Alice Corp v CLS Bank, No 13–298, 573 US ____ (2014)
Justice Thomas (for the Court):
At issue were Alice’s US patents 5,970,479, 6,912,510, 7,149,720, and 7,725,375. 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.”  CLS Bank alleged that the claims were invalid for being drawing to patent-ineligible subject matter. The District Court agreed, as did an en banc panel of the CAFC. Alice appealed.
Appeal is dismissed. The claims at issue are drawn to the abstract idea of intermediated settlement, and merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention.
Claim 33 in the ‘479 patent reads:
33. A method of exchanging obligations as between parties, each party holding a credit record and a debit record with an exchange institution, the credit records and debit records for exchange of predetermined obligations, the method comprising the steps of:
(a) creating a shadow credit record and a shadow debit record for each stakeholder party to be held independently by a supervisory institution from the exchange institutions;
(b) obtaining from each exchange institution a start-of-day balance for each shadow credit record and shadow debit record;
(c) for every transaction resulting in an exchange obligation, the supervisory institution adjusting each respective party’s shadow credit record or shadow debit record, allowing only these transactions that do not result in the value of the shadow debit record being less than the value of the shadow credit record at any time, each said adjustment taking place in chronological order; and
(d) at the end-of-day, the supervisory institution instructing ones of the exchange institutions to exchange credits or debits to the credit record and debit record of the respective parties in accordance with the adjustments of the said permitted transactions, the credits and debits being irrevocable, time invariant obligations placed on the exchange institutions.
The Court summarised the claims as being directed to “(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.” The parties also agreed that the “method claims require a computer as well.” 
To determine whether the claims at issue are drawn to an abstract idea, the Court applied its two-step framework from Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. ___ (2012): “[f]irst, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. If so, we then ask, ‘[w]hat else is there in the claims before us?’ To answer that question, we consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” 
At the first step of the Mayo framework, the Court found that the claims at issue were “drawn to the abstract idea of intermediated settlement.”  In making this finding, the Court analogised Alice’s “intermediated mediation” patent claims with “risk hedging” claims in Bilski.
Furthermore, the Court rejected Alice’s argument that “the abstract-ideas category is confined to ‘pre-existing, fundamental truth[s]’ that ‘exis[t] in principle apart from any human action.’” 
Turning then to the second step of the Mayo framework, the Court concluded that “the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.” 
The Court reiterated the proposition from Mayo that “[a] claim that recites an abstract idea must include ‘additional features’ to ensure ‘that the [claim] is more than a drafting effort designed to monopolize the [abstract idea].’” 
The Court next reviewed its jurisprudence on subject matter eligibility, and stated that “[t]hese cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.”  The Court further indicated that “if a patent’s recitation of a computer amounts to a mere instruction to ‘implemen[t]’ an abstract idea ‘on . . . a computer,’…that addition cannot impart patent eligibility.” 
The Court went on to reject Alice’s argument that computers, recited in a claim, are physical, and not purely conceptual, and therefore remove the claim from the realm of abstract ideas. The Court reasoned that following this argument “an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept. Such a result would make the determination of patent eligibility ‘depend simply on the draftsman’s art’.” 
The Court found that “each step [of the method claim] does no more than require a generic computer to perform generic computer functions.” 
Next, the Court considered the claim elements as a whole, and stated that Alice’s “method claims simply recite the concept of intermediated settlement as performed by a generic computer.”  The Court concluded that “the claims at issue amount to ‘nothing significantly more’ than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer.” 
Alice’s computer system and computer-readable medium claims were considered next, and the Court found them to be drawn to patent ineligible subject matter also. The Court rejected Alice’s argument that the system claims recite specific hardware, and as such are not abstract. The Court stated that “what petitioner characterizes as specific hardware – a ‘data processing system’ with a ‘communications controller’ and ‘data storage unit,’…is purely functional and generic. Nearly every computer will include a ‘communications controller’ and ‘data storage unit’ capable of performing the basic calculation, storage, and transmission functions required by the method claims….As a result, none of the hardware recited by the system claims ‘offers a meaningful limitation beyond generally linking the use of the [method] to a particular technological environment, that is, implementation via computers.’” 
Justice Sotomayor (Concurring):
In her one-paragraph concurring opinion, Justice Sotomayor hinted that being “merely a method of doing business” is also a ground of patent ineligibility, but agreed that the claims at issue were drawn to an abstract idea.
Perhaps more than any of its previous decisions, in this decision the Supreme Court attempts to provide an unequivocal assessment of patent eligibility of computer-implemented methods. The Court has underlined that reciting a generic computer or conventional computer-implementation is not enough to render an otherwise abstract idea patent eligible. Of particular interest to patent drafters, at least in four instances the Court cautions that patent eligibility should not depend merely on “drafting efforts” or the “draftman’s art”.
The standard outlined in this decision is in some ways encouraging as it is at least similar to approaches in Canada and Europe. It is also very discouraging because the standard remains unclear because the Court is allowing claim construction on the subject matter phase to assume equivalencies (e.g. a computer is just a disguise for a person), while in an infringement analysis such an equivalency would be virtually impossible to establish. The same problem exists in Canada. The Europeans, on the other hand, tend to deal with this issue under an obviousness analysis rather than a statutory subject matter analysis. The latter approach is preferred for predictability.
Overall the authors do not believe much has changed and that careful drafting of computer-implemented inventions is critical. However, the leeway given by the State Street decision (149 F.3d 1368 (Fed. Cir. 1998)) is gone.