Court Opinion

ID: 2679558
Source: CourtListenerOpinion
Date Created: 2014-06-19 15:00:59.860488+00
Date Added: 2024-06-11T12:27:13.496698
License: Public Domain

(Slip Opinion)              OCTOBER TERM, 2013                                       1

                                       Syllabus

         NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
       being done in connection with this case, at the time the opinion is issued.
       The syllabus constitutes no part of the opinion of the Court but has been
       prepared by the Reporter of Decisions for the convenience of the reader.
       See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

                                       Syllabus

      ALICE CORPORATION PTY. LTD. v. CLS BANK 

               INTERNATIONAL ET AL. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
                THE FEDERAL CIRCUIT

      No. 13–298.      Argued March 31, 2014—Decided June 19, 2014
Petitioner Alice Corporation is the assignee of several patents that dis-
  close a scheme for mitigating “settlement risk,” i.e., the risk that only
  one party to an agreed-upon financial exchange will satisfy its obliga-
  tion. In particular, the patent claims are designed to facilitate the
  exchange of financial obligations between two parties by using a
  computer system as a third-party intermediary. The patents in suit
  claim (1) a method for exchanging financial obligations, (2) a comput-
  er system configured to carry out the method for exchanging obliga-
  tions, and (3) a computer-readable medium containing program code
  for performing the method of exchanging obligations.
     Respondents (together, CLS Bank), who operate a global network
  that facilitates currency transactions, filed suit against petitioner,
  arguing that the patent claims at issue are invalid, unenforceable, or
  not infringed. Petitioner counterclaimed, alleging infringement. Af-
  ter Bilski v. Kappos, 561 U. S. 593, was decided, the District Court
  held that all of the claims were ineligible for patent protection under
  35 U. S. C. §101 because they are directed to an abstract idea. The
  en banc Federal Circuit affirmed.
Held: Because the claims are drawn to a patent-ineligible abstract idea,
 they are not patent eligible under §101. Pp. 5–17.
    (a) The Court has long held that §101, which defines the subject
 matter eligible for patent protection, contains an implicit exception
 for ‘ “[l]aws of nature, natural phenomena, and abstract ideas.’ ” As-
 sociation for Molecular Pathology v. Myriad Genetics, Inc., 569 U. S.
 ___, ___. In applying the §101 exception, this Court must distinguish
 patents that claim the “ ‘buildin[g] block[s]’ ” of human ingenuity,
 which are ineligible for patent protection, from those that integrate
2                    ALICE CORP. v. CLS BANK INT’L

                                   Syllabus

    the building blocks into something more, see Mayo Collaborative Ser-
    vices v. Prometheus Laboratories, Inc., 566 U. S. ___, ___, thereby
    “transform[ing]” them into a patent-eligible invention, id., at ___.
    Pp. 5–6.
       (b) Using this framework, the Court must first determine whether
    the claims at issue are directed to a patent-ineligible concept. 566
    U. S., at ___. If so, the Court then asks whether the claim’s elements,
    considered both individually and “as an ordered combination,” “trans-
    form the nature of the claim” into a patent-eligible application. Id.,
    at ___. Pp. 7–17.
         (1) The claims at issue are directed to a patent-ineligible concept:
    the abstract idea of intermediated settlement. Under “the longstand-
    ing rule that ‘[a]n idea of itself is not patentable,’ ” Gottschalk v. Ben-
    son, 409 U. S. 63, 67, this Court has found ineligible patent claims
    involving an algorithm for converting binary-coded decimal numerals
    into pure binary form, id., at 71–72; a mathematical formula for com-
    puting “alarm limits” in a catalytic conversion process, Parker v.
    Flook, 437 U. S. 584, 594–595; and, most recently, a method for hedg-
    ing against the financial risk of price fluctuations, Bilski, 561 U. S, at
    599. It follows from these cases, and Bilski in particular, that the
    claims at issue are directed to an abstract idea. On their face, they
    are drawn to the concept of intermediated settlement, i.e., the use of
    a third party to mitigate settlement risk. Like the risk hedging in
    Bilski, the concept of intermediated settlement is “ ‘a fundamental
    economic practice long prevalent in our system of commerce,’ ” ibid.,
    and the use of a third-party intermediary (or “clearing house”) is a
    building block of the modern economy. Thus, intermediated settle-
    ment, like hedging, is an “abstract idea” beyond §101’s scope. Pp. 7–
    10.
         (2) Turning to the second step of Mayo’s framework: The method
    claims, which merely require generic computer implementation, fail
    to transform that abstract idea into a patent-eligible invention.
    Pp. 10–16.
            (i) “Simply appending conventional steps, specified at a high
    level of generality,” to a method already “well known in the art” is not
    “enough” to supply the “ ‘inventive concept’ ” needed to make this
    transformation. Mayo, supra, at ___, ___. The introduction of a com-
    puter into the claims does not alter the analysis. Neither stating an
    abstract idea “while adding the words ‘apply it,’ ” Mayo, supra, at ___,
    nor limiting the use of an abstract idea “ ‘to a particular technological
    environment,’ ” Bilski, supra, at 610–611, is enough for patent eligi-
    bility. Stating an abstract idea while adding the words “apply it with
    a computer” simply combines those two steps, with the same deficient
    result. Wholly generic computer implementation is not generally the
                     Cite as: 573 U. S. ____ (2014)                    3

