Supreme Court Rules that a Generic Computer Application of a Fundamental Concept is Not Patent Eligible in Alice Corp. v. CLS Bank

by Ropes & Gray LLP

On June 19, 2014, the Supreme Court in Alice Corporation Pty. Ltd. v. CLS Bank International, No. 13-298, unanimously held that software relating to a computerized scheme for mitigating “settlement risk” was not patent eligible under 35 U.S.C. § 101. Applying the two-part inquiry outlined by the Court in Mayo Collaborative Servs. v. Prometheus Labs., the Court found that the claims at issue were drawn to an abstract idea, and that nothing in the claims rose to the level of an inventive concept sufficient to transform that abstract idea into a patent eligible invention.

The patent claims at issue in Alice Corp. generally concern a computerized platform through which a trusted third party, acting as an escrow or intermediary, can verify that each party to a financial transaction is able to perform its obligations under the transaction, before the parties actually perform. The patents included method claims, computer-readable media claims, and system claims.

The Federal Circuit en banc, in a one paragraph per curiam opinion, affirmed the district court’s decision finding all asserted claims to be patent ineligible under § 101. A majority of the panel (7-3) voted to strike down the method and computer-readable media claims as merely claiming a patent ineligible abstract idea, whereas the panel was evenly split as to whether the system claims were directed to patent eligible subject matter – though this was sufficient to affirm the decision below. In addition, a majority of the panel (8-2) agreed that all claims, regardless of their type, should be validated or invalidated together. The fractured panel authored six opinions plus “additional reflections” by former Chief Judge Rader, none of which garnered majority support. 

On appeal to the Supreme Court, Alice Corp. argued that claims are patent ineligible only if they merely recite, or simply use a computer to perform, a “fundamental truth” that is “equivalent to a law of nature” and “exist[s] in principle apart from any human action,” such as a mathematical formula. All other claims – including those that apply a fundamental truth in a “very specific way” (such as the patents-in-suit, in Alice Corp.’s view) – are patent eligible. CLS Bank argued that the Court’s precedents control the analysis in this case: Bilski v. Kappos dictates that the asserted claims, which are directed to a fundamental economic principle that is conceptually no different from the claims that were at issue in Bilski, recite an abstract idea; and Mayo v. Prometheus dictates that the asserted claims are not patent eligible because they lack an inventive concept sufficient to transform the underlying patent ineligible abstract idea into a patent eligible invention. 

In determining that the claims were directed to a patent ineligible abstract idea that is beyond the scope of § 101, the Court drew heavily on its decision in Bilski to find that the claimed concept of intermediated settlement is “a fundamental economic practice long prevalent in our system of commerce.” The Court emphasized that the concern driving  § 101 is “pre-emption” – “that patent law not inhibit further discovery by improperly tying up the future use of these building blocks of human ingenuity.”  Thus, the Court was unmoved by Alice Corp.’s attempt to narrow § 101, again citing Bilski, in which all of the claims – including one that reduced an abstract idea to a mathematical formula – were held to be patent ineligible abstract ideas. 

In determining that nothing in the claims transformed the abstract idea into a patent eligible invention, the Court, drawing on its precedents in Mayo, Parker v. Flook, and Diamond v. Diehr, found that the generic computer implementation of the claims was insufficient to supply the necessary inventive concept to transform an abstract idea into a patent eligible invention, noting that the process could be carried out on existing computers. While the Court’s decision limits software patents, it does not eliminate them, especially those that “improve the functioning of a computer itself” or “effect an improvement in any other technology or technical field.” 

Justice Sotomayor wrote a separate concurrence, joined by Justice Ginsburg and Justice Breyer. Parroting Justice Stevens’ concurrence in Bilski v. Kappos (which was also joined by Justices Sotomayor, Ginsburg, and Breyer), Justice Sotomayor stated her view that any claim that merely describes a business method is patent ineligible due to its failure to qualify as a process under § 101.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ropes & Gray LLP | Attorney Advertising

Written by:

Ropes & Gray LLP

Ropes & Gray LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.