ALICE CORPORATION PTY. LTD. v. CLS BANK INTERNATIONAL ET AL.
No. 13-298
SUPREME COURT OF THE UNITED STATES
June 19, 2014
573 U. S. ____ (2014)
OCTOBER TERM, 2013
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
Syllabus
ALICE CORPORATION PTY. LTD. v. CLS BANK INTERNATIONAL ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
Argued March 31, 2014—Decided June 19, 2014
Petitioner Alice Corporation is the assignee of several patents that disclose a 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 patent claims are designed to facilitate the exchange of financial obligations between two parties by using a computer system as a third-party intermediаry. The patents in suit claim (1) a method for exchanging financial obligations, (2) a computer system configured to carry out the method for exchanging obligations, and (3) a computer-readable medium containing program code for performing the method of exchanging obligations.
Respondents (together, CLS Bank), who operate a global network that facilitates currency transactions, filed suit against petitioner, arguing that the patent claims at issue are invalid, unenforceable, or not infringed. Petitioner counterclaimed, alleging infringement. After Bilski v. Kappos, 561 U. S. 593, was decided, the District Court held that all of the claims were ineligible for patent protection under
Held: Because the claims are drawn to a patent-ineligible abstract idea, they are not patent eligible under
(a) The Court has long held that
(b) Using this framework, the Court must first determine whether the claims аt issue are directed to a patent-ineligible concept. 566 U. S., at ___. If so, the Court then asks whether the claim‘s elements, considered both individually and “as an ordered combination,” “transform the nature of the claim” into a patent-eligible application. Id., at ___. Pp. 7–17.
(1) The claims at issue are directed to a patent-ineligible concept: the abstract idea of intermediated settlement. Under “the longstanding rule that ‘[a]n idea of itself is not patentable,‘” Gottschalk v. Benson, 409 U. S. 63, 67, this Court has found ineligible patent claims involving an algorithm for converting binary-coded decimal numerals into pure binary form, id., at 71–72; a mathematical formula for computing “alarm limits” in a catalytic conversion process, Parker v. Flook, 437 U. S. 584, 594–595; and, most recently, a method for hedging against the financial risk of price fluctuations, Bilski, 561 U. S., at 599. It follows from these cases, and Bilski in particular, that the claims at issue are directed to an abstract idea. On their face, they are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “a fundamental economic practice long prevalent in our system of commerce,” ibid., and the use of a third-party intermediary (or “clearing house“) is a building block of the modern economy. Thus, intermediated settlement, like hedging, is an “abstract idea” beyond
(2) Turning to the second step of Mayo‘s framework: The method claims, which merely require generic computer implementation, fail to transform that abstract idea into a рatent-eligible invention. Pp. 10–16.
(i) “Simply appending conventional steps, specified at a high level of generality,” to a method already “well known in the art” is not “enough” to supply the “inventive concept‘” needed to make this transformation. Mayo, supra, at ___. The introduction of a computer into the claims does not alter the analysis. Neither stating an abstract idea “while adding the words ‘apply it,‘” Mayo, supra, at ___, nor limiting the use of an abstract idea “to a particular technological environment,” Bilski, supra, at 610–611, is enough for patent eligibility. Stating an abstract idea while adding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Wholly generic computer implementation is not generally the
(ii) Here, the representative method claim does no more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. Taking the claim elements separately, the function performed by the computer at each step—creating and maintaining “shadow” accounts, obtaining data, adjusting account balances, and issuing automated instructions—is “[p]urely ‘conventional.‘” Mayo, 566 U. S., at ___. Considered “as an ordered combination,” these computer components “ad[d] nothing thаt is not already present when the steps are considered separately.” Id., at ___. Viewed as a whole, these method claims simply recite the concept of intermediated settlement as performed by a generic computer. They do not, for example, purport to improve the functioning of the computer itself or effect an improvement in any other technology or technical field. An instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer is not “enough” to transform the abstract idea into a patent-eligible invention. Id., at ___. Pp. 14–16.
(3) Because petitioner‘s system and media claims add nothing of substance to the underlying abstract idea, they too are patent ineligible under
717 F. 3d 1269, affirmed.
THOMAS, J., delivered the opinion for a unanimous Court. SOTOMAYOR, J., filed a concurring opinion, in which GINSBURG and BREYER, JJ., joined.