                                Syllabus

  sort of “additional featur[e]” that provides any “practical assurance
  that the process is more than a drafting effort designed to monopolize
  the [abstract idea] itself.” Mayo, supra, at ___. Pp. 11–14.
         (ii) Here, the representative method claim does no more than
  simply instruct the practitioner to implement the abstract idea of in-
  termediated settlement on a generic computer. Taking the claim el-
  ements separately, the function performed by the computer at each
  step—creating and maintaining “shadow” accounts, obtaining data,
  adjusting account balances, and issuing automated instructions—is
  “[p]urely ‘conventional. ’ ” Mayo, 566 U. S., at ___. Considered “as an
  ordered combination,” these computer components “ad[d] nothing . . .
  that is not already present when the steps are considered separate-
  ly.” Id., at ___. Viewed as a whole, these method claims simply recite
  the concept of intermediated settlement as performed by a generic
  computer. They do not, for example, purport to improve the function-
  ing of the computer itself or effect an improvement in any other tech-
  nology or technical field. An instruction to apply the abstract idea of
  intermediated settlement using some unspecified, generic computer
  is not “enough” to transform the abstract idea into a patent-eligible
  invention. Id., at ___. Pp. 14–16.
       (3) Because petitioner’s system and media claims add nothing of
  substance to the underlying abstract idea, they too are patent ineligi-
  ble under §101. Petitioner conceded below that its media claims rise
  or fall with its method claims. And the system claims are no differ-
  ent in substance from the method claims. The method claims recite
  the abstract idea implemented on a generic computer; the system
  claims recite a handful of generic computer components configured to
  implement the same idea. This Court has long “warn[ed] . . . against”
  interpreting §101 “in ways that make patent eligibility ‘depend simp-
  ly on the draftsman’s art.’ ” Mayo, supra, at ___. Holding that the
  system claims are patent eligible would have exactly that result.
  Pp. 16–17.
717 F. 3d 1269, affirmed.

  THOMAS, J., delivered the opinion for a unanimous Court. SO-
TOMAYOR, J., filed a concurring opinion, in which GINSBURG and BREYER,
JJ., joined.
                        Cite as: 573 U. S. ____ (2014)                              1

                             Opinion of the Court

     NOTICE: This opinion is subject to formal revision before publication in the
     preliminary print of the United States Reports. Readers are requested to
     notify the Reporter of Decisions, Supreme Court of the United States, Wash-
     ington, D. C. 20543, of any typographical or other formal errors, in order
     that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES
                                   _________________

                                   No. 13–298
                                   _________________

ALICE CORPORATION PTY. LTD, PETITIONER v. CLS
         BANK INTERNATIONAL ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

           APPEALS FOR THE FEDERAL CIRCUIT

                                 [June 19, 2014] 

   JUSTICE THOMAS delivered the opinion of the Court.
   The patents at issue in this case disclose a computer-
implemented scheme for mitigating “settlement risk” (i.e.,
the risk that only one party to a financial transaction will
pay what it owes) by using a third-party intermediary.
The question presented is whether these claims are patent
eligible under 35 U. S. C. §101, or are instead drawn to a
patent-ineligible abstract idea. We hold that the claims at
issue are drawn to the abstract idea of intermediated
settlement, and that merely requiring generic computer
implementation fails to transform that abstract idea into a
patent-eligible invention. We therefore affirm the judg-
ment of the United States Court of Appeals for the Federal
Circuit.
                             I

                             A

   Petitioner Alice Corporation is the assignee of several
patents that disclose schemes to manage certain forms of
financial risk.1 According to the specification largely
——————
 1 The   patents at issue are United States Patent Nos. 5,970,479 (the
2                  ALICE CORP. v. CLS BANK INT’L

