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Case Brief: CLS Bank v. Alice

FCJNothing conjures memories of law school like writing a case brief (with the possible exception of an emergency root canal).  Nonetheless, the judicial bar fight that is the Federal Circuit en banc decision in CLS Bank v. Alice Corp inspires me to dust off my case briefing skills, starting with Judge Lourie’s plurality concurrence as joined by Judges Dyk, Prost, Reyna, and Wallach.  Why call it a bar fight?  Everyone punches, everyone gets punched, no one wins, and participants and observers alike talk about it for months afterward.

To you patent law students out there who are stuck with CLS Bank for an upcoming turn in the Socratic hot seat … “You’re welcome.”

CLS Bank Intl. v. Alice Corp.

598 F.3d 1336 (2013)


– In 2007, CLS filed suit against Alice regarding patents nos. 5970479, 6912510, and 7149720

  • asserted noninfringement, invalidity, and unenforceability

– Parties renewed cross-motions regarding validity question under §101 after Bilski decision (2010)

  • Added Alice’s newly issued patent 7725375 to the suit

– United States District Court for the District of Columbia granted summary judgment

  • Alice’s claims invalid under §101
    • Method claims “directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk”
    • System claims “would preempt the use of the abstract concept of employing a neutral intermediary … on any computer …”
    • Media claims “directed to same abstract concept”

– Upon appeal in 2012, Federal Circuit panel reversed as to method, system, and media claims

– CLS Bank petition for rehearing en banc granted


– What test should the court adopt to determine whether a computer-implemented invention is a patent-ineligible abstract idea?

– When, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?

– In assessing patent eligibility under §101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium?

– Should related method, system, and/or media claims at times be considered equivalent for §101 purposes?


– Alice assigned patents regarding computerized escrow (automated trusted third party)

  • Claims to methods of exchanging obligations between parties (‘479 and ‘510 patents)
  • Claims to data processing systems for such exchanges (‘720)
  • Claims to computer-readable media containing program code for such exchanges (‘375)

– Parties stipulated that method claims require computer implementation

– CLS Bank argued that method of escrow is “fundamental and ancient”

  • Also that §101 inquiry does not involve presumption of validity as do statutory bases


– No single opinion commands a majority

  • nothing other than the court’s one paragraph Per Curiam Judgment is precedent

– Proposed patent-eligibility analysis steps:

1) Claim to eligible subject matter?

  • Categories: processes, machines, manufactures, and compositions of matter

2) Claim barred by judicially-created exception?

  • laws of nature, natural phenomena, and abstract ideas

2.a) What is the fundamental concept at risk of preemption?

  • “cannot meaningfully evaluate … until the idea supposedly at risk of preemption has been unambiguously identified.”
  • “Although not required, … a claim construction analysis before addressing §101 may be especially helpful … [for] a full understanding of what each claim entails.” (Bancorp)

2.b) What is the practical likelihood of preemption?

2.b.i. Is the fundamental concept disembodied? (no inventive concept)

– 2.b.i.a. Genuine human contribution? (invented, not discovered)

– 2.b.i.b. Non-trivial human contribution? (practical effect, not routine)

2.b.ii. Is the fundamental concept preempted? (subsume all applications)

– Preemption test IS NOT to be confused with novelty § 102 and nonobviousness § 103 analyses

– All issued patent claims receive a statutory presumption of validity (§ 282)

  • as with §102 and §103, presumption applies when §101 is raised as a basis for invalidity
  • Microsoft Corp (“invalidity defense to be proved by clear and convincing evidence”)


– §101 only addresses patent eligibility, not overall patentability

– Preemption is the primary focus in applying the common law exceptions to §101

NOT seeking to eliminate preemption per se

  • some measure of preemption is intrinsic to patent right (See 35 U.S.C. § 154)

