Alice Corp. Pty. Ltd. v. CLS Bank Int'l

Decision Date19 June 2014
Docket NumberNo. 13–298.,13–298.
Citation573 U.S. 208,134 S.Ct. 2347,189 L.Ed.2d 296
Parties ALICE CORPORATION PTY. LTD., Petitioner v. CLS BANK INTERNATIONAL et al.
CourtU.S. Supreme Court

Carter G. Phillips, Washington, DC, for Petitioner.

Mark Perry, Washington, DC, for Respondents.

Donald B. Verrilli, Jr., Solicitor General, for the United States as amicus curiae, by special leave of the Court, supporting the respondents.

Adam L. Perlman, Williams & Connolly LLP, Robert E. Sokohl, Sterne, Kessler, Goldstein & Fox PLLC, Carter G. Phillips, Counsel of Record, Jeffrey P. Kushan, Sidley Austin LLP, Washington, DC, Constantine L. Trela, Jr., Tacy F. Flint, Timothy R. Hargadon, Benjamin M. Flowers, Sidley Austin LLP, Chicago, IL, for Petitioner.

Mark A. Perry, Counsel of Record, Helgi C. Walker, Brian M. Buroker, Alexander N. Harris, Gibson, Dunn & Crutcher LLP, Washington, DC, for Respondents.

Justice THOMAS delivered the opinion of the Court.

The patents at issue in this case disclose a computer-implemented scheme for mitigating "settlement risk" (i.e., the risk that 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 the shadow records in real time as transactions are entered, allowing "only those transactions for which the parties' updated shadow records indicate sufficient resources to satisfy their mutual obligations." 717 F.3d 1269, 1285 (C.A.Fed.2013) (Lourie, J., concurring). At the end of the day, the intermediary instructs the relevant financial institutions to carry out the "permitted" transactions in accordance with the updated shadow records, ibid., thus mitigating the risk that only one party will perform the agreed-upon exchange.

In sum, the patents in suit claim (1) the foregoing method for exchanging obligations (the method claims), (2) a computer system configured to carry out the method for exchanging obligations (the system claims), and (3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims). All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well.

B

Respondents CLS Bank International and CLS Services Ltd. (together, CLS Bank) operate a global network that facilitates currency transactions. In 2007, CLS Bank filed suit against petitioner, seeking a declaratory judgment that the claims at issue are invalid, unenforceable, or not infringed. Petitioner counterclaimed, alleging infringement. Following this Court's decision in Bilski v. Kappos, 561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010), the parties filed cross-motions for summary judgment on whether the asserted claims are eligible for patent protection under 35 U.S.C. § 101. The District Court held that all of the claims are patent ineligible because they are directed to the abstract idea of "employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk." 768 F.Supp.2d 221, 252 (D.C.2011).

A divided panel of the United States Court of Appeals for the Federal Circuit reversed, holding that it was not "manifestly evident" that petitioner's claims are directed to an abstract idea. 685 F.3d 1341, 1352, 1356 (2012). The Federal Circuit granted rehearing en banc, vacated the panel opinion, and affirmed the judgment of the District Court in a one-paragraph per curiam opinion. 717 F.3d, at 1273. Seven of the ten participating judges agreed that petitioner's method and media claims are patent ineligible. See id., at 1274 (Lourie, J., concurring); id., at 1312–1313 (Rader, C.J., concurring in part and dissenting in part). With respect to petitioner's system claims, the en banc Federal Circuit affirmed the District Court's judgment by an equally divided vote. Id., at 1273.

Writing for a five-member plurality, Judge Lourie concluded that all of the claims at issue are patent ineligible. In the plurality's view, under this Court's decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ––––, 132 S.Ct. 1289, 182 L.Ed.2d 321 (2012), a court must first "identif[y] the abstract idea represented in the claim," and then determine "whether the balance of the claim adds ‘significantly more.’ " 717 F.3d, at 1286. The plurality concluded that petitioner's claims "draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary," and that the use of a computer to maintain, adjust, and reconcile shadow accounts added nothing of substance to that abstract idea. Ibid.