                          Opinion of the Court

shared by the patents, the invention “enabl[es] the man-
agement of risk relating to specified, yet unknown, future
events.” App. 248. The specification further explains that
the “invention relates to methods and apparatus, includ-
ing electrical computers and data processing systems
applied to financial matters and risk management.” Id.,
at 243.
  The claims at issue relate to a computerized scheme for
mitigating “settlement risk”—i.e., the risk that only one
party to an agreed-upon financial exchange will satisfy its
obligation. In particular, the claims are designed to facili-
tate the exchange of financial obligations between two
parties by using a computer system as a third-party in-
termediary. Id., at 383–384.2 The intermediary creates
“shadow” credit and debit records (i.e., account ledgers)
——————
’479 patent), 6,912,510, 7,149,720, and 7,725,375.
   2 The parties agree that claim 33 of the ’479 patent is representative

of the method claims. Claim 33 recites:
   “A method of exchanging obligations as between parties, each party
holding a credit record and a debit record with an exchange institution,
the credit records and debit records for exchange of predetermined
obligations, the method comprising the steps of:
   “(a) creating a shadow credit record and a shadow debit record for
each stakeholder party to be held independently by a supervisory
institution from the exchange institutions;
   “(b) obtaining from each exchange institution a start-of-day balance
for each shadow credit record and shadow debit record;
   “(c) for every transaction resulting in an exchange obligation, the
supervisory institution adjusting each respective party’s shadow credit
record or shadow debit record, allowing only these transactions that do
not result in the value of the shadow debit record being less than the
value of the shadow credit record at any time, each said adjustment
taking place in chronological order, and
   “(d) at the end-of-day, the supervisory institution instructing on[e] of
the exchange institutions to exchange credits or debits to the credit
record and debit record of the respective parties in accordance with the
adjustments of the said permitted transactions, the credits and debits
being irrevocable, time invariant obligations placed on the exchange
institutions.” App. 383–384.
                 Cite as: 573 U. S. ____ (2014)           3

                     Opinion of the Court

that mirror the balances in the parties’ real-world ac-
counts at “exchange institutions” (e.g., banks). The inter-
mediary updates the shadow records in real time as trans-
actions are entered, allowing “only those transactions for
which the parties’ updated shadow records indicate suffi-
cient resources to satisfy their mutual obligations.” 717
F. 3d 1269, 1285 (CA Fed. 2013) (Lourie, J., concurring).
At the end of the day, the intermediary instructs the
relevant financial institutions to carry out the “permitted”
transactions in accordance with the updated shadow
records, ibid., thus mitigating the risk that only one party
will perform the agreed-upon exchange.
  In sum, the patents in suit claim (1) the foregoing method
for exchanging obligations (the method claims), (2) a
computer system configured to carry out the method for
exchanging obligations (the system claims), and (3) a
computer-readable medium containing program code for
performing the method of exchanging obligations (the
media claims). All of the claims are implemented using a
computer; the system and media claims expressly recite a
computer, and the parties have stipulated that the method
claims require a computer as well.
                              B
   Respondents CLS Bank International and CLS Services
Ltd. (together, CLS Bank) operate a global network that
facilitates currency transactions. In 2007, CLS Bank filed
suit against petitioner, seeking a declaratory judgment
that the claims at issue are invalid, unenforceable, or not
infringed. Petitioner counterclaimed, alleging infringe-
ment. Following this Court’s decision in Bilski v. Kappos,
561 U. S. 593 (2010), the parties filed cross-motions for
summary judgment on whether the asserted claims are
eligible for patent protection under 35 U. S. C. §101. The
District Court held that all of the claims are patent ineli-
gible because they are directed to the abstract idea of
4              ALICE CORP. v. CLS BANK INT’L

                     Opinion of the Court

“employing a neutral intermediary to facilitate simultane-
ous exchange of obligations in order to minimize risk.”
768 F. Supp. 2d 221, 252 (DC 2011).
   A divided panel of the United States Court of Appeals
for the Federal Circuit reversed, holding that it was not
“manifestly evident” that petitioner’s claims are directed
to an abstract idea. 685 F. 3d 1341, 1352, 1356 (2012).
The Federal Circuit granted rehearing en banc, vacated
the panel opinion, and affirmed the judgment of the Dis-
trict Court in a one-paragraph per curiam opinion. 717
F. 3d, at 1273. Seven of the ten participating judges
agreed that petitioner’s method and media claims are
patent ineligible. See id., at 1274 (Lourie, J., concurring);
id., at 1312–1313 (Rader, C. J., concurring in part and
dissenting in part). With respect to petitioner’s system
claims, the en banc Federal Circuit affirmed the District
Court’s judgment by an equally divided vote. Id., at 1273.
   Writing for a five-member plurality, Judge Lourie con-
cluded that all of the claims at issue are patent ineligible.
In the plurality’s view, under this Court’s decision in Mayo
Collaborative Services v. Prometheus Laboratories, Inc.,
566 U. S. ___ (2012), a court must first “identif[y] the
abstract idea represented in the claim,” and then deter-
mine “whether the balance of the claim adds ‘significantly
more.’ ” 717 F. 3d, at 1286. The plurality concluded that
petitioner’s claims “draw on the abstract idea of reducing
settlement risk by effecting trades through a third-party
intermediary,” and that the use of a computer to maintain,
adjust, and reconcile shadow accounts added nothing of
substance to that abstract idea. Ibid.
   Chief Judge Rader concurred in part and dissented in
part. In a part of the opinion joined only by Judge Moore,
Chief Judge Rader agreed with the plurality that petition-
er’s method and media claims are drawn to an abstract
idea. Id., at 1312–1313. In a part of the opinion joined by
Judges Linn, Moore, and O’Malley, Chief Judge Rader
                 Cite as: 573 U. S. ____ (2014)            5

                     Opinion of the Court

would have held that the system claims are patent eligible
because they involve computer “hardware” that is “specifi-
cally programmed to solve a complex problem.” Id., at
1307. Judge Moore wrote a separate opinion dissenting in
part, arguing that the system claims are patent eligible.
Id., at 1313–1314. Judge Newman filed an opinion con-
curring in part and dissenting in part, arguing that all of
petitioner’s claims are patent eligible. Id., at 1327. Judges
Linn and O’Malley filed a separate dissenting opinion
reaching that same conclusion. Ibid.
  We granted certiorari, 571 U. S. ___ (2013), and now
affirm.
                              II
   Section 101 of the Patent Act defines the subject matter
eligible for patent protection. It provides:
      “Whoever invents or discovers any new and useful
    process, machine, manufacture, or composition of
    matter, or any new and useful improvement thereof,
    may obtain a patent therefor, subject to the conditions
    and requirements of this title.” 35 U. S. C. §101.
“We have long held that this provision contains an im-
portant implicit exception: Laws of nature, natural phe-
nomena, and abstract ideas are not patentable.” Associa-
tion for Molecular Pathology v. Myriad Genetics, Inc., 569
U. S. ___, ___ (2013) (slip op., at 11) (internal quotation
marks and brackets omitted). We have interpreted §101
and its predecessors in light of this exception for more
than 150 years. Bilski, supra, at 601–602; see also
O’Reilly v. Morse, 15 How. 62, 112–120 (1854); Le Roy v.
Tatham, 14 How. 156, 174–175 (1853).
   We have described the concern that drives this exclu-
sionary principle as one of pre-emption. See, e.g., Bilski,
supra, at 611–612 (upholding the patent “would pre-empt
use of this approach in all fields, and would effectively
6               ALICE CORP. v. CLS BANK INT’L

                       Opinion of the Court

grant a monopoly over an abstract idea”). Laws of nature,
natural phenomena, and abstract ideas are “ ‘ “the basic
tools of scientific and technological work.” ’ ” Myriad,
supra, at ___ (slip op., at 11). “[M]onopolization of those
tools through the grant of a patent might tend to impede
innovation more than it would tend to promote it,” thereby
thwarting the primary object of the patent laws. Mayo,
supra, at ___ (slip op., at 2); see U. S. Const., Art. I, §8, cl.
8 (Congress “shall have Power . . . To promote the Pro-
gress of Science and useful Arts”). We have “repeatedly
emphasized this . . . concern that patent law not inhibit
further discovery by improperly tying up the future use
of ” these building blocks of human ingenuity. Mayo,
supra, at ___ (slip op., at 16) (citing Morse, supra, at 113).
   At the same time, we tread carefully in construing this
exclusionary principle lest it swallow all of patent law.
Mayo, 566 U. S., at ___ (slip op., at 2). At some level, “all
inventions . . . embody, use, reflect, rest upon, or apply
laws of nature, natural phenomena, or abstract ideas.”
Id., at ___ (slip op., at 2). Thus, an invention is not ren-
dered ineligible for patent simply because it involves an
abstract concept. See Diamond v. Diehr, 450 U. S. 175,
187 (1981). “[A]pplication[s]” of such concepts “ ‘to a new
and useful end,’ ” we have said, remain eligible for patent
protection. Gottschalk v. Benson, 409 U. S. 63, 67 (1972).
   Accordingly, in applying the §101 exception, we must
distinguish between patents that claim the “ ‘buildin[g]
block[s]’ ” of human ingenuity and those that integrate the
building blocks into something more, Mayo, 566 U. S., at
___ (slip op., at 20), thereby “transform[ing]” them into a
patent-eligible invention, id., at ___ (slip op., at 3). The
former “would risk disproportionately tying up the use of
the underlying” ideas, id., at ___ (slip op., at 4), and are
therefore ineligible for patent protection. The latter pose
no comparable risk of pre-emption, and therefore remain
eligible for the monopoly granted under our patent laws.
                      Cite as: 573 U. S. ____ (2014) 
                   7

