Alice Corp. v. CLS Bank Int'l

24 Fla. L. Weekly Fed. S 870, 189 L. Ed. 2d 296, 134 S. Ct. 2347, 2014 U.S. LEXIS 4303, 110 U.S.P.Q. 2d (BNA) 1976, 2014 WL 2765283, 82 U.S.L.W. 4508
Supreme Court of the United States·Decided June 19, 2014·No. No. 13–298.·Published·Cited by 4 cases

Opinion

Justice THOMAS delivered the opinion of the Court.

The patents at issue in this case disclose a computer-implemented scheme for mitigating "settlement risk" ( i.e., the risk that *2352only one party to a financial transaction will pay what it owes) by using a third-party intermediary. The question presented is whether these claims are patent eligible under 35 U.S.C. § 101, or are instead drawn to a patent-ineligible abstract idea. We hold that the claims at issue are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention. We therefore affirm the judgment of the United States Court of Appeals for the Federal Circuit.

I

A

Petitioner Alice Corporation is the assignee of several patents that disclose schemes to manage certain forms of financial risk.1 According to the specification largely shared by the patents, the invention "enabl[es] the management of risk relating to specified, yet unknown, future events." App. 248. The specification further explains that the "invention relates to methods and apparatus, including electrical computers and data processing systems applied to financial matters and risk management." Id., at 243.

The claims at issue relate to a computerized scheme for mitigating "settlement risk"- i.e., the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. In particular, the claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediary. Id., at 383-384.2 The intermediary creates "shadow" credit and debit records ( i.e., account ledgers) that mirror the balances in the parties' real-world accounts at "exchange institutions" ( e.g., banks). The intermediary updates the shadow records in real time as transactions are entered, allowing "only those transactions for which the parties' updated shadow records indicate sufficient resources to satisfy their mutual obligations." 717 F.3d 1269, 1285 (C.A.Fed.2013) (Lourie, J., concurring). At the end of the day, the intermediary instructs the relevant financial institutions to carry out the "permitted" transactions in accordance with the updated shadow records, ibid., thus mitigating the risk that only one party will perform the agreed-upon exchange.

*2353In sum, the patents in suit claim (1) the foregoing method for exchanging obligations (the method claims), (2) a computer system configured to carry out the method for exchanging obligations (the system claims), and (3) a computer-readable medium containing program code for performing the method of exchanging obligations (the media claims). All of the claims are implemented using a computer; the system and media claims expressly recite a computer, and the parties have stipulated that the method claims require a computer as well.

B

Respondents CLS Bank International and CLS Services Ltd. (together, CLS Bank) operate a global network that facilitates currency transactions. In 2007, CLS Bank filed suit against petitioner, seeking a declaratory judgment that the claims at issue are invalid, unenforceable, or not infringed. Petitioner counterclaimed, alleging infringement. Following this Court's decision in Bilski v. Kappos, 561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792 (2010), the parties filed cross-motions for summary judgment on whether the asserted claims are eligible for patent protection under 35 U.S.C. § 101. The District Court held that all of the claims are patent ineligible because they are directed to the abstract idea of "employing a neutral intermediary to facilitate simultaneous exchange of obligations in order to minimize risk." 768 F.Supp.2d 221, 252 (D.C.2011).

A divided panel of the United States Court of Appeals for the Federal Circuit reversed, holding that it was not "manifestly evident" that petitioner's claims are directed to an abstract idea. 685 F.3d 1341, 1352, 1356 (2012). The Federal Circuit granted rehearing en banc, vacated the panel opinion, and affirmed the judgment of the District Court in a one-paragraph per curiam opinion. 717 F.3d, at 1273. Seven of the ten participating judges agreed that petitioner's method and media claims are patent ineligible. See id., at 1274 (Lourie, J., concurring); id., at 1312-1313 (Rader, C.J., concurring in part and dissenting in part). With respect to petitioner's system claims, the en banc Federal Circuit affirmed the District Court's judgment by an equally divided vote. Id., at 1273.

Writing for a five-member plurality, Judge Lourie concluded that all of the claims at issue are patent ineligible.

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Alice Corp. v. CLS Bank Int'l, 24 Fla. L. Weekly Fed. S 870, 189 L. Ed. 2d 296, 134 S. Ct. 2347, 2014 U.S. LEXIS 4303, 110 U.S.P.Q. 2d (BNA) 1976, 2014 WL 2765283, 82 U.S.L.W. 4508 (U.S. 2014).

24 Fla. L. Weekly Fed. S 870 (Alice Corp. v. CLS Bank Int'l) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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