Tag Archives: Section 101

Copyright and Web-DVR Broadcasting: The Latest Aereo and FilmOn X Decisions

Two recent decisions have added more discord among federal courts as to the question of whether technology that allows users to record copies of over-the-air broadcasts on remote servers for later web viewing violates broadcasters’ exclusive public performance rights under the Copyright Act.  On October 8, 2013 the US District Court for the District of Massachusetts aligned itself with the Second Circuit, holding that such services do not violate broadcasters’ performance rights in Hearst Stations v. Aereo (Aereo).  Reaching the exact opposite conclusion back on September 5, 2013, was the US District Court for the District of Columbia in Fox Television v. FilmOn X (FilmOn X).

The split among District Courts on this issue will likely lead to further appeals and decisions by the respective Court of Appeals.  Ultimately, the issue could be heard by the Supreme Court in the coming years, depending on whether the Courts of Appeals continue to be similarly split.

Before going to the current state of the law, this post will describe the technology that is at the heart of these copyright disputes by using Aereo as the example platform.

What is Aereo?

According to Aereo’s website, “Aereo is a technology platform that you can use to watch live broadcast television at home or on the go.” A potential Aereo user purchases a subscription from Aereo, which, in exchange, provides the user with a remote, cloud-based DVR to set and watch recordings.  The benefit to users is that the service only requires a compatible internet-enabled device, without the need to purchase antennas, boxes, or cables.  The concept is extremely simple:

Aereo

Once a potential user becomes an Aereo member, the user logs in and is assigned a miniaturized, private, remote antenna and DVR.  Aereo offers technology to give consumers access to their antenna and DVR via a web browser and supported internet-enabled devices.  Once the user has connected to his remote Aereo antenna, the user can then access the Aereo platform to view all major broadcast networks live in HD.  Alternatively, the user can enable their remote DVR to set recordings and watch the broadcasts later whenever the user wants.

How does Aereo Work?

When Aereo decides to enter a particular geographic region or market, it installs an array of mini antennas.  Each of these mini antennas are no larger than the size of a dime.  A large number of mini antennas are aggregated on a circuit board, which also contains other electronic components essential to Aereo’s Internet broadcast system.Antenna

While the antenna may be assigned to an individual user, they are generally available for dynamic allocation by the tuner server.  Essentially, this means that a specific antenna is assigned to one specific individual user only when that user is watching television via Aereo, but is then assigned to a different user when the first user is done.  Nevertheless, no single antenna is used by more than one user at a single time, and all dynamic antennas are shared. The antennas are networked to a tuner router and server, which in turn link to a video encoder. The encoder converts the signals from the antennas into a digital video format for viewing on computers and mobile devices.

When a user selects a channel to watch through Aereo’s web or mobile app, the user’s request is sent to Aereo’s web server. The server sends a command to the tuner router, which then identifies an available antenna and encoder slot.  Once the antenna begins receiving the signal, data for the requested channel flows from the antenna to the antenna router and then to the video encoder, where it is stored on an Aereo remote hard drive in a unique directory created for the specific user.  The data then goes through the distribution endpoint, over the Internet to the web or mobile app for the user’s consumption.

The Dispute

In the recent Aereo case, Hearst claimed that Aereo’s services violate its exclusive rights under Section 106 of the Copyright Act to: (1) publicly perform, (2) reproduce, (3) distribute, and (4) prepare derivative works based on its copyrighted programming.  The Court’s analysis focused on the first claim relating to public performance, which will be discussed below.

The Court quickly rejected Hearst’s claim that Aereo infringed its exclusive right to reproduce its works, stating that “holding a media company directly liable just because it provides technology that enables users to make copies of programming would be the rough equivalent of holding the owner of a copy machine liable because people use the machine to illegally reproduce copyrighted materials.”  Similarly, with respect to its distribution right, the Court sided with Aereo, relying heavily on the fact that Aereo’s technology does not allow users to download (only stream) the copyrighted content.  Likewise, with respect to Hearst’s exclusive right to make derivative works, the Court quickly disposed of Hearst’s argument that by reformatting intercepted programming Aereo violated the broadcaster’s right to prepare derivative works.  As the Court reasoned, “Hearst has presented no legal authority nor is the Court aware of any for the proposition that Aereo’s technology creates a derivative work merely by converting programs from their original digital format to a different digital format compatible with internet streaming.”

Public Performance Right

Quickly dismissing the above claims, the Court focused its discussion on Hearst’s first claim regarding its exclusive right to publicly perform its copyrighted works.  The Copyright Act gives copyright owners of audiovisual works the exclusive right, among others, to “perform the copyrighted work publicly.”  Section 101 of the Act provides that “to perform” an audiovisual work means “to show its images in any sequence or make the sounds accompanying it audible.”  To make matters more confusing, the statute distinguishes between public and private performances.  Having become known as the “Transmit Clause”, Section 101 provides that “to perform a work publicly” means to transmit a performance of the work to the public, “by means of any device or process, whether the members of the public capable of receiving the performance […] receive it in the same place or in separate places and at the same time or at different times.”  For additional insight – or perhaps more confusion – the House Committee on the Judiciary’s Report to the Copyright Act (revised 1976) provides a discussion on the intended meaning of “perform” and “public performance”:

“Concepts of public performance and public display cover not only the initial rendition or showing, but also any further act by which that rendition or showing is transmitted or communicated to the public. Thus, for example: a singer is performing when he or she sings a song; a broadcasting network is performing when it transmits his or her performance (whether simultaneously or from records); a local broadcaster is performing when it transmits the network broadcast; a cable television system is performing when it retransmits the broadcast to its subscribers; and any individual is performing whenever he or she … communicates the performance by turning on a receiving set.”