                          Opinion of the Court 

                               III

   In Mayo Collaborative Services v. Prometheus Laborato-
ries, Inc., 566 U. S. ___ (2012), we set forth a framework
for distinguishing patents that claim laws of nature, natu-
ral phenomena, and abstract ideas from those that claim
patent-eligible applications of those concepts. First, we
determine whether the claims at issue are directed to one
of those patent-ineligible concepts. Id., at ___ (slip op., at
8). If so, we then ask, “[w]hat else is there in the claims
before us?” Id., at ___ (slip op., at 9). To answer that
question, we consider the elements of each claim both
individually and “as an ordered combination” to determine
whether the additional elements “transform the nature of
the claim” into a patent-eligible application. Id., at ___
(slip op., at 10, 9). We have described step two of this
analysis as a search for an “ ‘inventive concept’ ”—i.e., an
element or combination of elements that is “sufficient to
ensure that the patent in practice amounts to significantly
more than a patent upon the [ineligible concept] itself.”
Id., at ___ (slip op., at 3).3
                              A
  We must first determine whether the claims at issue are
directed to a patent-ineligible concept. We conclude that
they are: These claims are drawn to the abstract idea of
intermediated settlement.
  The “abstract ideas” category embodies “the longstand-
ing rule that ‘[a]n idea of itself is not patentable.’ ” Ben-
son, supra, at 67 (quoting Rubber-Tip Pencil Co. v. How-
ard, 20 Wall. 498, 507 (1874)); see also Le Roy, supra, at
——————
  3 Because the approach we made explicit in Mayo considers all claim

elements, both individually and in combination, it is consistent with the
general rule that patent claims “must be considered as a whole.”
Diamond v. Diehr, 450 U. S. 175, 188 (1981); see Parker v. Flook, 437
U. S. 584, 594 (1978) (“Our approach . . . is . . . not at all inconsistent
with the view that a patent claim must be considered as a whole”).
8              ALICE CORP. v. CLS BANK INT’L

                     Opinion of the Court

175 (“A principle, in the abstract, is a fundamental truth;
an original cause; a motive; these cannot be patented, as
no one can claim in either of them an exclusive right ”). In
Benson, for example, this Court rejected as ineligible
patent claims involving an algorithm for converting binary-
coded decimal numerals into pure binary form, holding
that the claimed patent was “in practical effect . . . a pat-
ent on the algorithm itself.” 409 U. S., at 71–72. And in
Parker v. Flook, 437 U. S. 584, 594–595 (1978), we held
that a mathematical formula for computing “alarm limits”
in a catalytic conversion process was also a patent-
ineligible abstract idea.
  We most recently addressed the category of abstract
ideas in Bilski v. Kappos, 561 U. S. 593 (2010). The claims
at issue in Bilski described a method for hedging against
the financial risk of price fluctuations. Claim 1 recited a
series of steps for hedging risk, including: (1) initiating a
series of financial transactions between providers and
consumers of a commodity; (2) identifying market partici-
pants that have a counterrisk for the same commodity;
and (3) initiating a series of transactions between those
market participants and the commodity provider to bal-
ance the risk position of the first series of consumer trans-
actions. Id., at 599. Claim 4 “pu[t] the concept articulated
in claim 1 into a simple mathematical formula.” Ibid. The
remaining claims were drawn to examples of hedging in
commodities and energy markets.
  “[A]ll members of the Court agree[d]” that the patent at
issue in Bilski claimed an “abstract idea.” Id., at 609; see
also id., at 619 (Stevens, J., concurring in judgment).
Specifically, the claims described “the basic concept of
hedging, or protecting against risk.” Id., at 611. The
Court explained that “ ‘[h]edging is a fundamental economic
practice long prevalent in our system of commerce and
taught in any introductory finance class.’ ” Ibid. “The
concept of hedging” as recited by the claims in suit was
                 Cite as: 573 U. S. ____ (2014)            9

                     Opinion of the Court

therefore a patent-ineligible “abstract idea, just like the
algorithms at issue in Benson and Flook.” Ibid.
   It follows from our prior cases, and Bilski in particular,
that the claims at issue here are directed to an abstract
idea. Petitioner’s claims involve a method of exchanging
financial obligations between two parties using a third-
party intermediary to mitigate settlement risk. The in-
termediary creates and updates “shadow” records to re-
flect the value of each party’s actual accounts held at
“exchange institutions,” thereby permitting only those
transactions for which the parties have sufficient re-
sources. At the end of each day, the intermediary issues
irrevocable instructions to the exchange institutions to
carry out the permitted transactions.
   On their face, the claims before us are drawn to the
concept of intermediated settlement, i.e., the use of a third
party to mitigate settlement risk. Like the risk hedging in
Bilski, the concept of intermediated settlement is “ ‘a
fundamental economic practice long prevalent in our
system of commerce.’ ” Ibid.; see, e.g., Emery, Speculation
on the Stock and Produce Exchanges of the United States,
in 7 Studies in History, Economics and Public Law 283,
346–356 (1896) (discussing the use of a “clearing-house” as
an intermediary to reduce settlement risk). The use of a
third-party intermediary (or “clearing house”) is also a
building block of the modern economy. See, e.g., Yadav,
The Problematic Case of Clearinghouses in Complex Mar-
kets, 101 Geo. L. J. 387, 406–412 (2013); J. Hull, Risk
Management and Financial Institutions 103–104 (3d ed.
2012). Thus, intermediated settlement, like hedging, is an
“abstract idea” beyond the scope of §101.
   Petitioner acknowledges that its claims describe inter-
mediated settlement, see Brief for Petitioner 4, but rejects
the conclusion that its claims recite an “abstract idea.”
Drawing on the presence of mathematical formulas in
some of our abstract-ideas precedents, petitioner contends
10             ALICE CORP. v. CLS BANK INT’L

