Pre-roll ads can be patented: appeals court rules in Hulu case

The country’s top patent court has ruled that playing an ad before someone watches a piece of content on the internet is not an abstract idea, but is the subject of a valid patent.

The decision, issued on Friday by the Court of Appeals for the Federal Circuit, could spell trouble for the online video industry, which relies on advertising to make money. The patent in question is held by a company called Ultramercial that sued Hulu, YouTube(s goog) and others, claiming they had a monopoly on pre-roll ad technology. The technology looks like this (note the $ signs and the 5″ floppy) :

Pre-roll patent

The case has bounced up and down the court system for years and eventually landed at the Supreme Court, which in March vacated the patent court’s earlier ruling upholding the patent. The Supreme Court gave instructions to reconsider the issue in light of a decision called Mayo, which set out new limits on what can patented.

Groups like the EFF took the Supreme Court ruling as a signal to the patent court to rein in software patents — or the idea that abstract ideas (like using advertising as currency) shouldn’t be patentable simply because they’re on the internet.

The patent court, however, today said the pre-roll video patent was not abstract because:

The ’545 patent seeks to remedy problems with prior art banner advertising over the Internet, such as declin- ing click-through rates, by introducing a method of product distribution that forces consumers to view and possibly even interact with advertisements before permitting access to the desired media product. […]

Further, and even without formal claim construction, it is clear that several steps plainly require that the method be performed through computers, on the internet, and in a cyber-market environment. One clear example is the third step, “providing said media products for sale on an Internet website.”

The decision comes a day after the head of the FTC decried a patent system overrun by trolls, and a week after an important Supreme Court decision that limited patentable subject matter in the case of genes. The patent court’s pre-roll ruling, therefore, could provide further fuel to critics who accuse if of going “rogue” and protecting its bureaucratic turf rather than fostering innovation.

As for the case itself, it will go back to the California district court that initially rejected the patent. Hulu and YouTube have been dropped from the case and it is now on the shoulders of a company called Wildtangent to keep up the litigation. In a possible sign of hope, the Federal Circuit did not rule out the patent being invalidated on the grounds of anticipation or obviousness.

You can read the ruling for yourself here. The bulk of it involves the judges explaining why patentable subject matter should be as broad as possible; the discussion of the pre-roll patent starts on page 25.

Ultramercial v Hulu

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