## Facts

- Alice Corp. owned patents claiming computer-implemented methods and systems to mitigate “settlement risk” in financial transactions.
- The claimed scheme used a third-party intermediary to maintain “shadow” credit and debit records mirroring parties’ real accounts and to permit transactions only when shadow records showed sufficient funds.
- The asserted claims included (1) method claims for exchanging financial obligations, (2) system claims describing generic computer components configured to perform the method, and (3) computer-readable medium claims containing program code to perform the method.
- CLS Bank sought declaratory relief of noninfringement and invalidity; Alice counterclaimed for infringement.
- The district court held all asserted claims ineligible under 35 U.S.C. § 101 as directed to an abstract idea implemented electronically.
- The Federal Circuit, sitting en banc, produced no single rationale; it affirmed ineligibility for the method and medium claims, and an equally divided court affirmed ineligibility for the system claims.
- The Supreme Court granted certiorari to address patent eligibility of computer-implemented inventions under § 101.

## Issues

1. Whether claims directed to intermediated settlement are drawn to an “abstract idea” excluded from patent eligibility under 35 U.S.C. § 101.
2. Whether implementing that concept on a generic computer supplies an “inventive concept” that transforms the claims into patent-eligible subject matter.
3. Whether reciting the invention as a system or computer-readable medium, rather than a method, changes the § 101 analysis.

## Decision

- The Supreme Court unanimously affirmed the judgment that all asserted claims are not patent-eligible under § 101.
- Applying a two-step framework, the Court held the claims are directed to the abstract idea of intermediated settlement, a long-prevalent economic practice.
- The Court held the claims add only generic computer implementation—conventional functions such as maintaining shadow accounts, obtaining data, adjusting balances, and issuing instructions—which does not transform the abstract idea into a patent-eligible application.
- The system and computer-readable medium claims were not meaningfully different from the method claims because they recited generic components configured to carry out the same abstract idea.
- Justice Sotomayor, joined by Justices Ginsburg and Breyer, concurred in the judgment, expressing the view that methods of doing business should not qualify as “process[es]” under § 101.

## Legal Principles

- Section 101 contains implicit exceptions for laws of nature, natural phenomena, and abstract ideas; patents may not monopolize these basic tools of human ingenuity.
- Courts apply a two-step test: (1) determine whether the claims are directed to a patent-ineligible concept; if so, (2) determine whether claim elements, individually or as an ordered combination, add an “inventive concept” that transforms the claim into a patent-eligible application.
- A fundamental economic practice may constitute an abstract idea even when limited to a particular technological environment.
- Merely requiring generic computer implementation, or adding conventional steps stated at a high level of generality, does not supply the required inventive concept.
- Claims phrased as systems or media are ineligible when they recite only generic computer components used to implement the same abstract idea.

## Conclusion

The Court held that intermediated settlement is an abstract idea and that stating it as a computer-implemented method, system, or computer-readable medium using generic components and conventional functions does not add an inventive concept; therefore, all asserted claims were ineligible under 35 U.S.C. § 101.


Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014)