Chief Judge Rader concurred in part and dissented in part. In a part of the opinion joined only by Judge Moore, Chief Judge Rader agreed with the plurality that petitioner's method and media claims are drawn to an abstract idea. Id., at 1312–1313. In a part of the opinion joined by Judges Linn, Moore, and O'Malley, Chief Judge Rader would have held that the system claims are patent eligible because they involve computer "hardware" that is "specifically programmed to solve a complex problem." Id., at 1307. Judge Moore wrote a separate opinion dissenting in part, arguing that the system claims are patent eligible. Id., at 1313–1314. Judge Newman filed an opinion concurring in part and dissenting in part, arguing that all of petitioner's claims are patent eligible. Id., at 1327. Judges Linn and O'Malley filed a separate dissenting opinion reaching that same conclusion. Ibid.

We granted certiorari, 571 U.S. ––––, 134 S.Ct. 734, 187 L.Ed.2d 590 (2013), and now affirm.

II

Section 101 of the Patent Act defines the subject matter eligible for patent protection. It provides:

"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." 35 U.S.C. § 101.

"We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable." Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. ––––, ––––, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013) (internal quotation marks and brackets omitted). We have interpreted § 101 and its predecessors in light of this exception for more than 150 years. Bilski, supra, at 601–602, 130 S.Ct. 3218; see also O'Reilly v. Morse, 15 How. 62, 112–120, 14 L.Ed. 601 (1854) ; Le Roy v . Tatham, 14 How. 156, 174–175, 14 L.Ed. 367 (1853).

We have described the concern that drives this exclusionary principle as one of pre-emption. See, e.g., Bilski, supra, at 611–612, 130 S.Ct. 3218 (upholding the patent "would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea"). Laws of nature, natural phenomena, and abstract ideas are " "the basic tools of scientific and technological work." " Myriad, supra, at ––––, 133 S.Ct., at 2116. "[M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it," thereby thwarting the primary object of the patent laws. Mayo, supra, at ––––, 132 S.Ct., at 1923; see U.S. Const., Art. I, § 8, cl. 8 (Congress "shall have Power ... To promote the Progress of Science and useful Arts"). We have "repeatedly emphasized this ... concern that patent law not inhibit further discovery by improperly tying up the future use of" these building blocks of human ingenuity. Mayo, supra, at ––––, 132 S.Ct., at 1301 (citing Morse, supra, at 113).

At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. Mayo, 566 U.S., at ––––, 132 S.Ct., at 1293–1294. At some level, "all inventions ... embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas." Id., at ––––, 132 S.Ct., at 1293. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U.S. 175, 187, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981). "[A]pplication[s]" of such concepts " ‘to a new and useful end,’ " we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972).

Accordingly, in applying the § 101 excep...

