Alice Corp. v. CLS Bank Int'l
Alice fixed in place a two-step framework for analyzing patent-eligible subject matter under 35 U.S.C. § 101. Building on Mayo v. Prometheus, the Court held that claims directed to abstract ideas are not made eligible by reciting generic computer implementation. The opinion launched a decade of motion practice over software and business-method patents, and the resulting body of Federal Circuit case law remains unsettled in important respects.
Holding
The Supreme Court held that claims directed to the abstract idea of intermediated settlement, implemented on a generic computer, were not patent eligible under 35 U.S.C. § 101. The Court applied a two-step framework first articulated in Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. 66 (2012). At step one, the court asks whether the claim is directed to a patent-ineligible concept — a law of nature, a natural phenomenon, or an abstract idea. At step two, if so, the court asks whether the claim contains an "inventive concept" — an element or combination of elements sufficient to ensure that the patent in practice amounts to significantly more than a patent on the ineligible concept itself. Generic computer implementation alone does not supply the inventive concept.
Procedural posture and facts
Alice Corporation owned several patents directed to a computerized scheme for mitigating settlement risk in financial transactions. The claims described using a third-party intermediary to maintain shadow records, perform real-time settlement, and instruct exchange institutions to release funds only upon confirmed performance. The patents recited method, system, and computer-readable-medium claims directed to the same fundamental scheme.
CLS Bank International filed a declaratory-judgment action in the District of Columbia, alleging that the Alice patents were invalid as covering an abstract idea. The district court granted summary judgment for CLS Bank. A Federal Circuit panel reversed, but the en banc Federal Circuit, in a fragmented set of opinions, affirmed the district court. CLS Bank Int'l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc). The judges issued seven separate opinions and could not agree on a single rationale, which left the law of § 101 in particular need of clarification.
The Court's reasoning
Justice Thomas, writing for a unanimous Court, organized the analysis around the two-step framework that the Court had used in Mayo. The opinion is short and operates by tight analogy to prior § 101 decisions.
Step one: directed to an abstract idea
The Court did not attempt a comprehensive definition of "abstract idea." Instead, it compared the Alice claims to the claims at issue in Bilski v. Kappos, 561 U.S. 593 (2010), which had held the concept of risk hedging to be an abstract idea, and to the diagnostic-correlation claims invalidated in Mayo. Like risk hedging, intermediated settlement was "a fundamental economic practice long prevalent in our system of commerce" and was therefore an abstract idea. The Court rejected the argument that the claims were directed to a specific application rather than to the underlying idea, finding that the patents in fact claimed the abstract idea itself, recited at the level of the financial concept.
Step two: inventive concept
At step two, the Court asked whether the claim's elements, considered individually and as an ordered combination, contained an inventive concept. The method claims recited well-understood, routine, conventional activity: maintaining shadow records, querying institutions, performing transactions through the intermediary, and computing balances. Each step was generic. The system and computer-readable-medium claims fared no better; they recited generic computer hardware (a data-processing system, a communications controller, and similar elements) configured to perform the same generic steps. The Court concluded that simply implementing an abstract idea on a generic computer does not transform that idea into a patent-eligible invention.
The Mayo lineage
Alice continued a line of recent § 101 cases — Bilski on business methods, Mayo on diagnostic correlations, Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013), on isolated DNA — that emphasized the "implicit exception" to § 101 for laws of nature, natural phenomena, and abstract ideas. The exception, the Court explained, exists because monopolizing the basic tools of scientific and technological work would impede rather than promote innovation. The two-step framework operationalizes that policy concern.
The framework Alice produced
The two-step Alice/Mayo framework now governs every § 101 inquiry. In practice, courts apply it as follows:
- Step 1 (Mayo step one / Alice step 1): Determine whether the claim is "directed to" a patent-ineligible concept — an abstract idea, a law of nature, or a natural phenomenon. Federal Circuit cases distill several recurring categories, including methods of organizing human activity, mathematical concepts, and certain mental processes.
- Step 2A and 2B: The U.S. Patent and Trademark Office's 2019 Revised Patent Subject Matter Eligibility Guidance subdivided step one into a categorical screen (Step 2A Prong One — does the claim recite an abstract idea?) and a practical-application inquiry (Step 2A Prong Two — is the recited abstract idea integrated into a practical application?). If yes at the practical-application step, the claim is eligible; if not, the analysis proceeds to step two (Step 2B), the inventive-concept inquiry. The PTO guidance is administrative and does not bind courts, but it has shaped examination and Patent Trial and Appeal Board practice.
