United States Court of Appeals
`for the Federal Circuit
`______________________
`
`ULTRAMERCIAL, INC., AND ULTRAMERCIAL, LLC,
`Plaintiffs-Appellants,
`
`v.
`
`HULU, LLC,
`Defendant,
`
`AND
`
`WILDTANGENT, INC.,
`Defendant-Appellee.
`______________________
`
`2010-1544
`______________________
`
`Appeal from the United States District Court for the
`Central District of California in No. 09-CV-6918, Judge R.
`Gary Klausner.
`
`______________________
`
`Decided: November 14, 2014
`______________________
`
`LAWRENCE M. HADLEY, McKool Smith Hennigan, P.C.,
`of Los Angeles, California, for plaintiffs-appellants.
`
`GREGORY G. GARRE, Latham & Watkins LLP, of
`Washington, DC, for defendant-appellee. With him on the
`supplemental brief were GABRIEL K. BELL, of Washington,
`DC, and RICHARD G. FRENKEL and LISA K. NGUYEN, of
`
`1
`
`SAMSUNG-1050
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`

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`
` ULTRAMERCIAL, INC. v. HULU, LLC
`
`Menlo Park, California. Of counsel were RICHARD P.
`BRESS and Katherine I. Twomey, of Washington, DC.
`
`CHARLES DUAN, Public Knowledge, of Washington,
`DC, for amicus curiae Public Knowledge.
`
`DANIEL NAZER, Electronic Frontier Foundation, of San
`Francisco, California, for amicus curiae Electronic Fron-
`tier Foundation. With him on the brief was VERA
`RANIERI. Of counsel was JULIE P. SAMUELS.
`
`DARYL L. JOSEFFER, King & Spalding LLP, of Wash-
`ington, DC, for amicus curiae Google Inc. With him on
`the brief was ADAM M. CONRAD, of Charlotte, North
`Carolina.
`
`JAMES L. QUARLES III, Wilmer Cutler Pickering Hale
`and Dorr LLP, of Washington, DC, for amicus curiae The
`Clearing House Association, L.L.C. With him on the brief
`were GREGORY H. LANTIER, THOMAS G. SAUNDERS, and
`DANIEL AGUILAR.
`______________________
`Before LOURIE, MAYER,* and O’MALLEY, Circuit
` Judges.
`Opinion for the court filed by Circuit Judge LOURIE.
`Concurring Opinion filed by Circuit Judge MAYER.
`LOURIE, Circuit Judge.
`This appeal has returned to the court following an up
`and down journey to and from the Supreme Court. In our
`original decision, we reversed the district court’s holding
`
`* Pursuant to Fed. Cir. Internal Operating Proce-
`dure 15 ¶ 2 (Nov. 14, 2008), Circuit Judge Mayer was
`designated to replace Randall R. Rader, now retired, on
`this panel.
`
`2
`
`

`

`
`
`ULTRAMERCIAL, INC. v. HULU, LLC
` 3
`
`that granted WildTangent, Inc.’s (“WildTangent”) motion
`to dismiss Ultramercial, LLC and Ultramercial, Inc.’s
`(collectively “Ultramercial”) patent infringement com-
`plaint under Fed. R. Civ. P. 12(b)(6). See Ultramercial,
`LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011), vacat-
`ed sub nom. WildTangent, Inc. v. Ultramercial, LLC, 566
`U.S. __, 132 S. Ct. 2431 (2012). The district court had
`held that U.S. Patent 7,346,545 (the “’545 patent”), the
`basis for the complaint, does not claim patent-eligible
`subject matter under 35 U.S.C. § 101. See Ultramercial,
`LLC v. Hulu, LLC, No. 09-06918, 2010 WL 3360098 (C.D.
`Cal. Aug. 13, 2010)
`The present posture of the case is that Ultramercial is
`again appealing from the decision of the United States
`District Court for the Central District of California. Upon
`review of the ’545 patent and the standards adopted by
`the Supreme Court, for the reasons set forth below, we
`conclude that the ’545 patent does not claim patent-
`eligible subject matter and accordingly affirm the district
`court’s grant of WildTangent’s motion to dismiss.
`BACKGROUND
`Ultramercial owns the ’545 patent directed to a meth-
`od for distributing copyrighted media products over the
`Internet where the consumer receives a copyrighted
`media product at no cost in exchange for viewing an
`advertisement, and the advertiser pays for the copyright-
`ed content. Claim 1 of the ’545 patent is representative
`and reads as follows:
`A method for distribution of products over the In-
`ternet 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 purchase, wherein
`
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`

`
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` 4
`
` ULTRAMERCIAL, INC. v. HULU, LLC
`
`each said media product being comprised
`of at least one of text data, music data,
`and video data;
`a second step of selecting a sponsor mes-
`sage to be associated with the media
`product, said sponsor message being se-
`lected from a plurality of sponsor messag-
`es, said second step including accessing an
`activity log to verify that the total number
`of times which the sponsor message has
`been previously presented is less than the
`number of transaction cycles contracted by
`the sponsor of the sponsor message;
`a third step of providing the media prod-
`uct for sale at an Internet website;
`a fourth step of restricting general public
`access to said media product;
`a fifth step of offering to a consumer ac-
`cess to the media product without charge
`to the consumer on the precondition that
`the consumer views the sponsor message;
`a sixth step of receiving from the consum-
`er a request to view the sponsor message,
`wherein the consumer submits said re-
`quest in response to being offered access to
`the media product;
`a seventh step of, in response to receiving
`the request from the consumer, facilitat-
`ing the display of a sponsor message to the
`consumer;
`an eighth step of, if the sponsor message is
`not an interactive message, allowing said
`consumer access to said media product af-
`
`4
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`

`

`
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`ULTRAMERCIAL, INC. v. HULU, LLC
` 5
`
`ter said step of facilitating the display of
`said sponsor message;
`a ninth step of, if the sponsor message is
`an interactive message, presenting at
`least one query to the consumer and al-
`lowing said consumer access to said media
`product after receiving a response to said
`at least one query;
`a tenth step of recording the transaction
`event to the activity log, said tenth step
`including updating the total number of
`times the sponsor message has been pre-
`sented; and
`an eleventh step of receiving payment
`from the sponsor of the sponsor message
`displayed.
`’545 patent col. 8 ll. 5–48. As the other claims of the
`patent are drawn to a similar process, they suffer from
`the same infirmity as claim 1 and need not be considered
`further.
`As indicated above, Ultramercial sued Hulu, LLC
`(“Hulu”), YouTube, LLC (“YouTube”), and WildTangent,
`alleging infringement of all claims of the ’545 patent.
`Ultramercial, 2010 WL 3360098, at *1. Hulu and
`YouTube were dismissed from the case for reasons we
`need not concern ourselves with here, Ultramercial, 657
`F.3d at 1325, but WildTangent moved to dismiss for
`failure to state a claim, arguing that the ’545 patent did
`not claim patent-eligible subject matter. Ultramercial,
`2010 WL 3360098, at *2. The district court granted
`WildTangent’s pre-answer motion to dismiss under Rule
`12(b)(6) without formally construing the claims. Id. at
`*6–7. Ultramercial timely appealed.
`We reversed, concluding that the district court erred
`in granting WildTangent’s motion to dismiss for failing to
`
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` ULTRAMERCIAL, INC. v. HULU, LLC
`
`claim statutory subject matter. See Ultramercial, 657
`F.3d at 1330. WildTangent then filed a petition for a writ
`of certiorari, requesting review by the Supreme Court.
`The Supreme Court granted the petition, vacated our
`decision, and remanded the case for further consideration
`in light of its decision in Mayo Collaborative Services v.
`Prometheus Laboratories, Inc., 566 U.S. __, 132 S. Ct.
`1289 (2012). WildTangent, 132 S. Ct. 2431.
`On remand, we again reversed, concluding that the
`district court erred in granting WildTangent’s motion to
`dismiss for failing to claim statutory subject matter. See
`Ultramercial, LLC v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir.
`2013), vacated sub nom. WildTangent, Inc. v. Ultramer-
`cial, LLC, 573 U.S. __, 134 S. Ct. 2870 (2014). The saga
`continued as WildTangent filed a petition for certiorari
`from our 2013 decision, again requesting review by the
`Supreme Court.
`While WildTangent’s petition was pending, the Su-
`preme Court issued its decision in Alice Corp. v. CLS
`Bank International, 573 U.S. __, 134 S. Ct. 2347 (2014).
`In that case, the Court affirmed our judgment that meth-
`od and system claims directed to a computer-implemented
`scheme for mitigating settlement risk by using a third
`party intermediary were not patent-eligible under § 101
`because the claims “add nothing of substance to the
`underlying abstract idea.” See Alice, 134 S. Ct. at 2359–
`60. The Court in Alice made clear that a claim that is
`directed to an abstract idea does not move into § 101
`eligibility territory by “merely requir[ing] generic comput-
`er implementation.” Id. at 2357.
`Subsequently, the Court granted WildTangent’s peti-
`tion for a writ of certiorari, vacated our decision, and
`remanded the case for further consideration in light of
`Alice. See WildTangent, 134 S. Ct. 2870. We invited and
`received briefing by the parties. We also received four
`amicus briefs, all in support of the appellee, WildTangent.
`
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`

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`
`ULTRAMERCIAL, INC. v. HULU, LLC
` 7
`
`DISCUSSION
`As indicated, this case is back to this court on Ultra-
`mercial’s original appeal from the district court’s dismis-
`sal, but in its present posture we have the added benefit
`of the Supreme Court’s reasoning in Alice. We review a
`district court’s dismissal for failure to state a claim under
`the law of the regional circuit in which the district court
`sits, here the Ninth Circuit. Juniper Networks, Inc. v.
`Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011) (citation
`omitted). The Ninth Circuit 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 Bar-
`ney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). We review
`questions concerning patent-eligible subject matter under
`35 U.S.C. § 101 without deference. Research Corp. Techs.,
`Inc. v. Microsoft Corp., 627 F.3d 859, 867 (Fed. Cir. 2010).
`A § 101 analysis begins by identifying whether an in-
`vention fits within one of the four statutorily provided
`categories of patent-eligible subject matter: processes,
`machines, manufactures, and compositions of matter. 35
`U.S.C. § 101. Section 101 “contains an important implicit
`exception: Laws of nature, natural phenomena, and
`abstract ideas are not patentable.” Alice, 134 S. Ct. at
`2354 (quoting Ass’n for Molecular Pathology v. Myriad
`Genetics., Inc., 569 U.S. __, 133 S. Ct. 2107, 2116 (2013)).
`In Alice, the Supreme Court identified a “framework for
`distinguishing patents that claim laws of nature, natural
`phenomena, and abstract ideas from those that claim
`patent-eligible applications of those concepts.” Id. at 2355
`(citing Mayo, 132 S. Ct. at 1296–97). “First, we determine
`whether the claims at issue are directed to one of those
`patent-ineligible concepts.” Id. If not, the claims pass
`muster under § 101. Then, in the second step, if we
`determine that the claims at issue are directed to one of
`those patent-ineligible concepts, we must determine
`whether the claims contain “an element or combination of
`elements that is ‘sufficient to ensure that the patent in
`
`7
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`

`

`
`
` 8
`
` ULTRAMERCIAL, INC. v. HULU, LLC
`
`practice amounts to significantly more than a patent upon
`the [ineligible concept] itself.’” Id. (quoting Mayo, 132 S.
`Ct. at 1294) (alteration in original).
`Ultramercial argues that the ’545 claims are not di-
`rected to the type of abstract idea at issue in Alice—one
`that was “routine,” “long prevalent,” or “conventional”—
`and are, instead, directed to a specific method of advertis-
`ing and content distribution that was previously unknown
`and never employed on the Internet before. In other
`words, Ultramercial argues that the Supreme Court
`directs us to use a type of 103 analysis when assessing
`patentability so as to avoid letting § 101 “swallow all of
`patent law.” Alice, 134 S. Ct. at 2354. According to
`Ultramercial, abstract ideas remain patent-eligible under
`§ 101 as long as they are new ideas, not previously well
`known, and not routine activity. Ultramercial contends,
`moreover, that, even if the claims are directed to an
`abstract idea, the claims remain patent-eligible because
`they extend beyond generic computer implementation of
`that abstract idea. Ultramercial argues that the claims
`require users to select advertisements, which was a
`change from existing methods of passive advertising and
`involves more than merely implementing an abstract
`idea.
`WildTangent responds that the ’545 claims are di-
`rected to the abstract idea of offering free media in ex-
`change for watching advertisements and that the mere
`implementation of that idea on a computer does not
`change that fact. WildTangent contends that because the
`claims do no more than break the abstract idea into basic
`steps and add token extra-solution activity, the claims
`add no meaningful limitations to convert the abstract idea
`into patent-eligible subject matter.
`We agree with WildTangent that the claims of the
`’545 patent are not directed to patent-eligible subject
`matter. Following the framework set out in Alice, we first
`
`8
`
`

