__ U.S. __ (2014), 13-298, Alice Corporation PTY. Ltd. v. CLS Bank International

Docket Nº:13-298
Citation:__ U.S. __, 134 S.Ct. 2347, 189 L.Ed.2d 296, 82 U.S.L.W. 4508
Opinion Judge:THOMAS, JUSTICE
Party Name:ALICE CORPORATION PTY. LTD, PETITIONER v. CLS BANK INTERNATIONAL ET AL
Attorney:Carter G. Phillips argued the cause for petitioner. Mark Perry argued the cause for respondents. Donald B. Verrilli, Jr. argued the cause for the United States, as amicus curiae.
Judge Panel:THOMAS, J., delivered the opinion for a unanimous Court. SOTOMAYOR, J., filed a concurring opinion, in which GINSBURG and BREYER, JJ., joined. CONCUR BY: SOTOMAYOR JUSTICE SOTOMAYOR, with whom JUSTICE GINSBURG and JUSTICE BREYER join, concurring.
Case Date:June 19, 2014
Court:United States Supreme Court
 
FREE EXCERPT

Page __

__ U.S. __ (2014)

134 S.Ct. 2347, 189 L.Ed.2d 296, 82 U.S.L.W. 4508

ALICE CORPORATION PTY. LTD, PETITIONER

v.

CLS BANK INTERNATIONAL ET AL

No. 13-298

United States Supreme Court

June 19, 2014

Argued March 31, 2014

[134 S.Ct. 2348] ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

Affirmed.

SYLLABUS

[134 S.Ct. 2349] Petitioner Alice Corporation is the assignee of several patents that disclose a scheme for mitigating " settlement risk," i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. In particular, the patent claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediary. The patents in suit claim (1) a method for exchanging financial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.

Respondents (together, CLS Bank), who operate a global network that facilitates currency transactions, filed suit against petitioner, arguing that the patent claims at issue are invalid, unenforceable, or not infringed. Petitioner counterclaimed, alleging infringement. After Bilski v. Kappos, 561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, was decided, the District Court held that all of the claims were ineligible for patent protection under 35 U.S.C. § 101 because they are directed to an abstract idea. The en banc Federal Circuit affirmed.

Held : Because the claims are drawn to a patent-ineligible abstract idea, they [134 S.Ct. 2350] are not patent eligible under § 101. Pp. 5-17.

(a) The Court has long held that § 101, which defines the subject matter eligible for patent protection, contains an implicit exception for ' " [l]aws of nature, natural phenomena, and abstract ideas.'" Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. ___, ___, 133 S.Ct. 2107, 186 L.Ed.2d 124, 126. In applying the § 101 exception, this Court must distinguish patents that claim the " 'buildin[g] block[s]'" of human ingenuity, which are ineligible for patent protection, from those that integrate the building blocks into something more, see Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___, ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325, thereby " transform[ing]" them into a patent-eligible invention, id., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. Pp. 5-6.

(b) Using this framework, the Court must first determine whether the claims at issue are directed to a patent-ineligible concept. 566 U.S., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. If so, the Court then asks whether the claim's elements, considered both individually and " as an ordered combination," " transform the nature of the claim" into a patent-eligible application. Id., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. Pp. 7-17.

(1) The claims at issue are directed to a patent-ineligible concept: the abstract idea of intermediated settlement. Under " the longstanding rule that '[a]n idea of itself is not patentable,'" Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273, this Court has found ineligible patent claims involving an algorithm for converting binary-coded decimal numerals into pure binary form, id., at 71-72, 93 S.Ct. 253, 34 L.Ed.2d 273; a mathematical formula for computing " alarm limits" in a catalytic conversion process, Parker v. Flook, 437 U.S. 584, 594-595, 98 S.Ct. 2522, 57 L.Ed.2d 451; and, most recently, a method for hedging against the financial risk of price fluctuations, Bilski, 561 U.S. at 599, 130 S.Ct. 3218, 177 L.Ed.2d 792. It follows from these cases, and Bilski in particular, that the claims at issue are directed to an abstract idea. On their face, they are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is " 'a fundamental economic practice long prevalent in our system of commerce,'" ibid., and the use of a third-party intermediary (or " clearing house" ) is a building block of the modern economy. Thus, intermediated settlement, like hedging, is an " abstract idea" beyond § 101's scope. Pp. 7-10.

