Judgement Briefs

Intellectual Property Rights

Alice Corporation Pty. Ltd. v. CLS Bank International

573 U.S. 208 (2014)

Citation
573 U.S. 208 (2014)
Court
Supreme Court of the United States
Date
19 June 2014
Bench
Full Court; Thomas J. delivered the unanimous opinion

Facts

  • Alice Corporation owned patents relating to computerised financial transactions.
  • The patents addressed settlement risk, meaning the possibility that one party would perform while the other failed to do so.
  • The claimed system used a computerised intermediary to:
  • record both parties’ obligations;
  • maintain shadow accounts;
  • authorise settlement only where sufficient resources existed.
  • CLS Bank sought a declaration that the patent claims were invalid.
  • Alice argued that use of a computer transformed the method into a patentable technological invention.
  • The dispute reached the United States Supreme Court.

Issue

  • Whether intermediated financial settlement is an abstract idea.
  • Whether implementing that idea through a generic computer supplies a patentable inventive concept.
  • Whether method, system and computer-readable-medium claims should receive different outcomes.

Rule

  • The Mayo–Alice framework involves two stages:
  • determine whether the claim is directed to a law of nature, natural phenomenon or abstract idea;
  • if so, determine whether additional elements supply an inventive concept sufficient to transform it into patent-eligible application.
  • Merely stating “apply it with a computer” is insufficient.
  • Generic functions such as:
  • storing information;
  • obtaining data;
  • performing calculations;
  • communicating results do not ordinarily transform an abstract idea.
  • The claim must contain something more than routine and conventional computer implementation.
  • Courts examine the claim as a whole but cannot allow drafting form to disguise the same abstract substance.

Application

  • The basic concept of using an intermediary to reduce settlement risk had long existed in commerce.
  • It was comparable to other fundamental economic practices previously treated as abstract.
  • Alice’s claims therefore satisfied the first stage.
  • At the second stage, the Court examined what the computer added.
  • The claims required ordinary computing activities:
  • creating electronic records;
  • adjusting account balances;
  • issuing instructions;
  • communicating with financial institutions.
  • They did not describe:
  • a new computer architecture;
  • an improved data-processing technique;
  • a technical solution to a computer problem;
  • unconventional hardware.
  • The computer merely performed the abstract financial method more quickly and efficiently.
  • Speed, automation and convenience through generic computing were not enough.
  • Alice argued that the system claims covered physical computer components and should therefore survive.
  • The Court rejected this distinction because the components were described only in generic terms.
  • Allowing the system claims would permit the applicant to monopolise the same abstract idea through different drafting.
  • The computer-readable-medium claims failed for the same reason.
  • The decision did not state that every software invention is unpatentable.
  • A computer-related claim may qualify where it improves technology or applies an idea through a specific inventive mechanism.
  • These claims lacked that additional technical contribution.

Conclusion

  • The Supreme Court unanimously held all the challenged claims patent ineligible.
  • Intermediated settlement was an abstract idea.
  • Generic computer implementation did not supply an inventive concept.
  • Use this case for: an abstract business method does not become patentable merely because ordinary computer functions are used to automate it.