Yesterday, the Supreme Court issued its highly anticipated decision in Alice v. CLS Bank.  In a unanimous ruling, the Court held that Alice Corporation’s patents for computerized mitigation of settlement risk cover an abstract idea, and are therefore patent-ineligible and invalid under § 101 of the Patent Act.

As described by the Court, Alice’s patents cover systems and methods for facilitating the exchange of financial obligations between two parties, by using a computer system as a third-party intermediary.  Citing its rationale in Bilski v. Kappos, the Court reasoned that, like Bilski’s patented methods of risk hedging, “the concept of intermediated settlement is ‘a fundamental economic practice long prevalent in our system of commerce’.”  The Court also cited its principle against preemption as outlined in Mayo v. Prometheus, emphasizing that “patent law [should] not inhibit further discovery by improperly tying up the future use of building blocks of human ingenuity.” The Court concluded that “the use of a third-party intermediary (or ‘clearing house’) is a building block of the modern economy.”

Having determined that Alice’s claims cover an abstract idea, the Court applied the second prong of its framework from Mayo, by evaluating whether the language of the claims transformed their claimed abstract idea into a patent-eligible invention.  On this point, the court held that Alice’s claims merely required “generic computer implementation” and therefore failed to transform their abstract idea into a patent-eligible invention.

Notably, the Supreme Court declined to define what constitutes an abstract idea, and declined to provide a pronouncement regarding the patent-eligibility of all business method or software patents.  However, the Court was clear that the implementation of an idea on a computer does not transform that idea into patent-eligible subject matter.  Thus, the Supreme Court’s decision appears to be tailored to the facts of the case at issue, and provides another example of what constitutes a patent-ineligible abstract idea.


For more analysis of the oral arguments in this case, visit:

The Supreme Court’s opinion is available at: