Alice Corporation Pvt. Ltd. vs. CLS Bank International (Case Analysis)

Alice Corporation Private Limited had a patent claim over a “Computer implemented scheme for mitigating ‘settlement risk’ by using a third-party intermediary”.[1] CLS seeked a declaratory judgement before the US Supreme Court contesting Alice’s claim to be “invalid, unenforceable, or not infringed.”[2]

The court held that in accordance with the exception to Section 101 of the US Patent Act, 1952[3], ‘abstract ideas’ are ineligible to be patented. It took the precedent of the two-step framework laid down by the Mayo vs. Prometheus Labs[4]case and tried determining if the present claim was patent eligible or not. 

Firstly, it had to determine if the claim was regarding an abstract idea, and further check if it had an ‘inventive concept’ attached to it for such an idea to transform into a patent eligible application.  

For the first step, the court used the precedent of Bilski vs. Kappos,[5] and stated that the present concept is “a fundamental economic practice long prevalent in our system of commerce,” and that third-party intermediary “is a building block of the modern economy”. Since this is a pre-existing “fundamental truth”, therefore, it is an abstract idea in accordance with the exception under Section 101.[6]

An abstract idea does not simply become ineligible for patenting though. It becomes so if these concepts are not applied “to a new and useful end.”[7]

This is where the second step comes in. In this the court stated that there was no ‘inventive concept’ used to transform such an abstract idea into a patent eligible application. It clarified that ‘apply(ing)’ such an idea with a  generic computer does not make it patent eligible. The function that the computer performs here is that of an intermediary which is  conventional in nature.  Mere recitation of a concept to a computer which is configured to implement such functions does not significantly add anything to the technological or technical field, thereby  it has no “additional (inventive) element” attached to it.[8]

Therefore, the court rejected the application and  upheld  that patenting such an abstract idea with no inventive concept attached to it would lead to a monopolisation of such concepts, hindering innovation and restricting growth in commerce. 

Implications of the case

In the Myriad[9] case, it was laid down that abstract ideas are the “the basic tools of scientific and technological work.”’ However, this definition is quite vague and ambiguous. Further, it was stated in Bilski[10], in accordance with Flook[11]that patenting such ‘big’ abstract ideas like the business method of hedging commodity prices would lead to massive “social cost”, “hindrance to further innovation”, “monopolisation” and would further limit ‘”egitimate competition”.[12]However, even after understanding the implications of patenting ‘abstract ideas’, the court still failed to provide a test to  “distinguish between patents that claim the ‘building blocks’ of human ingenuity and those that integrate the building blocks into something more.”[13] Transformation in the building blocks makes a process or a product patent eligible. Yet, the court in the present case failed to cease this opportunity to provide parameters and a definitive meaning to what ‘abstract ideas’[14] and ‘inventive concept’ meant in patent cases.[15] It simply dealt with the case in accordance with the precedents set by Flook and Bilski, and the framework laid down by Mayo, rather than expanding on the jurisprudence regarding the patentability criteria for clarity in future cases.


[1] Alice Corporation Pvt. Ltd. vs. CLS Bank International et al 134 S. Ct. 2347 (2014).

[2] Alice Corporation Pvt. Ltd. vs. CLS Bank International et al 134 S. Ct. 2347 (2014).

[3] United States Code, 1952, https://www.govinfo.gov/content/pkg/USCODE-2011-title35/pdf/USCODE-2011-title35.pdf

[4] Mayo vs. Prometheus Labs 132 S.Ct.1289 (2012).

[5] Bilski vs. Kappos, 561 U.S. 593 (2010).

[6] Alice Corporation Pvt. Ltd. vs. CLS Bank International et al 134 S. Ct. 2347 (2014).

[7] Gottschalk vs. Benson, 409 U. S. 63, 67 (1972). 

[8] “Analysing Alice Corporation Pty Ltd v CLS Bank International Et Al.” Centre for Internet & Society, 2014, https://cis-india.org/a2k/analysing-alice-corporation-pty-ltd-v-cls-bank-international-et-al.

[9] Association for Molecular Pathology vs. Myriad Genetics Inc 133 S.Ct. 2107 (2013).

[10] Bilski vs. Kappos, 561 U.S. 593 (2010).

[11] Flook,  437 U.S. 584. 

[12] Bilski vs. Kappos, 561 U.S. 593 (2010).

[13] Alice Corporation Pvt. Ltd. vs. CLS Bank International et al 134 S. Ct. 2347 (2014).

[14] “Analysing Alice Corporation Pty Ltd v CLS Bank International Et Al.” Centre for Internet & Society, 2014, https://cis-india.org/a2k/analysing-alice-corporation-pty-ltd-v-cls-bank-international-et-al.

[15] Sinha, Stuti. “Case Analysis: Alice Corp. v. CLS Bank (134 S. Ct. 2347 (2014)) – Intellectual Property – India.” Welcome to Mondaq, Khurana and Khurana, 29 Aug. 2018, https://www.mondaq.com/india/patent/731008/case-analysis-alice-corp-v-cls-bank-134-s-ct-2347-2014.

Aishwarya Says:

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