The Decision

The District Court for the District of Massachusetts in Aereo relied on the Second Circuit’s holding that similar DVR technology does not infringe a copyright holder’s exclusive right to perform its work publicly.  In the 2008, the Second Circuit decided the Cablevision case, which held RS–DVR technology non-infringing of the original broadcaster’s public performance right because the technology’s manner of transmitting a recorded program to the viewer who recorded it did not constitute a public performance.  The Cablevision opinion concluded:

“In sum, we find that the transmit clause directs us to identify the potential audience of a given transmission, i.e., the persons “capable of receiving” it, to determine whether that transmission is made “to the public.” Because each RS–DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances “to the public,” and therefore do not infringe any exclusive right of public performance.”

Likewise, earlier this year, the Second Circuit applied its reasoning from Cablevision in WNET, Thirteen v. Aereo (WNET) to the very Aereo service that was before the District of Massachusetts Court.  In WNET, the Second Circuit affirmed their Cablevision decision and found that Aereo’s transmissions to subscribers also did not infringe.  The court described Cablevision’s holding as resting on two essential facts:

1)      The RS–DVR system created unique copies of each program a customer wished to record; and

2)      A customer could only view the unique copy that was generated on his behalf.

Adopting the Second Circuit’s rationale, the Massachusetts court found that Aereo’s system is consistent with the two key factors above because it (1) employs individually-assigned antennas to create copies unique to each user and (2) only at the user’s request.

The Split: FilmOn X

Not persuaded by the Second Circuit’s Cablevision or WNET decisions, the District Court for the District of Columbia came out the other way in the FilmOn X case.  Quite simply, its decision rested on a different, and not unreasonable, statutory interpretation of the Transmit Clause.  The FilmOn X court reasoned that what makes a transmission public is not the intended audience of any given copy of the program, but the intended audience of the initial broadcast.

At the end of the day, this battle of statutory interpretations may need to be settled by the Supreme Court, or – don’t hold your breath – an Act of Congress.

Software Patents: The Federal Circuit Goes on a WildTangent

In the next few weeks, the U.S. Supreme Court will decide whether to grant certiorari in the patent dispute between WildTangent and Ultramercial.  The case, if heard by the Court, would be a suitable vehicle to provide guidance on how 35 U.S.C. § 101 applies to computer implemented inventions.  In essence, the question presented would read something like:  At what point does a method patent on an otherwise abstract concept sufficiently claim reference to a computer (or computer-implemented service like the Internet) to make such an abstract concept patent eligible under 35 U.S.C. § 101?  To put this question in context, here’s a little background on the parties involved and the lower courts’ decisions.

The Infringer: WildTangent

WildTangent operates a games service that allows consumers around the world to access downloadable, online, and social games via the Internet. WildTangent’s service reaches over 20 million monthly gamers in the United States and Europe with a catalog of more than 1,000 games from nearly 100 developers.  Rather than paying to play, consumers can let an advertiser sponsor free game play sessions. To do so, the consumer must agree to display an advertisement before he is given access to the game.

The Patent Holder: Ultramercial, LLC

According to Ultramercial’s website, Ultramercial is a technology company that offers patented financial engines for monetizing online content along with integrated end-to-end solutions.  They developed an ad model consisting of “interactive, full-page ads that are always served in exchange for premium content or services.”  Ultramercial, more importantly for this post, is the patent holder of U.S. Patent No. 7,346,545 (the ‘545 patent).  The ‘545 patent claims a method for distributing copyrighted products (e.g., songs, movies, books) over the Internet where the consumer receives a copyrighted product for free in exchange for viewing an advertisement, and the advertiser pays for the copyrighted content.  You know, kind of like this:

The Dispute

In 2011, WildTangent challenged a ruling that it had infringed the ‘545 patent owned by Ultramercial, LLC.  Specifically, the ′545 patent claims a particular internet and computer-based method for monetizing copyrighted products, consisting of the following steps:

(1) receiving media products from a copyright holder, (2) selecting an advertisement to be associated with each media product, (3) providing said media products for sale on an Internet website, (4) restricting general public access to the media products, (5) offering free access to said media products on the condition that the consumer view the advertising, (6) receiving a request from a consumer to view the advertising, (7) facilitating the display of advertising and any required interaction with the advertising, (8) allowing the consumer access to the associated media product after such display and interaction, if any, (9) recording this transaction in an activity log, and (10) receiving payment from the advertiser.

