Video-Streaming Patent Falls in Win for Google, Banks

The idea of letting Internet users watch free videos if they first view an advertisement isn’t an invention that should be patented, an appeals court said in the latest ruling limiting legal protections for software.

Ultramercial LLC’s patent simply covers “the abstract concept of offering media content in exchange for viewing an advertisement,” the U.S. Court of Appeals for the Federal Circuit said in an opinion posted on its website today. The ruling invalidating the patent is a victory for closely held WildTangent Inc., which lets consumers play online games after watching an ad.

The case, first filed in 2009, has bounced around courts -- and twice was sent back from the U.S. Supreme Court -- amid a broader debate over what types of business methods and software are eligible for patent protection. More than a dozen patents have been invalidated since the high court in June said adding the phrase “on a computer” isn’t enough to turn a concept into an invention.

“We’re thrilled with the decision,” said Gregory Garre of Latham & Watkins in Washington, who represented Redmond, Washington-based WildTangent.

Ultramercial, which sells its program to both advertisers and websites, is now reviewing today’s decision and evaluating its next step, according to Lawrence Hadley of McKool Smith in Los Angeles, who represented Ultramercial.

Google Inc. and The Clearing House, an association of the largest commercial banks, were among those backing WildTangent’s challenge in filings with the Federal Circuit.

‘Abstract Idea’

Patents should be issued only for specific ways to do something, rather than the general idea, Google said in an Aug. 29 filing with the court.

The Ultramercial patent “simply uses a general purpose computer as a tool to carry out its business method -- the abstract idea of packaging paid advertisements into free entertainment,” The Clearing House said in a Sept. 3 filing. “That concept was ingrained in the entertainment and broadcast industry long before Ultramercial’s claimed invention.”

Rancho Palos Verdes, California-based Ultramercial provides software to websites to handle advertising. WildTangent had been a customer in 2006 before it decided to “pursue alternative advertising services,” according to Ultramercial’s original complaint.

Patent Upheld

Ultramercial’s patent was twice upheld by the Federal Circuit, the nation’s top patent court. It was ordered to reconsider the patent again by the Supreme Court following the June software decision.

“Ultramercial is disappointed that the Federal Circuit has found its groundbreaking invention on a novel way of monetizing copyrighted content while reducing Internet piracy to be not patentable, particularly after the Federal Circuit twice found, in unanimous written opinions, that Ultramercial’s invention does claim patent-eligible subject matter,” Hadley said in statement.

Ultramercial had also sued Yahoo Inc. and Hulu LLC, which airs TV shows and is owned by Walt Disney Co., 21st Century Fox Inc. and Comcast Corp.’s NBCUniversal. Both companies have since settled, although Hulu remains on the case title.

The case is Ultramercial Inc. v. Hulu LLC, 2010-1544, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Ultramercial LLC v. Hulu LLC, 09cv6918, U.S. District Court for the Central District of California (Los Angeles)

(An earlier version of this article was corrected to note that Hulu had settled its case yet was still on the court documents.)

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