- Inventive concept (Mayo step two / Alice step 2): Examine the claim elements individually and as an ordered combination. Generic computer functions, well-understood routine activity, and field-of-use limitations are not sufficient. A specific technological improvement, an unconventional combination of steps, or a non-routine implementation can supply the inventive concept.
Subsequent application
Alice triggered an immediate wave of motions to dismiss and motions for judgment on the pleadings. District courts found large numbers of software and business-method patents ineligible under § 101 as a threshold matter, often before claim construction. The Eastern District of Texas, the Western District of Texas, the Northern District of California, and the District of Delaware developed local practices for handling Alice motions, with varying levels of receptivity to early dismissal.
The Federal Circuit has built a body of case law that draws lines case by case. Decisions such as Enfish, LLC v. Microsoft Corp., 822 F.3d 1327 (Fed. Cir. 2016), and BASCOM Global Internet Services, Inc. v. AT&T Mobility LLC, 827 F.3d 1341 (Fed. Cir. 2016), articulated paths to eligibility for software claims that improve computer functionality or that combine known elements in non-conventional ways. Other decisions have invalidated software claims as abstract ideas implemented on generic hardware. The result is a fact-intensive, panel-dependent body of law that resists easy generalization.
Step two has acquired procedural texture as well. Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), held that whether a claim limitation is "well-understood, routine, conventional" can be a question of fact, which can preclude resolution at the pleading stage if the patentee plausibly alleges otherwise. Berkheimer slowed the pace of pleading-stage Alice dismissals in some courts and shifted the analysis toward summary judgment.
Alice has also reshaped patent prosecution and the landscape of the Patent Trial and Appeal Board. Examiners reject software and business-method applications under § 101 with greater frequency, and the PTAB regularly addresses § 101 in inter partes review's sister proceeding, post-grant review. (IPR itself is limited to §§ 102 and 103 grounds.) Covered Business Method (CBM) review, before its sunset, was a particular vehicle for § 101 challenges.
Open questions and pressure points
The post-Alice § 101 landscape is unsettled in several important respects, and this is one of the few areas where a careful encyclopedia must say so plainly.
First, the boundary of "abstract idea" remains undefined. The Federal Circuit and the Supreme Court have declined to articulate a comprehensive test, and the resulting case-by-case analogizing produces inconsistent outcomes for similarly situated patents. Practitioners and judges alike have called for clearer rules; the Court has so far left the question to the Federal Circuit to develop.
Second, the line between step one and step two has frayed. After the 2019 PTO Guidance, examiners often resolve eligibility at the "practical application" stage of step one, and many Federal Circuit panels analyze the same facts at step two. The framework therefore operates differently in different forums.
Third, the role of factual disputes in the analysis remains contested. Berkheimer treats the conventionality inquiry as factual, but other cases treat the entire § 101 analysis as a question of law decidable on the pleadings. The procedural posture — motion to dismiss, motion for summary judgment, post-trial motion — substantially affects outcomes.
Fourth, there is sustained legislative pressure to amend § 101. Multiple bills have been introduced to revise the eligibility framework, including proposals to abolish the judicially created exceptions and to clarify the categories of eligible subject matter. As of the date of this entry, no such legislation has been enacted, and the Alice/Mayo framework continues to govern.
Fifth, the application of Alice to emerging technologies — artificial intelligence, machine learning, biotech diagnostics — is a continuing source of doctrine. Diagnostic-method patents in particular have struggled under Mayo and Alice, leaving large categories of medical-diagnostic innovation in an uncertain eligibility posture.
Citation and record
Formal citation: Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208 (2014).
Below: CLS Bank Int'l v. Alice Corp., 717 F.3d 1269 (Fed. Cir. 2013) (en banc), affirming the district court's grant of summary judgment of invalidity.
Author: Justice Thomas for a unanimous Court. Argued March 31, 2014; decided June 19, 2014. Justice Sotomayor filed a brief concurring opinion joined by Justices Ginsburg and Breyer.
Vote alignment: 9-0.
See also
- Section 101 patent eligibilityThe doctrinal home of the Alice/Mayo framework.
- ObviousnessA separate § 103 analysis that often parallels § 101 in software cases.
- Post-grant reviewPGR is the post-grant proceeding that includes § 101 challenges.
- KSR Int'l Co. v. Teleflex Inc.The companion analytic framework for obviousness.
- Title 35 reference35 U.S.C. § 101 sets the statutory eligibility provision.
- GlossaryDefinitions of "abstract idea," "inventive concept," and related terms.
Last reviewed: 2026