications of the idea. This in-
`quiry focuses on whether the claims tie the otherwise
`abstract idea to a specific way of doing something with a
`computer, or a specific computer for doing something; if
`so, they likely will be patent eligible. On the other hand,
`claims directed to nothing more than the idea of doing
`that thing on a computer are likely to face larger prob-
`lems. While no particular type of limitation is necessary,
`meaningful limitations may include the computer being
`part of the solution, being integral to the performance of
`the method, or containing an improvement in computer
`technology. A special purpose computer, i.e., a new ma-
`chine, specially designed to implement a process may be
`sufficient.
`
`
`Patent Law > Subject Matter > Processes > Computer
`Software & Mental Steps
`[HN27] Where a patent claim is tied to a computer in a
`specific way, such that the computer plays a meaningful
`role in the performance of the claimed invention, it is as
`a matter of fact not likely to pre-empt virtually all uses of
`an underlying abstract idea, leaving the invention patent
`eligible. Inventions with specific applications or im-
`provements to technologies in the marketplace are not
`likely to be so abstract that they override the statutory
`language and framework of the Patent Act.
`
`
`Civil Procedure > Pleading & Practice > Defenses,
`Demurrers & Objections > Failures to State Claims
`Patent Law > Subject Matter > Processes > New Uses
`[HN28] With respect to a motion under Fed. R. Civ. P.
`12(b)(6) claiming a patent involved ineligible subject
`matter, the complaint and the patent must by themselves
`show clear and convincing evidence that the claim is not
`directed to an application of an abstract idea, but to a
`disembodied abstract idea itself. After all, unlike the
`Copyright Act which divides ideas from expression, the
`Patent Act, 35 U.S.C.S. § 101 et seq., covers and protects
`any new and useful technical advance, including applied
`ideas.
`
`
`Patent Law > Subject Matter > Processes > General
`Overview
`[HN29] When assessing the abstract idea exception, the
`35 U.S.C.S. § 101 inquiry is a two-step one: first, wheth-
`er the claim involves an intangible abstract idea; and if
`so, whether meaningful limitations in the claim make it
`
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`clear that the claim is not to the abstract idea itself, but to
`a non-routine and specific application of that idea.
`
`
`Patent Law > Subject Matter > Processes > Computer
`Software & Mental Steps
`[HN30] Programming creates a new machine because a
`general purpose computer in effect becomes a special
`purpose computer once it is programmed to perform par-
`ticular functions pursuant to instructions from program
`software.
`
`
`Patent Law > Claims & Specifications > General Over-
`view
`Patent Law > Subject Matter > General Overview
`[HN31] Written description and enablement are condi-
`tions for patentability that Title 35 sets wholly apart from
`whether the invention falls into a category of statutory
`subject matter. The coarse eligibility filter of 35 U.S.C.S.
`§ 101 is not the statutory tool to address concerns about
`vagueness, indefinite disclosure, or lack of enablement,
`as these infirmities are expressly addressed by 35
`U.S.C.S. § 112.
`
`COUNSEL: LAWRENCE M. HADLEY, Hennigan,
`Bennett & Dorman LLP, of Los Angeles, California,
`argued for plaintiffs-appellants. With him on the brief
`were HAZIM ANSARI and MIEKE K. MALMBERG.
`
`GREGORY G. GARRE, Latham & Watkins, LLP, of
`Washington, DC, argued for defendant-appellee. On the
`brief were RICHARD G. FRENKEL and LISA K.
`NGUYEN, of Palo Alto, California. Of counsel were
`RICHARD P. BRESS, GABRIEL BELL and KATHE-
`RINE TWOMEY, of Washington, DC.
`
`JUDGES: Before RADER, Chief Judge, LOURIE, and
`O'MALLEY, Circuit Judges. Opinion for the court filed
`by Chief Judge RADER. Concurring opinion filed by
`Circuit Judge LOURIE.
`
`OPINION BY: RADER
`
`OPINION
`RADER, Chief Judge.
`The United States District Court for the Central Dis-
`trict of California dismissed this patent suit, filed by Ul-
`tramercial, LLC and Ultramercial, Inc. (collectively,
`that U.S. Patent No.
`"Ultramercial"), by holding
`7,346,545 ("the
`'545 patent") does not claim pa-
`tent-eligible subject matter. In an earlier decision, later
`vacated by the United States Supreme Court, this court
`reversed the district court's holding and remanded. Ul-
`
`tramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir.
`2011), [*2] vacated sub nom. WildTangent, Inc. v. Ul-
`tramercial, LLC, 132 S.Ct. 2431, 182 L. Ed. 2d 1059
`(2012). Because this court again holds that the district
`court erred in holding that the subject matter of the '545
`patent is not a "process" within the language and mean-
`ing of 35 U.S.C. § 101, this court again reverses and re-
`mands.
`
`I.
`
`The '545 patent claims a method for distributing
`copyrighted products (e.g., songs, movies, books) over
`the Internet where the consumer receives a copyrighted
`product for free in exchange for viewing an advertise-
`ment, and the advertiser pays for the copyrighted con-
`tent. Claim 1 of the '545 patent reads:
`
`
` 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 pur-
`chase, wherein each said
`media product being com-
`prised of at least one of
`text data, music data, and
`video data;
`a second step of se-
`lecting a sponsor message
`to be associated with the
`media product, said spon-
`sor message being selected
`from a plurality of sponsor
`messages, said second step
`including accessing an ac-
`tivity log to [*3] verify
`that the total number of
`times which the sponsor
`message has been previ-
`ously presented is less than
`the number of transaction
`cycles contracted by the
`sponsor of
`the sponsor
`message;
`a third step of provid-
`ing the media product for
`sale at an Internet website;
`
`

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`2013 U.S. App. LEXIS 12715, *; 107 U.S.P.Q.2D (BNA) 1193
`
`Page 7
`
`a fourth step of re-
`stricting general public ac-
`cess 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 spon-
`sor message;
`a sixth step of receiv-
`ing from the consumer a
`request to view the sponsor
`message, wherein the con-
`sumer submits said request
`in response to being of-
`fered 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, al-
`lowing said consumer ac-
`cess to said media product
`after said step of facilitat-
`ing the display of said
`sponsor message;
`a ninth step of, if the
`sponsor message is an in-
`teractive message, pre-
`senting at least one query
`to the consumer and al-
`lowing said consumer ac-
`cess to said media product
`after receiving a response
`[*4] to said at least one
`query;
`a tenth step of record-
`ing 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 re-
`ceiving payment from the
`
`the sponsor
`sponsor of
`message displayed.
`
`
`
`
`
`
`
`'545 patent col. 8, ll. 5-48.
`Ultramercial sued Hulu, LLC ("Hulu"), YouTube,
`LLC ("YouTube"), and WildTangent, Inc. ("WildTan-
`gent"), alleging infringement of the '545 patent. Hulu
`and YouTube have been dismissed from the case.
`WildTangent moved to dismiss for failure to state a
`claim, arguing that the '545 patent did not claim pa-
`tent-eligible subject matter. The district court granted
`WildTangent's pre-answer motion to dismiss under Rule
`12(b)(6). Ultramercial appeals. This court has jurisdic-
`tion under 28 U.S.C. § 1295(a)(1).
`[HN1] This court reviews a district court's dismissal
`for failure to state a claim under the law of the regional
`circuit. Juniper Networks, Inc. v. Shipley, 643 F.3d 1346,
`1350 (Fed. Cir. 2011) (citation omitted). The Ninth Cir-
`cuit reviews de novo challenges to a dismissal for failure
`to state a claim under Fed. R. Civ. P. 12(b)(6). Livid
`Holdings Ltd. v. Salomon Smith Barney, Inc., 403 F.3d
`1050, 1055 (9th Cir. 2005). [*5] This court also re-
`views
`the ultimate determination
`regarding pa-
`tent-eligible subject matter under 35 U.S.C. § 101 with-
`out deference. In re Ferguson, 558 F.3d 1359, 1363
`(Fed. Cir. 2009).
`
`II.
`
`The district court dismissed Ultramercial's claims for
`failure to claim statutory subject matter without formally
`construing the claims and, further, without requiring de-
`fendants to file answers. This raises several preliminary
`issues.
`First, [HN2] it will be rare that a patent infringement
`suit can be dismissed at the pleading stage for lack of
`patentable subject matter. This is so because every issued
`patent is presumed to have been issued properly, absent
`clear and convincing evidence to the contrary. See, e.g.,
`CLS Bank Int'l v. Alice Corp., F.3d , 2013 U.S.
`App. LEXIS 9493, 2013 WL 1920941, *33 (Fed. Cir.
`May 10, 2013) (Chief Judge Rader, and Judges Linn,
`Moore, and O'Malley, concluding that "any attack on an
`issued patent based on a challenge to the eligibility of the
`subject matter must be proven by clear and convincing
`evidence," and Judges Lourie, Dyk, Prost, Reyna, and
`Wallach, concluding that a statutory presumption of va-
`lidity applies when § 101 is raised as a basis for invalid-
`ity in district court proceedings.). [*6] Further, if Rule
`12(b)(6) is used to assert an affirmative defense, dismis-
`sal is appropriate only if the well-pleaded factual allega-
`
`

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`2013 U.S. App. LEXIS 12715, *; 107 U.S.P.Q.2D (BNA) 1193
`
`Page 8
`
`tions in the complaint, construed in the light most favor-
`able to the plaintiff, suffice to establish the defense. See
`Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127
`S. Ct. 1955, 167 L. Ed. 2d 929 (2007); Jones v. Bock, 549
`U.S. 199, 215, 127 S. Ct. 910, 166 L. Ed. 2d 798 (2007).
`Thus, the only plausible reading of the patent must be
`that there is clear and convincing evidence of ineligibil-
`ity. For those reasons, Rule 12(b)(6) dismissal for lack of
`eligible subject matter will be the exception, not the rule.
`Second, as is shown more fully below, [HN3] the
`analysis under § 101, while ultimately a legal determina-
`tion, is rife with