Patentability of royalties mechanism concept called into question by US Supreme Court

Ultramercial was granted patent rights for a "method and system for payment of intellectual property royalties by interposed sponsor on behalf of consumer over a telecommunications network" by the US Patent and Trademark Office in 2008.

According to a summary of the invention it gives consumers "a legitimate and cashless way to obtain copyrighted music or other forms of intellectual property, while still delivering a royalty to the intellectual property rights holder."

"In one instance, a consumer may obtain the right to download a musical composition if he or she agrees to first view an advertisement presentation, such as a multimedia video commercial, by an automobile manufacturer, who thereafter pays the royalties to the holder of the intellectual property product on behalf of the consumer," it said.

Ultramercial sued rival firm Hulu for infringement of is patent but last year a California court ruled that the invention was not patentable on the basis that it merely covered an "abstract idea", according to a report by IP Spotlight.

The Court of Appeals overturned that verdict in September last year but that decision has now been "vacated" by the Supreme Court which has sent it back (8-page / 102KB PDF) to the same court for "for further consideration in light of" another recent ruling.

The relevant case is Mayo Collaborative Services v Prometheus Laboratories in which the Supreme Court ruled that a patent covering a personalised drug administering and testing process for serving reduced doses to patients was not patentable because it followed "laws of nature", according to IP Spotlight.

The Supreme Court had said in that ruling that "to transform a law of nature into a patent-eligible application of such law, one must do more than simply state the law of nature while adding the words ‘apply it.’"

In the Court of Appeals' decision on the Ultramercial patent it had said that "an application of an abstract idea may well be deserving of patent protection" and had determined that Ultramercial's concept required "controlled interaction with a consumer via an internet website, something far removed from purely mental steps." Because the patent covered "monetizing and distributing copyrighted products over the Internet" the Court of Appeals had held Ultramercial's invention to be patentable, the IP Spotlight report said.

Technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com said that "while Ultramercial's claims may not relate to 'laws of nature' in the traditional sense in which most people understand that concept, they do appear to have been made in respect of what is a pretty basic idea".

"The idea that content can and should be free to consumers if advertisers reward copyright owners, including musicians, film producers and television networks is an abstract idea that I am sure many of us have had. The fact that Ultramercial have come up with a technical process by which this idea can be implemented should not of itself entitle it to restrict the ability of platforms such as Hulu from providing innovative content distribution services," he said.

"The services of Hulu and its competitors promote growth in creative industries, enable advertisers to capitalise on the widespread distribution of creative works, and keep consumers happy in a way that will in all likelihood reduce online piracy. It is not surprising then that the United States Supreme Court is asking a lower court to be careful before allowing a patent claim that will add to the costs of doing business in this area," said Scanlon.