                      Opinion of the Court

that the abstract-ideas category is confined to “preexist-
ing, fundamental truth[s]” that “ ‘exis[t ] in principle apart
from any human action.’ ” Id., at 23, 26 (quoting Mayo,
566 U. S., at ___ (slip op., at 8)).
   Bilski belies petitioner’s assertion. The concept of risk
hedging we identified as an abstract idea in that case
cannot be described as a “preexisting, fundamental truth.”
The patent in Bilski simply involved a “series of steps
instructing how to hedge risk.” 561 U. S., at 599. Al-
though hedging is a longstanding commercial practice, id.,
at 599, it is a method of organizing human activity, not a
“truth” about the natural world “ ‘that has always existed,’ ”
Brief for Petitioner 22 (quoting Flook, supra, at 593,
n. 15). One of the claims in Bilski reduced hedging to a
mathematical formula, but the Court did not assign any
special significance to that fact, much less the sort of
talismanic significance petitioner claims. Instead, the
Court grounded its conclusion that all of the claims at
issue were abstract ideas in the understanding that risk
hedging was a “ ‘fundamental economic practice.’ ” 561
U. S., at 611.
   In any event, we need not labor to delimit the precise
contours of the “abstract ideas” category in this case. It is
enough to recognize that there is no meaningful distinc-
tion between the concept of risk hedging in Bilski and the
concept of intermediated settlement at issue here. Both
are squarely within the realm of “abstract ideas” as we
have used that term.
                             B
   Because the claims at issue are directed to the abstract
idea of intermediated settlement, we turn to the second
step in Mayo’s framework. We conclude that the method
claims, which merely require generic computer implemen-
tation, fail to transform that abstract idea into a patent-
eligible invention.
                   Cite as: 573 U. S. ____ (2014)              11

                       Opinion of the Court

                                1
   At Mayo step two, we 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. 566 U. S., at ___,
___ (slip op., at 3, 11). A claim that recites an abstract
idea must include “additional features” to ensure “that the
[claim] is more than a drafting effort designed to monopo-
lize the [abstract idea].” Id., at ___ (slip op., at 8–9). Mayo
made clear that transformation into a patent-eligible
application requires “more than simply stat[ing] the [ab-
stract idea] while adding the words ‘apply it.’ ” Id., at ___
(slip op., at 3).
   Mayo itself is instructive. The patents at issue in Mayo
claimed a method for measuring metabolites in the blood-
stream in order to calibrate the appropriate dosage of
thiopurine drugs in the treatment of autoimmune dis-
eases. Id., at ___ (slip op., at 4–6). The respondent in that
case contended that the claimed method was a patent-
eligible application of natural laws that describe the rela-
tionship between the concentration of certain metabolites
and the likelihood that the drug dosage will be harmful or
ineffective. But methods for determining metabolite levels
were already “well known in the art,” and the process at
issue amounted to “nothing significantly more than an
instruction to doctors to apply the applicable laws when
treating their patients.” Id., at ___ (slip op., at 10).
“Simply appending conventional steps, specified at a high
level of generality,” was not “enough” to supply an “ ‘in-
ventive concept.’ ” Id., at ___, ___, ___ (slip op., at 14, 8, 3).
   The introduction of a computer into the claims does not
alter the analysis at Mayo step two. In Benson, for exam-
ple, we considered a patent that claimed an algorithm
implemented on “a general-purpose digital computer.” 409
U. S., at 64. Because the algorithm was an abstract idea,
see supra, at 8, the claim had to supply a “ ‘new and use-
12             ALICE CORP. v. CLS BANK INT’L