NOTICE: This opinion is subject to formаl revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 13-298
ALICE CORPORATION PTY. LTD, PETITIONER v. CLS BANK INTERNATIONAL ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
[June 19, 2014]
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 only 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
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
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)
In 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 obligatiоns (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 (2010), the parties filed cross-motions for summary judgment on whether the asserted claims are eligible for patent protection under
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. In the plurality‘s view, under this Court‘s decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. 66 (2012), a court must first “identif[y] the abstract idea represented in the claim,” and then determine “whether the balance of the claim adds ‘significantly more.‘” 717 F. 3d, at 1286. The plurality concluded that petitioner‘s claims “draw on the abstract idea of reducing settlement risk by effecting trades through a third-party intermediary,” and that the use of a computer to maintain, adjust, and reconcile shadow accounts added nothing of substance to that abstract idea. Ibid.
Chief Judge Rader concurred in part and dissented in part. In a part of the opinion joined only by Judge Moore, Chief Judge Rader agreed with the plurality that petitioner‘s method and media claims are drawn to an abstract idea. Id., at 1312–1313. In a part of the opinion joined by Judges Linn, Moore, and O‘Malley, Chief Judge Rader
We granted certiorari, 571 U. S. 1068 (2013), and now affirm.
II
“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”
35 U. S. C. §101 .
“We have long held that this provision contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” Association for Moleculаr Pathology v. Myriad Genetics, Inc., 569 U. S. 576, 589 (2013) (internal quotation marks and brackets omitted). We have interpreted
We have described the concern that drives this exclusionary principle as one of pre-emption. See, e.g., Bilski, supra, at 611–612 (upholding the patent “would pre-empt use of this approach in all fields, and would effectively
At the same time, we tread carefully in construing this exclusionary principle lest it swallow all of patent law. Mayo, 566 U. S., at 71. At some level, “all inventions embody, use, reflect, rest upon, or apply laws of nature, natural phenomena, or abstract ideas.” Id., at ___. Thus, an invention is not rendered ineligible for patent simply because it involves an abstract concept. See Diamond v. Diehr, 450 U. S. 175, 187 (1981). “[A]pplication[s]” of such concepts “‘“to a new and useful end,“‘” we have said, remain eligible for patent protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).
Accordingly, in applying the
In Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U. S. 66 (2012), we set forth a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstraсt ideas from those that claim patent-eligible applications of those concepts. First, we determine whether the claims at issue are directed to one of those patent-ineligible concepts. Id., at ___. If so, we then ask, “[w]hat else is there in the claims before us?” Id., at ___. 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. Id., at ___. We have described step two of this analysis as a search for an “‘inventive concept‘“—i.e., an element or combination of elements that is “sufficient to ensure that the pаtent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Id., at ___.3
A
We must first determine whether the claims at issue are directed to a patent-ineligible concept. We conclude that they are: These claims are drawn to the abstract idea of intermediated settlement.
The “abstract ideas” category embodies “the longstanding rule that ‘[a]n idea of itself is not patentable.‘” Benson, supra, at 67 (quoting Rubber-Tip Pencil Co. v. Howard, 20 Wall. 498, 507 (1874)); see also Le Roy, supra, at
We most recently addressed the category of abstract ideas in Bilski v. Kappos, 561 U. S. 593 (2010). The claims at issue in Bilski described a method for hedging against the financial risk of price fluctuations. Claim 1 recited a series of steps for hedging risk, including: (1) initiating a series of financial transactions between providers and consumers of a commodity; (2) identifying market participants that have a counterrisk for the same commodity; and (3) initiating a series of transactions between those market participants and the commodity provider to balance the risk position of the first series of consumer transactions. Id. , at 599. Claim 4 “pu[t] the concept articulated in claim 1 into a simple mathematical formula.” Ibid. The remaining claims were drawn to examples of hedging in commodities and energy markets.
“[A]ll members of the Court agree[d]” that the patent at issue in Bilski claimed an “abstract idea.” Id., at 609; see also id., at 619 (Stevens, J., concurring in judgment). Specifically, the claims described “the basic concept of hedging, or protecting against risk.” Id., at 611. The Court explained that “‘[h]edging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.‘” Ibid. “The concept of hedging” as recited by the claims in suit was
It follows from our prior cases, and Bilski in particular, that the claims at issue here are directed to an abstract idea. Petitioner‘s claims involve a method of exchanging financial obligations between two parties using a third-party intermediary to mitigate settlement risk. The intermediary creates and updates “shadow” records to reflect the value of each party‘s actual accounts held at “exchange institutions,” thereby permitting only those transactions for which the parties have sufficient resources. At the end of each day, the intermediary issues irrevocable instructions to the exchange institutions to carry out the permitted trаnsactions.
