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IP: The machines fight back

Federal Circuit panel says “nevermind” to Cybersource.

A few weeks ago I celebrated in this column a recent Federal Circuit decision, Cybersource Corp. v. Retail Decisions, Inc., in which the court held that a process is not “tied to a machine” if the steps can be performed, however impractically, without it. That is (or was) a good rule, and one that lawyers and judges can apply (or could have applied) easily. But on Sept. 15—exactly 30 days later—a different Federal Circuit panel held the exact opposite, dismissing the court’s earlier decision. 

In Ultramercial, LLC. v. Hulu, LLC, the court considered a patent that claimed a method of having someone pay for another guy’s lunch, only here the lunch was copyrighted material—e.g., music—that advertisers (the proverbial other guys) purchased so that subscribers could listen for free. Of course, the method used the Internet, and so the plaintiff argued it was “tied to a machine” and thus was patent-eligible subject matter. Naturally, the district court was unpersuaded and, thankfully, killed the patent.

Enter the Federal Circuit. Now, remember, this is 30 days after Cybersource, in which the court held that a method of detecting credit card fraud was not patent-eligible even though it used the Internet because a human being could—however impractical—practice the claimed method with a scratch pad and a pencil, thus rendering the Internet incidental. But somehow in Ultramercial, the court held that the third-party payer system becomes patentable solely because it uses the Internet, even though Darrin Stephens and Larry Tate could do the same for their client, Columbia House, using the post office and a TV Guide insert, all without the help of Samantha or Tabitha, to say nothing of Endora. 

Well, here we are, a week into patent reform. Two decisions. Two irreconcilable results. Even the Critical Legal Studies professors—are there any left? (pun intended) —would have a hard time with this one.

But compared to the court’s holding, the dicta is more troubling. According to the court, § 101’s list of patent-eligible subject matter is only a “coarse eligibility filter” —whatever that means—and “not [a] substitute[] for the substantive patentability requirements” of §§ 102, 103 and 112. The sole exception is where a patent claim is so abstract as to “manifestly ... override” the presumption that a process is patentable.

Does this really mean what I think it means—that even the most inane patent claims must now be evaluated for novelty, non-obviousness and enablement? How fitting that we get this decision on quarterly tax day—Sept. 15—because it surely will cost Americans another trillion (and this time we know no jobs will be created). 

Let’s go back to the example from my Cybersource column. Say I discover a new way to San Jose that shaves an hour and passes a good deli. I also recite using “a vehicle with propulsion means” so I don’t get bothered by this new not-so-manifestly-abstract test. According to Cybersource, I own nothing. But according to Ultramercial, I can charge a royalty from every driver who uses my route, or, even better, obtain an injunction preventing others from doing so. And the poor saps whom I sue have to scour the globe for some other poor sap who knew this route earlier. Good luck. I hope they have an extra $2 million they haven’t already spent on $6 gas.

Here’s to patent reform. 

Oh, and happy tax day, too.

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