(2) Turning to the second step of Mayo 's framework: The method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention. Pp. 10-16.

(i) " Simply appending conventional steps, specified at a high level of generality," to a method already " well known in the art" is not " enough " to supply the " 'inventive concept'" needed to make this transformation. Mayo, supra, at ___, ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. The introduction of a computer into the claims does not alter the analysis. Neither stating an abstract idea " while adding the words 'apply it,'" Mayo, supra, at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325, nor limiting the use of an abstract idea " 'to a particular technological environment,'" Bilski, supra, at 610-611, 130 S.Ct. 3218, 177 L.Ed.2d 792, is enough for patent eligibility. Stating an abstract idea while adding the words " apply it with a computer" simply combines those two steps, with the same deficient result. Wholly generic computer implementation is not generally the sort of " additional

[134 S.Ct. 2351] featur[e]" that provides any " practical assurance that the process is more than a drafting effort designed to monopolize the [abstract idea] itself." Mayo, supra, at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. Pp. 11-14.

(ii) Here, the representative method claim does no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. Taking the claim elements separately, the function performed by the computer at each step--creating and maintaining " shadow" accounts, obtaining data, adjusting account balances, and issuing automated instructions--is " [p]urely 'conventional. '" Mayo, 566 U.S., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. Considered " as an ordered combination," these computer components " ad[d] nothing . . . that is not already present when the steps are considered separately." Id., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 325. Viewed as a whole, these method claims simply recite the concept of intermediated settlement as performed by a generic computer. They do not, for example, purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field. An instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not " enough " to transform the abstract idea into a patent-eligible invention. Id., at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321, 335. Pp. 14-16.

(3) Because petitioner's system and media claims add nothing of substance to the underlying abstract idea, they too are patent ineligible under § 101. Petitioner conceded below that its media claims rise or fall with its method claims. And the system claims are no different in substance from the method claims. The method claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long " warn[ed] . . . against" interpreting § 101 " in ways that make patent eligibility 'depend simply on the draftsman's art.'" Mayo, supra, at ___, 132 S.Ct. 1289, 182 L.Ed.2d 321. Holding that the system claims are patent eligible would have exactly that result. Pp. 16-17.

717 F.3d 1269, affirmed.

Carter G. Phillips argued the cause for petitioner.

Mark Perry argued the cause for respondents.

Donald B. Verrilli, Jr. argued the cause for the United States, as amicus curiae.

THOMAS, J., delivered the opinion for a unanimous Court. SOTOMAYOR, J., filed a concurring opinion, in which GINSBURG and BREYER, JJ., joined.

OPINION

THOMAS, JUSTICE

The patents at issue in this case disclose a computer-implemented scheme for mitigating " settlement risk" ( i.e., the risk that [134 S.Ct. 2352] only one party to a financial transaction will pay what it owes) by using a third-party intermediary. The question presented is whether these claims are patent eligible under 35 U.S.C. § 101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent- eligible invention. We therefore affirm the judgment of the United States Court of Appeals for the Federal Circuit.

I

A

Petitioner Alice Corporation is the assignee of several patents that disclose schemes to manage certain forms of financial risk. 1 According to the specification largely shared by the patents, the invention " enabl[es] the management of risk relating to specified, yet unknown, future events." App. 248. The specification further explains that the " invention relates to methods and apparatus, including electrical computers and data processing systems applied to financial matters and risk management." Id., at 243.

The claims at issue relate to a computerized scheme for mitigating " settlement risk" -- i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. In particular, the claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediary. Id., at 383-384. 2 The intermediary creates " shadow" credit and debit records ( i.e., account ledgers) that mirror the balances in the parties' real-world accounts at " exchange institutions" ( e.g., banks). The intermediary updates...

To continue reading

FREE SIGN UP