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
- Whether claims directed to intermediated settlement are drawn to an “abstract idea” excluded from patent eligibility under 35 U.S.C. § 101.
- Whether implementing that concept on a generic computer supplies an “inventive concept” that transforms the claims into patent-eligible subject matter.
- 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.