What did the Supreme Court decide in Alice v. CLS Bank?

The Court held that claims directed to an abstract idea—using a third party to manage settlement risk—implemented on a generic computer are not patent-eligible under §101.

What is the Alice two-step test?

Step 1: Is the claim directed to a judicial exception (e.g., abstract idea)? Step 2: If yes, does it include an inventive concept that transforms it into a patent-eligible application?

Do system or media claims help?

No. Dressing the same abstract idea as a system, machine, or article of manufacture does not make it eligible if only generic computer parts are used.

What happens to software patents after Alice?

Software claims must do more than automate an abstract idea. They need specific, technological improvements or unconventional steps to pass §101.

Alice Corporation v. CLS Bank International

Supreme Court of the United States 2014 573 U.S. 208 Patent • §101 • Software ~8 min read

Abstract Idea Computer-Implemented Alice Two-Step India

Author: Gulzar Hashmi

Location: India

Slug: alice-corporation-v-cls-bank-international

Published: 2025-11-01

CASE_TITLE: Alice Corporation v. CLS Bank International PRIMARY_KEYWORDS: §101, abstract idea, Alice two-step SECONDARY_KEYWORDS: software patents, generic computer, settlement risk PUBLISH_DATE: 2025-11-01 AUTHOR_NAME: Gulzar Hashmi LOCATION: India

Quick Summary

Alice claimed patents on a computerized settlement system that used a third party to remove settlement risk. The Court said this was an abstract idea. Putting that idea on a generic computer did not add an inventive concept. So, under 35 U.S.C. §101, the claims were not patent-eligible.

Gavel over circuit board symbolizing abstract idea vs computer implementation

Issues

Are computer-implemented claims (system, method, media) patent-eligible if they apply an abstract idea?
Does using generic computer components add an inventive concept?

Rules

§101 Eligibility: Laws of nature, abstract ideas, and natural phenomena are excluded.
Alice Two-Step: (1) Is the claim directed to an abstract idea? (2) If yes, do the elements, alone or as an ordered combination, add an inventive concept?
Generic Computer ≠ Inventive Concept: Saying “do it on a computer” is not enough.

Facts (Timeline)

Patents: Alice (Australia) owned four patents (’479, ’510, ’720, ’375) on computerized trading platforms using a third-party guarantor to remove settlement risk.

2007: CLS sues seeking judgment of ineligibility and non-infringement; Alice counterclaims for infringement.

District Court: Claims invalid—directed to an abstract idea.

Federal Circuit: Affirms the invalidity (after complex en banc history).

Supreme Court (2014): Affirms—no inventive concept beyond the abstract idea implemented on a generic computer.

Timeline of Alice case from patents to Supreme Court ruling

Arguments

Appellant (Alice)

The system uses computer networks and data processing steps.
Adds specific steps to manage settlement risk.
Claims cover system/method/media forms, not just an idea.

Respondent (CLS)

Core is an age-old idea: third-party intermediation.
Generic computer parts; nothing unconventional.
No inventive concept beyond the abstract idea.

Judgment

Held: Claims are not patent-eligible. Managing settlement risk via a third party is an abstract idea. Implementing it on a generic computer does not supply an inventive concept under §101.

Abstract ideas are the building blocks of innovation and must remain free.
Labeling claims as system or media does not change the analysis.

Ratio (Core Principle)

If claims target an abstract idea and add only generic computer functions, they fail §101. An inventive concept must transform the idea into a real technological application.

Why It Matters

Defines how courts screen software patents.
Guides drafting: show a specific technical improvement or unconventional steps.
Protects the public domain of abstract ideas.

Key Takeaways

§101 Filter

Claims must pass the Alice two-step screen.

Generic Computer

Automation alone is not an inventive concept.

Tech Improvement

Show how the computer is improved or used in an unconventional way.

Forms Don’t Save

System/media claims fall with the same abstract core.

Mnemonic + 3-Step Hook

Mnemonic: “Idea ≠ Invention” — Idea alone is not enough.

Name the Idea: What abstract concept is claimed?
Find the Spark: Is there an inventive concept beyond a generic computer?
Show the Tech: Point to a concrete technical improvement.

IRAC Outline

Issue: Are Alice’s computer-implemented settlement claims patent-eligible?

Rule: §101 excludes abstract ideas unless claims add an inventive concept.

Application: Claims recite intermediation using generic computer steps; nothing unconventional or specific to improve the computer.

Conclusion: Ineligible under §101; judgments for CLS affirmed.

Glossary

Abstract Idea: A basic concept (e.g., intermediated settlement) that patent law keeps free for all.
Inventive Concept: Extra elements that transform an abstract idea into a specific, eligible application.
Generic Computer: Routine hardware/software performing conventional functions.