Alice-Mayo is calibrated to keep overbroad patents from disrupting innovation

C. Alice Corp. Pty. Ltd. V. CLS Bank Intern.: Further Defining the Test

The test for patent eligibility for inventions that relate to law of nature was then further refined in Alice Corp. Pty. Ltd. v. CLS Bank Intern. In Alice, the petitioner was the assignee of patents which were designed to use a computer system as a third-party intermediary to facilitate the exchange of financial obligations between parties.67 The scheme was used to mitigate “settlement risk[.]”68 The Supreme Court once again was tasked with determining whether a process that focused on an abstract idea could be protected under existing patent law.

The patent claims used this computerized process to limit the risk that only one party will satisfy its obligation in an agreed upon financial exchange.69 The system did this by creating “shadow” credit and debit records that “mirror the balances of the parties’ real world accounts at ‘exchange institutions’” then used these to instruct the financial institutions to “carry out the ‘permitted’ transactions in accordance with the updated shadow records[.]”70 By doing this, the method of exchanging obligations mitigated the risk that only one party will perform.71

In 2007, CLS Bank International filed a suit against Alice Corp. seeking declaratory judgement stating that the patents at issue are invalid.72 The Supreme Court cited Mayo in its attempt to balance policy considerations surrounding its decisions to limit the patentability of natural phenomena. The Court did not want to inhibit the future progress and discovery by tying up the use of the “building blocks of human ingenuity” but also did not want to let these exclusionary principles “swallow all of patent law.”73

The Supreme Court then articulated the current Alice/Mayo test: first, courts must “determine whether the claims at issue are directed to a patent-ineligible concept.”74 If the claims are directed to a patent-ineligible concept, then courts 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 application.”75

In this case, the Court determined that the claims at issue were directed to the abstract idea of intermediated settlement, a “fundamental economic practice long prevalent in our system of commerce.”76 Moving on to step two of the analysis, the Court concluded that “merely requir[ing] generic computer implementation” fails to sufficiently transform this abstract idea into a patent-eligible invention.77