`

`
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`ULTRAMERCIAL, INC. v. HULU, LLC
` 9
`
`“determine whether the claims at issue are directed to one
`of those patent-ineligible concepts.” Id. at 2355 (citing
`Mayo, 132 S. Ct. at 1296–97). The district court found
`that the abstract idea at the heart of the ’545 patent was
`“that one can use [an] advertisement as an exchange or
`currency.” Ultramercial, 2010 WL 3360098, at *6. We
`agree.
`We first examine the claims because claims are the
`definition of what a patent is intended to cover. An
`examination of the claim limitations of the ’545 patent
`shows that claim 1 includes eleven steps for displaying an
`advertisement in exchange for access to copyrighted
`media. Without purporting to construe the claims, as the
`district court did not, the steps include: (1) receiving
`copyrighted media from a content provider; (2) selecting
`an ad after consulting an activity log to determine wheth-
`er the ad has been played less than a certain number of
`times; (3) offering the media for sale on the Internet; (4)
`restricting public access to the media; (5) offering the
`media to the consumer in exchange for watching the
`selected ad; (6) receiving a request to view the ad from the
`consumer; (7) facilitating display of the ad; (8) allowing
`the consumer access to the media; (9) allowing the con-
`sumer access to the media if the ad is interactive; (10)
`updating the activity log; and (11) receiving payment from
`the sponsor of the ad. ’545 patent col. 8 ll. 5–48.
`This ordered combination of steps recites an abstrac-
`tion—an idea, having no particular concrete or tangible
`form. The process of receiving copyrighted media, select-
`ing an ad, offering the media in exchange for watching the
`selected ad, displaying the ad, allowing the consumer
`access to the media, and receiving payment from the
`sponsor of the ad all describe an abstract idea, devoid of a
`concrete or tangible application. Although certain addi-
`tional limitations, such as consulting an activity log, add
`a degree of particularity, the concept embodied by the
`majority of the limitations describes only the abstract
`
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`

`
`
` 10
`
` ULTRAMERCIAL, INC. v. HULU, LLC
`
`idea of showing an advertisement before delivering free
`content.
`As the Court stated in Alice, “[a]t some level, ‘all in-
`ventions . . . embody, use, reflect, rest upon, or apply laws
`of nature, natural phenomena, or abstract ideas.’” Alice,
`134 S. Ct. at 2354 (quoting Mayo, 132 S. Ct. at 1293). We
`acknowledge this reality, and we do not purport to state
`that all claims in all software-based patents will neces-
`sarily be directed to an abstract idea. Future cases may
`turn out differently. But here, the ’545 claims are indeed
`directed to an abstract idea, which is, as the district court
`found, a method of using advertising as an exchange or
`currency. We do not agree with Ultramercial that the
`addition of merely novel or non-routine components to the
`claimed idea necessarily turns an abstraction into some-
`thing concrete. In any event, any novelty in implementa-
`tion of the idea is a factor to be considered only in the
`second step of the Alice analysis.
`The second step in the analysis requires us to deter-
`mine whether the claims do significantly more than
`simply describe that abstract method. Mayo, 132 S. Ct. at
`1297. We must examine the limitations of the claims to
`determine whether the claims contain an “inventive
`concept” to “transform” the claimed abstract idea into
`patent-eligible subject matter. Alice, 134 S. Ct. at 2357
`(quoting Mayo, 132 S. Ct. at 1294, 1298). The transfor-
`mation of an abstract idea into patent-eligible subject
`matter “requires ‘more than simply stat[ing] the [abstract
`idea] while adding the words ‘apply it.’” Id. (quoting
`Mayo, 132 S. Ct. at 1294) (alterations in original). “A
`claim that recites an abstract idea must include ‘addition-
`al features’ to ensure ‘that the [claim] is more than a
`drafting effort designed to monopolize the [abstract
`idea].’” Id. (quoting Mayo, 132 S. Ct. at 1297) (alterations
`in original). Those “additional features” must be more
`than “well-understood, routine, conventional activity.”
`Mayo, 132 S. Ct. at 1298.
`
`10
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`