                      Opinion of the Court

ful’ ” application of the idea in order to be patent eligible.
409 U. S., at 67. But the computer implementation did
not supply the necessary inventive concept; the process
could be “carried out in existing computers long in use.”
Ibid. We accordingly “held that simply implementing a
mathematical principle on a physical machine, namely a
computer, [i]s not a patentable application of that princi-
ple.” Mayo, supra, at ___ (slip op., at 16) (citing Benson,
supra, at 64).
   Flook is to the same effect. There, we examined a com-
puterized method for using a mathematical formula to
adjust alarm limits for certain operating conditions (e.g.,
temperature and pressure) that could signal inefficiency or
danger in a catalytic conversion process. 437 U. S., at
585–586. Once again, the formula itself was an abstract
idea, see supra, at 8, and the computer implementation
was purely conventional. 437 U. S., at 594 (noting that
the “use of computers for ‘automatic monitoring-
alarming’ ” was “well known”). In holding that the process
was patent ineligible, we rejected the argument that
“implement[ing] a principle in some specific fashion” will
“automatically fal[l] within the patentable subject matter
of §101.” Id., at 593. Thus, “Flook stands for the proposi-
tion that the prohibition against patenting abstract ideas
cannot be circumvented by attempting to limit the use of
[the idea] to a particular technological environment.”
Bilski, 561 U. S., at 610–611 (internal quotation marks
omitted).
   In Diehr, 450 U. S. 175, by contrast, we held that a
computer-implemented process for curing rubber was
patent eligible, but not because it involved a computer.
The claim employed a “well-known” mathematical equa-
tion, but it used that equation in a process designed to
solve a technological problem in “conventional industry
practice.” Id., at 177, 178. The invention in Diehr used a
“thermocouple” to record constant temperature measure-
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                      Opinion of the Court

ments inside the rubber mold—something “the industry
ha[d] not been able to obtain.” Id., at 178, and n. 3. The
temperature measurements were then fed into a computer,
which repeatedly recalculated the remaining cure time
by using the mathematical equation. Id., at 178–179.
These additional steps, we recently explained, “trans-
formed the process into an inventive application of the
formula.” Mayo, supra, at ___ (slip op., at 12). In other
words, the claims in Diehr were patent eligible because
they improved an existing technological process, not be-
cause they were implemented on a computer.
  These cases demonstrate that the mere recitation of a
generic computer cannot transform a patent-ineligible
abstract idea into a patent-eligible invention. Stating an
abstract idea “while adding the words ‘apply it’ ” is not
enough for patent eligibility. Mayo, supra, at ___ (slip op.,
at 3). Nor is limiting the use of an abstract idea “ ‘to a
particular technological environment.’ ” Bilski, supra, at
610–611. Stating an abstract idea while adding the words
“apply it with a computer” simply combines those two
steps, with the same deficient result. Thus, if a patent’s
recitation of a computer amounts to a mere instruction to
“implemen[t]” an abstract idea “on . . . a computer,” Mayo,
supra, at ___ (slip op., at 16), that addition cannot impart
patent eligibility. This conclusion accords with the pre-
emption concern that undergirds our §101 jurisprudence.
Given the ubiquity of computers, see 717 F. 3d, at 1286
(Lourie, J., concurring), wholly generic computer imple-
mentation is not generally the sort of “additional featur[e]”
that provides any “practical assurance that the process is
more than a drafting effort designed to monopolize the
[abstract idea] itself.” Mayo, 566 U. S., at ___ (slip op., at
8–9).
  The fact that a computer “necessarily exist[s] in the
physical, rather than purely conceptual, realm,” Brief for
Petitioner 39, is beside the point. There is no dispute that
14             ALICE CORP. v. CLS BANK INT’L

                     Opinion of the Court

a computer is a tangible system (in §101 terms, a “ma-
chine”), or that many computer-implemented claims are
formally addressed to patent-eligible subject matter. But
if that were the end of the §101 inquiry, an applicant could
claim any principle of the physical or social sciences by
reciting a computer system configured to implement the
relevant concept. Such a result would make the determi-
nation of patent eligibility “depend simply on the drafts-
man’s art,” Flook, supra, at 593, thereby eviscerating the
rule that “ ‘[l]aws of nature, natural phenomena, and
abstract ideas are not patentable,’ ” Myriad, 569 U. S., at
___ (slip op., at 11).
                              2
   The representative method claim in this case recites the
following steps: (1) “creating” shadow records for each
counterparty to a transaction; (2) “obtaining” start-of-day
balances based on the parties’ real-world accounts at
exchange institutions; (3) “adjusting” the shadow records
as transactions are entered, allowing only those transac-
tions for which the parties have sufficient resources; and
(4) issuing irrevocable end-of-day instructions to the ex-
change institutions to carry out the permitted transac-
tions. See n. 2, supra. Petitioner principally contends that
the claims are patent eligible because these steps “require
a substantial and meaningful role for the computer.” Brief
for Petitioner 48. As stipulated, the claimed method
requires the use of a computer to create electronic records,
track multiple transactions, and issue simultaneous in-
structions; in other words, “[t]he computer is itself the
intermediary.” Ibid. (emphasis deleted).
   In light of the foregoing, see supra, at 11–14, the rele-
vant question is whether the claims here do more than
simply instruct the practitioner to implement the abstract
idea of intermediated settlement on a generic computer.
They do not.
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                      Opinion of the Court

