By Andrew Chung
(Reuters) - In a victory for tech companies fighting costly litigation, a U.S. appeals court has made an about-face and ruled that an idea for offering online videos in exchange for watching an ad is too basic to deserve a patent.
The decision Friday by the U.S. Court of Appeals for the Federal Circuit invalidating the patent owned by Ultramercial LLC confirmed the reach of a recent U.S. Supreme Court ruling that has placed a cloud over the soundness of many software patents.
Last June, in Alice v. CLS Bank, the Supreme Court ruled that a basic idea - not normally eligible for a patent - does not become patent-worthy if run on a computer.
On Friday, after the high court ordered it to reconsider Ultramercial's patent eligibility in light of Alice, the appeals court panel said Ultramercial's technology was a basic concept and unpatentable.
The decision was a long-awaited victory for WildTangent Inc, the Redmond, Washington-based online game company which Ultramercial had sued in 2009 for infringing its ad-based video patent.
The case was tossed back and forth over the years between the Federal Circuit, the nation's designated patent appeals court, and the Supreme Court. After the Federal Circuit upheld Ultramercial's patent for a second time last year, the high court ordered it to take a second look, this time in light of its Alice ruling.
The impact of Alice has been profound. Federal courts, along with the U.S. Patent and Trademark Office, have regularly cited the case in canceling software patents over the last five months.
The decision Friday was good news for many tech firms that have long complained about lawsuits by companies that sue over broadly worded software patents. In fact, Google Inc filed a brief in support of WildTangent in the case. Many of these tech companies have lobbied Congress to reform the patent system to make such litigation more difficult.
Ultramercial's attorney Lawrence Hadley said the ruling goes even further than Alice.
"This leaves open the question of whether all software, business method patents are now invalid," he said.
The case is Ultramercial Inc v. WildTangent Inc, U.S. Court of Appeals for the Federal Circuit, No. 10-1544.
(Reporting by Andrew Chung; Editing by Ted Botha and Leslie Adler)