On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is ““a fundamental economic practice long prevalent in our system of commerce.” Ibid.; see, e.g., Emery, Speculation on the Stock and Produce Exchanges of the United States, in 7 Studies in History, Economics and Public Law 283, 346–356 (1896) (discussing the use of a “clearing-house” as an intermediary to reduce settlement risk). The use of a third-party intermediary (or “clearing house“) is also a building block of the modern economy. See, e.g., Yadav, The Problematic Case of Clearinghouses in Complex Markеts, 101 Geo. L. J. 387, 406–412 (2013); J. Hull, Risk Management and Financial Institutions 103–104 (3d ed. 2012). Thus, intermediated settlement, like hedging, is an “abstract idea” beyond the scope of
Petitioner acknowledges that its claims describe intermediated settlement, see Brief for Petitioner 4, but rejects the conclusion that its claims recite an “abstract idea.” Drawing on the presence of mathematical formulas in some of our abstract-ideas precedents, petitioner contends
Bilski belies petitioner‘s assertion. The concept of risk hedging we identified as an abstract idea in that case cannot be describеd as a “preexisting, fundamental truth.” The patent in Bilski simply involved a “series of steps instructing how to hedge risk.” 561 U. S., at 599. Although hedging is a longstanding commercial practice, id., at 599, it is a method of organizing human activity, not a “truth” about the natural world ““that has always existed,” Brief for Petitioner 22 (quoting Flook, supra, at 593, n. 15). One of the claims in Bilski reduced hedging to a mathematical formula, but the Court did not assign any special significance to that fact, much less the sort of talismanic significance petitioner claims. Instead, the Court grounded its conclusion that all of the claims at issue were abstract ideas in the understanding that risk hedging was a ““fundamental economic practice.” 561 U. S., at 611.
In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meаningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.
B
Because the claims at issue are directed to the abstract idea of intermediated settlement, we turn to the second step in Mayo‘s framework. We conclude that the method claims, which merely require generic computer implementation, fail to transform that abstract idea into a patent-eligible invention.
At Mayo step two, we must examine the elements of the claim to determine whether it contains an “inventive concept” sufficient to “transform” the claimed abstract idea into a patent-eligible аpplication. 566 U. S., at ___. 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] itself.” Id., at ___. Mayo made clear that transformation into a patent-eligible application requires “more than simply stat[ing] the [abstract idea] while adding the words ‘apply it.‘” Id., at ___.
Mayo itself is instructive. The patents at issue in Mayo claimed a method for measuring metabolites in the bloodstream in order to calibrate the appropriate dosage of thiopurine drugs in the treatment of autoimmune diseases. Id., at ___. The respondent in that case contended that the claimed method was a patent-eligible application of natural laws that describe the relatiоnship between the concentration of certain metabolites and the likelihood that the drug dosage will be harmful or ineffective. But methods for determining metabolite levels were already “well known in the art,” and the process at issue amounted to “nothing significantly more than an instruction to doctors to apply the applicable laws when treating their patients.” Id., at ___. “Simply appending conventional steps, specified at a high level of generality,” was not “enough” to supply an “inventive concept.” Id., at ___.