  Taking the claim elements separately, the function
performed by the computer at each step of the process is
“[p]urely conventional.” Mayo, supra, at ___ (slip op., at
10) (internal quotation marks omitted). Using a computer
to create and maintain “shadow” accounts amounts to
electronic recordkeeping—one of the most basic functions
of a computer. See, e.g., Benson, 409 U. S., at 65 (noting
that a computer “operates . . . upon both new and previ-
ously stored data”). The same is true with respect to the
use of a computer to obtain data, adjust account balances,
and issue automated instructions; all of these computer
functions are “well-understood, routine, conventional
activit[ies]” previously known to the industry. Mayo, 566
U. S., at ___ (slip op., at 4). In short, each step does no
more than require a generic computer to perform generic
computer functions.
  Considered “as an ordered combination,” the computer
components of petitioner’s method “ad[d] nothing . . . that
is not already present when the steps are considered
separately.” Id., at ___ (slip op., at 10). Viewed as a
whole, petitioner’s method claims simply recite the concept
of intermediated settlement as performed by a generic
computer. See 717 F. 3d, at 1286 (Lourie, J., concurring)
(noting that the representative method claim “lacks any
express language to define the computer’s participation”).
The method claims do not, for example, purport to improve
the functioning of the computer itself. See ibid. (“There is
no specific or limiting recitation of . . . improved computer
technology . . . ”); Brief for United States as Amicus Curiae
28–30. Nor do they effect an improvement in any other
technology or technical field. See, e.g., Diehr, 450 U. S., at
177–178. Instead, the claims at issue amount to “nothing
significantly more” than an instruction to apply the ab-
stract idea of intermediated settlement using some un-
specified, generic computer. Mayo, 566 U. S., at ___ (slip
op., at 10). Under our precedents, that is not “enough” to
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                     Opinion of the Court

transform an abstract idea into a patent-eligible invention.
Id., at ___ (slip op., at 8).
                              C
  Petitioner’s claims to a computer system and a computer-
readable medium fail for substantially the same rea-
sons. Petitioner conceded below that its media claims rise
or fall with its method claims. En Banc Response Brief for
Defendant-Appellant in No. 11–1301 (CA Fed.) p. 50, n. 3.
As to its system claims, petitioner emphasizes that those
claims recite “specific hardware” configured to perform
“specific computerized functions.” Brief for Petitioner 53.
But what petitioner characterizes as specific hardware—a
“data processing system” with a “communications control-
ler” and “data storage unit,” for example, see App. 954,
958, 1257—is purely functional and generic. Nearly every
computer will include a “communications controller” and
“data storage unit” capable of performing the basic calcu-
lation, storage, and transmission functions required by the
method claims. See 717 F. 3d, at 1290 (Lourie, J., concur-
ring). As a result, none of the hardware recited by the
system claims “offers a meaningful limitation beyond
generally linking ‘the use of the [method] to a particular
technological environment,’ that is, implementation via
computers.” Id., at 1291 (quoting Bilski, 561 U. S., at
610–611).
  Put another way, the system claims are no different
from the method claims in substance. The method claims
recite the abstract idea implemented on a generic computer;
the system claims recite a handful of generic computer
components configured to implement the same idea. This
Court has long “warn[ed] . . . against” interpreting §101
“in ways that make patent eligibility ‘depend simply on
the draftsman’s art.’ ” Mayo, supra, at ___ (slip op., at 3)
(quoting Flook, 437 U. S., at 593); see id., at 590 (“The
concept of patentable subject matter under §101 is not
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                     Opinion of the Court

‘like a nose of wax which may be turned and twisted in
any direction . . . ’ ”). Holding that the system claims are
patent eligible would have exactly that result.
   Because petitioner’s system and media claims add noth-
ing of substance to the underlying abstract idea, we hold
that they too are patent ineligible under §101.
                       *    *      *
 For the foregoing reasons, the judgment of the Court of
Appeals for the Federal Circuit is affirmed.

                                                  It is so ordered.
                 Cite as: 573 U. S. ____ (2014)            1

                  SOTOMAYOR, J., concurring

SUPREME COURT OF THE UNITED STATES
                         _________________

                          No. 13–298
                         _________________

ALICE CORPORATION PTY. LTD, PETITIONER v. CLS
         BANK INTERNATIONAL ET AL.
 ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF 

           APPEALS FOR THE FEDERAL CIRCUIT

                        [June 19, 2014] 

   JUSTICE SOTOMAYOR, with whom JUSTICE GINSBURG
and JUSTICE BREYER join, concurring.
   I adhere to the view that any “claim that merely de-
scribes a method of doing business does not qualify as a
‘process’ under §101.” Bilski v. Kappos, 561 U. S. 593, 614
(2010) (Stevens, J., concurring in judgment); see also In re
Bilski, 545 F. 3d 943, 972 (CA Fed. 2008) (Dyk, J., concur-
ring) (“There is no suggestion in any of th[e] early [Eng-
lish] consideration of process patents that processes for
organizing human activity were or ever had been patent-
able”). As in Bilski, however, I further believe that the
method claims at issue are drawn to an abstract idea. Cf.
561 U. S., at 619 (opinion of Stevens, J.). I therefore join
the opinion of the Court.