To continue reading

Request your trial
9543 cases
  • Int'l Bus. Machs. Corp. v. Zillow Grp., Inc.
    • United States
    • U.S. District Court — Western District of Washington
    • July 14, 2021
    ...are not directed to eligible subject matter as required by Section 101 of the Patent Act .2 In Alice Corp. v. CLS Bank Int'l , 573 U.S. 208, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014), the Supreme Court reminded us that, pursuant to § 101 , "[l]aws of nature, natural phenomena, and abstract i......
  • Carfax, Inc. v. Red Mountain Techs., Case No. 1:14–cv–01590–GBL–IDD.
    • United States
    • U.S. District Court — Eastern District of Virginia
    • March 30, 2015
    ...infringement under 35 U.S.C. § 271 where Defendants allege that under 35 U.S.C. § 101 and consistent with the Supreme Court's ruling in Alice, the patents are directed towards non-patentable subject matter. The third issue is whether the Court should grant Defendant Red Mountain's 12(b)......
  • Device Enhancement LLC. v. Amazon.com, Inc.
    • United States
    • U.S. District Court — District of Delaware
    • May 17, 2016
    ...by improperly tying up the future use of’ these building blocks of human ingenuity." Alice Corp. Pty. Ltd. v. CLS Bank Int'l , ––– U.S. ––––, 134 S.Ct. 2347, 2354, 189 L.Ed.2d 296 (2014) (citing Bilski II , 561 U.S. at 611–12, 130 S.Ct. 3218 and Mayo Collaborative Servs. v. Prometheus Labs.......
  • Ocado Innovation, Ltd. v. AutoStore AS
    • United States
    • U.S. District Court — District of New Hampshire
    • August 13, 2021
    ...patent-ineligible concept such as laws of nature, natural phenomena, or abstract ideas. See Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208, 217, 134 S.Ct. 2347, 189 L.Ed.2d 296 (2014) (citing Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 77-78, 132 S.Ct. 1289, 182......
  • Request a trial to view additional results
79 firm's commentaries
  • My Reflections On Examining And Prosecuting Patents In AI For The Last 40 Years
    • United States
    • Mondaq United States
    • October 12, 2021
    ...6 Bilski v. Kappos, 561 U.S. 593 (210); Mayo v. Prometheus, 566 U.S. 66 (2012); Alice v. CLS Bank 573 U.S. 208 7 October 2019 Update: Subject Matter Eligibility, issued October 17, 2019; https://www.uspto.gov/sites/default/files/documents/peg_oct_2019_update.pdf The content of this article ......
  • My Reflections On Examining And Prosecuting Patents In AI For The Last 40 Years
    • United States
    • Mondaq United States
    • October 12, 2021
    ...6 Bilski v. Kappos, 561 U.S. 593 (210); Mayo v. Prometheus, 566 U.S. 66 (2012); Alice v. CLS Bank 573 U.S. 208 7 October 2019 Update: Subject Matter Eligibility, issued October 17, 2019; https://www.uspto.gov/sites/default/files/documents/peg_oct_2019_update.pdf The content of this article ......
  • Considerations For Innovators When Navigating Patent Eligibility On The International Stage
    • United States
    • Mondaq United States
    • December 2, 2021
    ...2020 ' Executive Summary," World Intellectual Property Organization, https://bit.ly/3HfFEfW (2020). 2. Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208 (2014) (quoting Mayo Collaborative Servs. v. Prometheus Lab'ys, Inc., 566 U.S. 66, 78 3. Id. at 221. 4. McRO, Inc. v. Bandai Namco Games Am......
  • Considerations For Innovators When Navigating Patent Eligibility On The International Stage
    • United States
    • Mondaq United States
    • December 2, 2021
    ...2020 ' Executive Summary," World Intellectual Property Organization, https://bit.ly/3HfFEfW (2020). 2. Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208 (2014) (quoting Mayo Collaborative Servs. v. Prometheus Lab'ys, Inc., 566 U.S. 66, 78 3. Id. at 221. 4. McRO, Inc. v. Bandai Namco Games Am......
  • Request a trial to view additional results
106 books & journal articles
  • An Interview with Rob Law
    • United States
    • ABA General Library Landslide No. 10-6, July 2018
    • July 1, 2018
    ...https://www.forbes.com/sites/ ericgoldman/2012/11/28/the-problems-with-software-patents/. 5. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). 6. H.O. Maycotte, To Patent or Not to Patent: That Is the Question for Startups , Forbes (Jan. 12, 2016), https://www.forbes.com/site......
  • Cultural Identities and Territoriality in a Global Marketplace
    • United States
    • ABA General Library Landslide No. 14-4, June 2022
    • June 1, 2022
    ...is, see Mark A. Lemley et al., The Patent Enforcement Iceberg , 97 Tex. L. Rev. 801 (2019). 13. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014). 14. For more information on the comeback of Alice -impacted patents, see Kent Richardson et al., The Surprising Impact of Alice on th......
  • The Supreme assimilation of patent law.
    • United States
    • Michigan Law Review Vol. 114 No. 8, June 2016
    • June 1, 2016
    ...1289 (2012). (52.) Ass'n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013). (53.) Alice Corp. v. CLS Bank Int'l, 134 S. Ct. 2347 (54.) KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007). (55.) Nautilus, Inc. v. Biosig Instruments, Inc., 134 S. Ct. 2120 (2014). (56.) ......
  • Willful Patent Infringement: Lingering Questions
    • United States
    • ABA General Library Landslide No. 14-4, June 2022
    • June 1, 2022
    ...is, see Mark A. Lemley et al., The Patent Enforcement Iceberg , 97 Tex. L. Rev. 801 (2019). 13. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014). 14. For more information on the comeback of Alice -impacted patents, see Kent Richardson et al., The Surprising Impact of Alice on th......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT