Remove particular combination of characters

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Remove particular combination of characters from string.

Given a string, we need to remove a particular combination of characters, for example, if s = “aacbbdccaac” and if combination is “ac” then our output will be “abbdcca”. If s = “aacaaccd” and if combination is “ac”, then output should be “acd”. Following will be the execution  aacaaccd ——-> aacd ——>ad 
Note that this has to be done in linear time and without any extra space.

Here there are two subparts of the problem: One, we need to keep track we have already encountered the first character in the combination of characters needed to be removed.
Second we need to keep track of the position where the next character should be placed in the string if it is not to be eliminated. First problem can be easily solved by maintaining a state machine, where we have two states and one moves from one state to another based on the input. In current example, we have states like state “INITIAL” and “MOVED”, Whenever we encountered “a”, we move from INITIAL to MOVED. Then if we get “c” in “MOVED” state we are sure that we have encountered the whole pattern and they need to be removed. If we are in “MOVED” state and if we don’t get “c”, we move back to “INITIAL” state.

For the second part, we can simply follow the approach we have used in this post, that is to maintain two pointers, one to point to the character to be processed, and other to point position where current character to be placed if it is not be eliminated.
The problem can be extended with multiple characters in pattern, with change in state machine accordingly.Same state machine method can be used to count number of words in a given string. Whenever we encounter the separator, we move to OUT state and as soon as we see first character in OUT state we move to IN state till we again see separator.

#define INITIAL 1
#define MOVED 2
char * remove_pattern(char *s, char * pattern){
    int state = INITIAL;
    if(s == NULL) return NULL;
    if(pattern == NULL) return s;

    char * source = s;
    char * destination  = s;
    while(*source != ''){

        /*If character is not equal to the first character of the pattern,
          copy it as such */
          if(state == INITIAL && *source != *pattern){
               *destination = *source;
               destination++;
          }
          else if( *source == *pattern && state == INITIAL){
              /* Move state to MOVED */
              state = MOVED;
          }else if(state == MOVED && *source != *(pattern + 1)){
                /* If next character is not as per pattern, 
                   copy previous character first. */
                *destination =  *pattern;
                destination++;
                /* If next character is first character of the pattern,
                   move state to INITIAL */
                   if(*source != *pattern){
                       *destination  = *source;
                       destination++;
                       state =  INITIAL;
                   }
             }
         /* If we hit the pattern, start again and move state to INITIAL */
          else if(state == MOVED && *source == *(pattern + 1)){
                state = INITIAL;
          }
          /* After moving the characters, check if they 
            don't make pattern again */
          if((int)(destination-s) >= 2
              && *(destination -2) == *pattern
              && *(destination-1) == *(pattern +1)){
              destination -=2;
          }
          source++;
    }
    *destination = '';
    return s;
}

Test cases
1. When pattern is present
s= “aaacacacbbb” pattern = “ac”

2. When pattern is not pattern
s =”aaaabdcaaa” pattern  = “ac”
3. When movement leads to pattern again
s= “abacaccdc” pattern =”ac”

4. When string is NULL or pattern is NULL s= NULL pattern = NULL
5. When return string is empty s = “acacacac” pattern =”ac”

6. Just first character in pattern s= “aaaaaaaaa” pattern =”ac”

The complexity of the above code is O(N) and no extra space used.