Supreme Court No. 13–298

In their final patent ruling for the current term, the Supreme Court concluded that Alice Corporation’s claims were directed at the abstract idea of intermediated settlement that merely required generic computer implementation, and thus ineligible subject matter under § 101.

Alice is the assignee of four patents targeted at managing financial risk using a computer as a third party intermediary. CLS Bank is an international bank that facilitates currency transactions who filed a declaratory judgment action against Alice seeking a ruling that the patents were invalid. Both parties subsequently filed cross-motions for summary judgment regarding the patentability of Alice’s patent claims. The DC District Court granted CLS’s motion holding that all the claims of the patents at issue were invalid as an abstract idea. On appeal, the en banc Federal Circuit affirmed the District Court holding, following a divided panel decision that reversed the lower court.

The Supreme Court held that Alice’s claims were directed towards the abstract idea of intermediated settlement, likening the Alice claims to the claimed risk hedging steps found ineligible in the Bilski decision. The Court added that merely adding "a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention." The rationale for the Court’s conclusion was justified by the “preemption concern” that the Court characterized as undergirding § 101 jurisprudence; that allowing an inventor to monopolize the basic building blocks of innovation would impede rather than promote the progress of science and the useful arts. In upholding the Federal Circuit’s decision, the Court made it clear that taking an abstract idea and adding the words “apply it” would effectively make patentability hinge on the draftsman’s art, something the Court has long warned against.

Chris Genheimer