At issue was whether Ultramercial’s process-type patent (also referred to as method patents) claims an abstract idea.  If so, the patent should be held invalid as abstract ideas have long been held to be non-patentable subject matter.  WildTangent argued that the idea of using advertising as a form of currency is abstract and vague, like the abstract concept of hedging, which proved patent-ineligible in the Supreme Court’s Bilski decision.  Not persuaded, Judge Rader, writing for the Court of Appeals for the Federal Circuit, upheld Ultramercial’s patent, stating that it “does not simply claim the age-old idea that advertising can serve as currency. Instead [it] discloses a practical application of this idea.”

Then, once again, after being ordered by the Supreme Court to reexamine the case in light of the Court’s Mayo decision, the Federal Circuit upheld its decision this past June and ruled that Ultramercial’s patents were not ineligible subject matter.

The Law of Patent Eligibility under Section 101

Section 101 of the Patent Act establishes the subject-matter eligibility requirement for all patents. It provides that “whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” Section 101’s subject-matter eligibility is considered a threshold check, since the actual patentability of a claimed invention ultimately depends on more rigorous conditions, such as novelty, non-obviousness, and adequate disclosure.

Nevertheless, case law has established three categories of subject matter that fall outside the eligibility bounds of § 101: (1) laws of nature, (2) natural phenomena, and (3) abstract ideas.  As the Supreme Court explained in its Bilski decision, these non-patentable categories are considered the “the basic tools of scientific and technological work” and accordingly they are “part of the storehouse of knowledge of all men” and women.  Judge Rader, writing for the Federal Circuit, explained “an abstract idea is one that has no reference to material objects or specific examples—i.e., it is not concrete.”

A claim can embrace an abstract idea and be patentable when drawn to an application of that idea.  On the other hand, a claim is not patent eligible if the claim is to the abstract idea itself.  The inquiry here is to determine on which side of the line the claim falls: does the claim cover only an abstract idea, or instead does the claim cover an application of an abstract idea?  In determining on which side of the line the claim falls, the relevant inquiry is whether a claim, as a whole, includes meaningful limitations restricting it to an application, rather than merely an abstract idea.

Okay, but what exactly does “meaningful limitation” mean?  Well, it’s helpful, for starters, to describe what “meaningful limitation” does not mean.

First, if a claim covers all practical applications of an abstract idea, it is not meaningfully limited.  This much is not hotly disputed.  That is, it is well settled law that if a claim preempts all practical uses of an idea, then it is not patent eligible.  For example, one cannot claim the formula for converting binary-coded decimal numerals to pure binary numerals because this mathematical formula has no substantial practical application except in connection with digital computing.

Second, going a step further, it is also well established that even if a claim does not entirely preempt all application of an abstract idea, courts will still not find meaningful limitation to the extent the claim contains only insignificant constraints on the use or implementation of the invention.  For example, simply tying the claim to a relevant audience, a category of use, field of use, or technological environment will not carry the day; the claim will still be deemed patent-ineligible.

So now that it is clear what “meaningful limitation” is not, here’s where courts come out on the much less settled law of what “meaningful limitation” is.  A claim is said to be meaningfully limited if it requires a particular machine implementing a process or a particular transformation of matter.  A claim also will be limited meaningfully when, in addition to the abstract idea, the claim recites added limitations which are essential to the invention. In those instances, the added limitations do more than recite pre- or post-solution activity, they are central to the solution itself. And, in such circumstances, the abstract idea is not wholly pre-empted; it is only preempted when practiced in conjunction with the other necessary elements of the claimed invention.

The Federal Circuit’s Questionable Rationale

When assessing computer implemented claims, the Federal Circuit admits that the mere reference to a computer will not save a method claim from being deemed too abstract to be patent eligible.  However, in the same opinion, the Federal Circuit stated that the fact that a claim is tied to a computer is, nevertheless, an important indication of patent eligibility.  In Judge Rader’s opinion, “this tie to a machine moves it farther away from a claim to the abstract idea itself […] [and] makes it less likely that the claims will pre-empt all practical applications of the idea.”  The Federal Circuit goes even further and finds “meaningful limitation” when a claim references a computer in such a way that the computer plays a meaningful role in the performance of the claimed invention.  The difficulty in the standard created by the Federal Circuit is that “meaningful limitation” in the context of a computer-based method patent is now defined as one in which the computer plays a “meaningful role”.  This, to legal practitioners and research-and-developers alike, is a difficult concept to implement and strategize around.  One might even go as far as to say that the “meaningful limitation” standard is itself an abstract idea under the Ultramercial decision.

Ultimately, the Federal Circuit’s decision seems to rely heavily on procedural considerations.  As the Federal Circuit stated, “the district court erred in requiring the patentee to come forward with a construction that would show the claims were eligible. The district court held the asserted claim to be ineligible because it is “abstract.” In this procedural posture, the complaint and the patent must by themselves show clear and convincing evidence that the claim is not directed to an application of an abstract idea, but to a disembodied abstract idea itself.”

It would seem that the Supreme Court could – and should – provide useful guidance on this notion.  Otherwise, seemingly, any claimed invention that simply invokes computers or applications of computer technology would survive summary judgment and be put to a trier of facts, which of course would likely have significant impacts on the costs and burdens associated with patent litigation.