`

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`ULTRAMERCIAL, INC. v. HULU, LLC
` 11
`
`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 adver-
`tisement. Adding routine additional steps such as updat-
`ing 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 insuffi-
`cient to supply an “inventive concept.” Id. at 2357 (quot-
`ing Mayo, 132 S. Ct. at 1294, 1297, 1300). Indeed, the
`steps of consulting and updating an activity log represent
`insignificant “data-gathering steps,” CyberSource Corp. v.
`Retail Decisions, Inc., 654 F.3d 1366, 1370 (Fed. Cir.
`2011), and thus add nothing of practical significance to
`the underlying abstract idea. Further, that the system is
`active, rather than passive, and restricts public access
`also represents only insignificant “[pre]-solution activity,”
`which is also not sufficient to transform an otherwise
`patent-ineligible abstract idea into patent-eligible subject
`matter. Mayo, 132 S. Ct. at 1298 (alteration in original).
`The claims’ invocation of the Internet also adds no in-
`ventive concept. As we have held, the use of the Internet
`is not sufficient to save otherwise abstract claims from
`ineligibility under § 101. See CyberSource, 654 F.3d at
`1370 (reasoning that the use of the Internet to verify
`credit card transaction does not meaningfully add to the
`abstract idea of verifying the transaction). Narrowing the
`
`11
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`

`
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` 12
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` ULTRAMERCIAL, INC. v. HULU, LLC
`
`abstract idea of using advertising as a currency to the
`Internet is an “attempt[] to limit the use” of the abstract
`idea “to a particular technological environment,” which is
`insufficient to save a claim. Alice, 134 S. Ct. at 2358
`(citing Bilski v. Kappos, 561 U.S. 593, 610–11, 130 S. Ct.
`3218, 3230 (2010)). Given the prevalence of the Internet,
`implementation of an abstract idea on the Internet in this
`case is not sufficient to provide any “practical assurance
`that the process is more than a drafting effort designed to
`monopolize the [abstract idea] itself.” Mayo, 132 S. Ct. at
`1297. In sum, each of those eleven steps merely instructs
`the practitioner to implement the abstract idea with
`“routine, conventional activit[ies],” which is insufficient to
`transform the patent-ineligible abstract idea into patent-
`eligible subject matter. Id. at 1298. That some of the
`eleven steps were not previously employed in this art is
`not enough—standing alone—to confer patent eligibility
`upon the claims at issue.
`While the Supreme Court has held that the machine-
`or-transformation test is not the sole test governing § 101
`analyses, Bilski, 561 U.S. at 604, that test can provide a
`“useful clue” in the second step of the Alice framework, see
`Bancorp Servs., L.L.C., v. Sun Life Assurance Co. of Can.,
`687 F.3d 1266, 1278 (Fed. Cir. 2012) (holding that the
`machine-or-transformation test remains an important
`clue in determining whether some inventions are process-
`es under § 101), cert denied, 573 U.S. __, 134 S. Ct. 2870
`(2014). A claimed process can be patent-eligible under
`§ 101 if: “(1) it is tied to a particular machine or appa-
`ratus, or (2) it transforms a particular article into a
`different state or thing.” In re Bilski, 545 F.3d 943, 954
`(Fed. Cir. 2008) (en banc), aff’d on other grounds, Bilski,
`561 U.S. 593.
`The claims of the ’545 patent, however, are not tied to
`any particular novel machine or apparatus, only a general
`purpose computer. As we have previously held, the
`Internet is not sufficient to save the patent under the
`
`12
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`

