19 June 2014

Law in Plain English: Alice Corporation Pty. Ltd. v. CLS Bank International

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblogAlice Corporation Pty. Ltd. v. CLS Bank International

Argument: Mar 30 2014 (Aud.)

Discussion: Alice, an Australian company, owns several patents which relate to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate "counterparty" or "settlement" risk. Settlement risk refers to the risk to each party in an exchange that only one of the two parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counterparty's performance. Alice's patents address that risk by relying on a trusted third party to ensure the exchange of either both parties' obligations or neither obligation. CLS Bank filed suit against Alice seeking a declaratory judgment of noninfringement, invalidity, and unenforceability as to the  patents. Alice answered and counterclaimed, alleging infringement. the district court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice's patents invalid under 35 U.S.C. § 101. A panel of the Federal Circuit reversed, holding that the claims at issue, including claims drawn to methods, computer-readable media, and systems, were all patent eligible under § 101. Upon consideration en banc, a majority of the Federal Circuit affirmed the district court's holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under § 101.

Issue: The question before the Court is whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Holding: In a unanimous decision, the Supreme Court ruled that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101.
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