Rather, ineligibility is based on wholesale preemption

  • Funk Bros. (fundamental principles must remain “free to all . . . and reserved exclusively to none.”)
  • Mayo, 132 S. Ct. at 1301 (noting “concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature.”)
  • Bilski, 130 S. Ct. at 3231 (concluding claims “would pre-empt [risk hedging] in all fields, and would effectively grant a monopoly over an abstract idea”)
  • Diehr, 450 U.S. at 187 (“process admittedly employs a well-known mathematical equation, but they do not seek to pre-empt the use of that equation.”)
  • Benson, 409 U.S. at 72 (“patent [that] would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.”)
  • O’Reilly v. Morse, 56 U.S. 62, 113 (1853) (claim would have broadly conferred “a monopoly” in the use of electromagnetism, “however developed, for the purpose of printing at a distance”)

– patent-eligible claim must include limitations that

— 1) add “significantly more” (Prometheus) to the basic principle (no disembodiment)

  • “sometimes” referred to as “inventive concept” (Flook)

— 2) with the result that the claim covers significantly less (no preemption)

– (past case “guideposts” caution against overly formalistic approach / bright line rules)

  • Patent monopoly confined within definite bounds? (Benson)
  • Computer a meaningful limitation? (Benson)
  • Some inventive concept beyond formula itself? (Flook)
  • More than trivial field-of-use limitation? (Flook)
  • No preemption of other uses of equation? (Diehr)
  • Specific application, rather than idea in isolation? (Diehr)
  • Preempt use of approach in all fields? (Bilski)
  • Hollow field-of-use limit? Token post-solution activity? (Bilski)
  • More than describe natural law? Add enough? (Prometheus)
  • Machine-or-transformation as a useful clue? (Bilski)

– As to Alice’s method claims

1) Eligible subject matter? Yes, method recites a process

2.a) Fundamental concept? Abstract idea of reducing settlement risk (a form of escrow)

  • “Whether long in use or just recognized, abstract ideas remain abstract”
    • therefore, CLS Bank “fundamental and ancient” argument is not persuasive

2.b.i) Disembodied?

  • Reducing settlement risk using escrow is “disembodied” concept (Alappat)
  • Claims add “significantly more”?
    • Implementation-specific limitations?
      • Nothing of substance
        • shadow records = basic function of obligation tracking
        • exchange accounts = routine reconciliation tasks
    • Specific computer implementation?
      • No express language to limit to any specific computer
      • No improvement; merely post-solution activity
      • Computer add more than merely accelerated calculations?
        • No nontrivial / non-conventional human contribution
        • No material narrowing of claims relative to abstract idea

FAIL: As in Bilski, upholding Alice’s claims to methods of financial intermediation “would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.”

– As to Alice’s computer-readable medium claims

Claims in Beauregard format

  • Formally recite a tangible article of manufacture (storage medium)
  • contain a computer program for directing a computer to carry out the process

1) Eligible subject matter? Yes, subject matter is a physical (storage) device

2.a) Fundamental concept? Every substantive limitation drawn to escrow method steps

  • Not “truly drawn to a specific computer readable medium” but “to the underlying method” (CyberSource)

FAIL: Therefore, fails preemption test for same reasons as method claims

  • Media adds no inventive concept

– As to Alice’s system claims

Claims recite “data processing systems” configured to enable escrow functionality

1) Eligible subject matter? Yes, subject matter is tangible devices as system components

  • Computer
  • Data storage unit
  • First party device
  • Communications controller

2.a) Fundamental concept? “None of the recited hardware offers a meaningful limitation beyond generally linking ‘the use of the [method] to a particular technological environment,’ that is, implementation via computers. Bilski, 130 S. Ct. at 3230 (quoting Diehr, 450 U.S. at 191)”

FAIL: Therefore, fails preemption test for same reasons as method claims

  • System components add no inventive concept

HOLDING: Asserted method, system, and computer-readable media claims are ineligible subject matter

JUDGMENT: Affirmed district court finding of invalidity


Next time, more case briefs on the responses to Judge Lourie’s opinion.