`
`
`ULTRAMERCIAL, INC. v. HULU, LLC
` 13
`
`machine prong of the machine-or-transformation test.
`CyberSource, 654 F.3d at 1370. It is a ubiquitous infor-
`mation-transmitting medium, not a novel machine. And
`adding a computer to otherwise conventional steps does
`not make an invention patent-eligible. Alice, 134 S. Ct. at
`2357. Any transformation from the use of computers or
`the transfer of content between computers is merely what
`computers do and does not change the analysis.
`Although the preamble of claim 1 also requires a facil-
`itator, ’545 patent col 8, l. 6, the specification makes clear
`that the facilitator can be a person and not a machine, id.
`col. 3, ll. 47–50. Thus, nowhere does the ’545 patent tie
`the claims to a novel machine.
`The claims of the ’545 patent also fail to satisfy the
`transformation prong of the machine-or-transformation
`test. The method as claimed refers to a transaction
`involving the grant of permission and viewing of an
`advertisement by the consumer, the grant of access by the
`content provider, and the exchange of money between the
`sponsor and the content provider. These manipulations of
`“public or private legal obligations or relationships, busi-
`ness risks, or other such abstractions cannot meet the test
`because they are not physical objects or substances, and
`they are not representative of physical objects or sub-
`stances.” Bilski, 545 F.3d at 963. We therefore hold that
`the claims of the ’545 patent do not transform any article
`to a different state or thing. While this test is not conclu-
`sive, it is a further reason why claim 1 of the ’545 patent
`does not contain anything more than conventional steps
`relating to using advertising as a currency.
`CONCLUSION
`Because the ’545 patent claims are directed to no
`more than a patent-ineligible abstract idea, we conclude
`that the district court did not err in holding that the ’545
`patent does not claim patent-eligible subject matter.
`
`13
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`

`
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` 14
`
` ULTRAMERCIAL, INC. v. HULU, LLC
`
`Accordingly, the decision of the district court granting
`WildTangent’s motion to dismiss is affirmed.
`AFFIRMED
`
`14
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`

`

`United States Court of Appeals
`for the Federal Circuit
`______________________
`
`
`
`
`
`
`
`
`
`ULTRAMERCIAL, INC., AND ULTRAMERCIAL, LLC,
`Plaintiffs-Appellants,
`
`v.
`
`HULU, LLC,
`Defendant,
`
`AND
`
`WILDTANGENT, INC.,
`Defendant-Appellee.
`______________________
`
`2010-1544
`______________________
`
`
`MAYER, Circuit Judge, concurring.
`I agree that the claims asserted by Ultramercial, Inc.
`and Ultramercial, LLC (together, “Ultramercial”) are
`ineligible for a patent, but write separately to emphasize
`three points. First, whether claims meet the demands of
`35 U.S.C. § 101 is a threshold question, one that must be
`addressed at the outset of litigation.
` Second, no
`presumption of eligibility attends the section 101 inquiry.
`Third, Alice Corporation v. CLS Bank International, 134
`S. Ct. 2347, 2356–59 (2014), for all intents and purposes,
`set out a technological arts test for patent eligibility.
`Because the purported inventive concept in Ultramercial’s
`asserted claims is an entrepreneurial rather than a
`technological one, they fall outside section 101.
`
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`