The introduction of a computer into the claims does not alter the analysis at Mayo step two. In Benson, for example, we considered a patent that claimed an algorithm implemented on “a general-purpose digital computer.” 409 U. S., at 64. Because the algorithm was an abstract idea, see supra, at 8, the claim had to supply a ““new and use-
Flook is to the same effect. There, we examined a computerized method for using a mathematical formula to adjust alarm limits for certаin operating conditions (e.g., temperature and pressure) that could signal inefficiency or danger in a catalytic conversion process. 437 U. S., at 585–586. Once again, the formula itself was an abstract idea, see supra, at 8, and the computer implementation was purely conventional. 437 U. S., at 594 (noting that the “use of computers for ‘automatic monitoringalarming‘” was “well known“). In holding that the process was patent ineligible, we rejected the argument that “implement[ing] a principle in some specific fashion” will “automatically fal[l] within the patentable subject matter of
In Diehr, 450 U. S. 175, by contrast, we held that a computer-implemented process for curing rubber was patent eligible, but not because it involved a computer. The claim employed a “well-known” mathematical equation, but it used that equation in a process designed to solve a technological problem in “conventional industry practice.” Id., at 177, 178. The invention in Diehr used a “thermocouple” to record constant temperature measure-
These cases demonstrate that the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention. Stating an abstract idea “while adding the words ‘apply it‘” is not enough for patent eligibility. Mayo, supra, at ___. Nor is limiting the use of an abstract idea ““to a particular technological environment.” Bilski, supra, at 610–611. Stating an abstract idea while аdding the words “apply it with a computer” simply combines those two steps, with the same deficient result. Thus, if a patent‘s recitation of a computer amounts to a mere instruction to “implemen[t]” an abstract idea “on . . . a computer,” Mayo, supra, at ___, that addition cannot impart patent eligibility. This conclusion accords with the preemption concern that undergirds our
The fact that a computer “necessarily exist[s] in the physical, rather than purely conceptual, realm,” Brief for Petitioner 39, is beside the point. There is no dispute that
2
The representative method claim in this case recites the following steps: (1) “creating” shadow records for each counterparty to a transaction; (2) “obtaining” start-of-day balances based on the parties’ real-world accounts at exchange institutions; (3) “adjusting” the shadow records as transactions are entered, allowing only those transactions for which the parties have sufficient resources; and (4) issuing irrevocable end-of-day instructions to the exchange institutions to carry out the permitted transactions. See n. 2, supra. Petitioner principally contends that the claims are patent eligible because these steps “require a substantial and meaningful role for the computer.” Brief for Petitioner 48. As stipulated, the claimed method requires the use of a computer to create electronic records, track multiple transactions, and issue simultaneous instructions; in other words, “[t]he computer is itself the intermediary.” Ibid. (emphasis deleted).
In light of the foregoing, see supra, at 11–14, the relevant question is whether the claims here do more than simply instruct the practitioner to implement the abstract idea of intermediated settlement on a generic computer. They do not.
Considered “as an ordered combination,” the computer components of petitioner‘s method “ad[d] nothing . . . that is not already present when the steps are considered separately.” Id., at ___. Viewed as a whole, petitioner‘s method claims simply recite the concept of intermediated settlement as performed by a generic computer. See 717 F. 3d, at 1286 (Lourie, J., concurring) (noting that the representative method claim “lacks any express language to define the computer‘s participation“). The method claims do not, for example, purport to improve the functioning of the computer itself. See ibid. (“There is no specific or limiting recitation of . . . improved computer technology . . .“); Brief for United States as Amicus Curiae 28–30. Nor do they effect an improvement in any other technology or technical field. See, e.g., Diehr, 450 U. S., at 177–178. Instead, the claims at issue amount to “nothing significаntly more” than an instruction to apply the abstract idea of intermediated settlement using some unspecified, generic computer. Mayo, 566 U. S., at ___. Under our precedents, that is not “enough” to
C
Petitioner‘s claims to a computer system and a computer-readable medium fail for substantially the same reasons. Petitioner conceded below that its media claims rise or fall with its method claims. En Banc Response Brief for Defendant-Appellant in No. 11–1301 (CA Fed.) p. 50, n. 3. As to its system claims, petitioner emphasizes that those claims recite “specific hardware” configured to perform “specific computerized functions.” Brief for Petitioner 53. But what petitioner characterizes as specific hаrdware—a “data processing system” with a “communications controller” and “data storage unit,” for example, see App. 954, 958, 1257—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. See 717 F. 3d, at 1290 (Lourie, J., concurring). 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.” Id., at 1291 (quoting Bilski, 561 U. S., at 610–611).
Put another way, the system claims are no different from the method claims in substance. The methоd claims recite the abstract idea implemented on a generic computer; the system claims recite a handful of generic computer components configured to implement the same idea. This Court has long “warn[ed] . . . against” interpreting
Because petitioner‘s system and media claims add nothing of substance to the underlying abstract idea, we hold that they too are patent ineligible under
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For the foregoing reasons, the judgment of the Court of Appeals for the Federal Circuit is affirmed.
It is so ordered.
SUPREME COURT OF THE UNITED STATES
No. 13-298
ALICE CORPORATION PTY. LTD, PETITIONER v. CLS BANK INTERNATIONAL ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
[June 19, 2014]
JUSTICE SOTOMAYOR, with whom JUSTICE GINSBURG and JUSTICE BREYER join, concurring.
I adhere to the view that any “claim that merely describes a method of doing business does not qualify as a ‘process’ under
Notes
“A method of exchanging obligations as between pаrties, 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, аllowing 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 on[e] 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.” App. 383–384.