`
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` 2
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` ULTRAMERCIAL, INC. v. HULU, LLC
`
`I.
`The Constitution’s Intellectual Property Clause is at
`once a grant of power and a restriction on that power.
`Graham v. John Deere Co., 383 U.S. 1, 5 (1966); see also
`In re Yuan, 188 F.2d 377, 380 (CCPA 1951) (explaining
`that the constitutional grant of authority to issue patents
`“is the only one of the several powers conferred upon the
`Congress which is accompanied by a specific statement of
`the reason for it”). 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,” U.S. Const. art. I, § 8, cl. 8.
`“This is the standard expressed in the Constitution and it
`may not be ignored.” Graham, 383 U.S. at 6.
`
`Section 101 is the gateway to the Patent Act for good
`reason. It is the sentinel, charged with the duty of
`ensuring that our nation’s patent laws encourage, rather
`than
`impede, scientific progress and
`technological
`innovation. See Mayo Collaborative Servs. v. Prometheus
`Labs., Inc., 132 S. Ct. 1289, 1301 (2012) (emphasizing
`that patent protection may not “foreclose[] more future
`invention than the underlying discovery could reasonably
`justify”); Motion Picture Patents Co. v. Universal Film
`Mfg. Co., 243 U.S. 502, 511 (1917) (explaining that “the
`primary purpose” of the patent system is to promote
`scientific progress, not to “creat[e] . . . private fortunes for
`the owners of patents”). The Supreme Court has thus
`dictated that section 101 imposes “a threshold test,” Bilski
`v. Kappos, 561 U.S. 593, 602 (2010), one that must be
`satisfied before a court can proceed
`to consider
`subordinate validity issues such as non-obviousness under
`35 U.S.C. § 103 or adequate written description under 35
`U.S.C. § 112. See Parker v. Flook, 437 U.S. 584, 593
`(1978) (“Flook”) (“The obligation to determine what type of
`discovery is sought to be patented” so as to determine
`whether it falls within the ambit of section 101 “must
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`ULTRAMERCIAL, INC. v. HULU, LLC
` 3
`
`precede the determination of whether that discovery is, in
`fact, new or obvious.”). This court has likewise correctly
`recognized that subject matter eligibility is the primal
`inquiry, one that must be addressed at the outset of
`litigation. See In re Comiskey, 554 F.3d 967, 973 (Fed.
`Cir. 2009) (“Only if the requirements of § 101 are satisfied
`is the inventor allowed to pass through to the other
`requirements for patentability, such as novelty under
`§ 102 and . . . non-obviousness under § 103.” (citations
`and internal quotation marks omitted)); State St. Bank &
`Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368,
`1372 n.2 (Fed. Cir. 1998) (Section 101 is “[t]he first door
`which must be opened on the difficult path to
`patentability.” (citations and internal quotation marks
`omitted)).
`
`In this sense, the section 101 determination bears
`some of the hallmarks of a jurisdictional inquiry. Just as
`a court must assure itself of its own jurisdiction before
`resolving the merits of a dispute, see Diggs v. Dep’t of
`Hous. & Urban Dev., 670 F.3d 1353, 1355 (Fed. Cir.
`2011), it must likewise first assess whether claimed
`subject matter is even eligible for patent protection before
`addressing questions of invalidity or infringement. If a
`patent is not directed to “the kind of discover[y]” that the
`patent laws were intended to protect, Flook, 437 U.S. at
`593 (1978) (internal quotation marks omitted), there is no
`predicate for any inquiry as to whether particular claims
`are invalid or infringed. Indeed, if claimed subject matter
`does not fall within the ambit of section 101, any
`determination on validity or infringement constitutes an
`impermissible advisory opinion. See Oil, Chem. & Atomic
`Workers Int’l Union v. Missouri, 361 U.S. 363, 367 (1960)
`(emphasizing that federal courts are to decide only “actual
`controversies by a judgment which can be carried into
`effect, and not to give opinions upon moot questions or
`abstract propositions” (citations and internal quotation
`marks omitted)).
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` ULTRAMERCIAL, INC. v. HULU, LLC
`
`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,” Bell Atl. Corp. v. Twombly, 550
`U.S. 544, 558 (2007) (citations and internal quotation
`marks omitted). Here, for example, the district court
`properly invoked section 101 to dismiss Ultramercial’s
`infringement suit on the pleadings. No formal claim
`construction was required because the asserted claims
`disclosed no more than “an abstract idea garnished with
`accessories” and there was no “reasonable construction
`that would bring [them] within patentable subject
`matter.” Ultramercial, LLC v. Hulu, LLC, No. 09-CV-
`6918, 2010 WL 3360098, at *6 (C.D. Cal. Aug. 13, 2010).
`
`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. Those who own
`vague and overbroad business method patents will often
`file “nearly identical patent infringement complaints
`against a plethora of diverse defendants,” and then
`“demand . . . a quick settlement at a price far lower than
`the cost to defend the litigation.” Eon-Net LP v. Flagstar
`Bancorp, 653 F.3d 1314, 1326 (Fed. Cir. 2011). In many
`such cases, the patentee will “place[] little at risk when
`filing suit,” whereas the accused infringer will be forced to
`spend huge sums to comply with broad discovery
`requests. Id. at 1327 (noting that accused infringers are
`often required “to produce millions of pages of documents,
`collected
`from
`central repositories and numerous
`document custodians”).
` Given the staggering costs
`associated with discovery, “Markman” hearings, and trial,
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`ULTRAMERCIAL, INC. v. HULU, LLC
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`
`it is hardly surprising that accused infringers feel
`compelled to settle early in the process. See id. (noting
`that the accused infringer had “expended over $600,000 in
`attorney fees and costs to litigate [the] case through claim
`construction”); see also Cardinal Chem. Co. v. Morton
`Int’l, Inc., 508 U.S. 83, 101 n.24 (1993), (explaining that
`“prospective defendants will often decide that paying
`royalt