Background
Alice Corporation held patents covering a computer-implemented method for mitigating settlement risk in financial transactions. The core concept was using a trusted third-party intermediary — implemented in software — to ensure that both parties to a financial exchange fulfilled their obligations simultaneously, preventing the scenario where one party pays but the other defaults before completing its side of the deal. CLS Bank International, which operates the world’s largest multicurrency cash settlement system, sought a declaration that Alice’s patents were invalid and unenforceable.
A district court granted summary judgment finding all of Alice’s claims patent-ineligible under § 101. A Federal Circuit panel reversed. Then the court ordered en banc rehearing — and what emerged was one of the most publicly dissonant judicial opinions in Federal Circuit history.
The Court’s Holding
With ten judges participating, the Federal Circuit produced seven separate opinions. The court affirmed the district court’s judgment of ineligibility by an equally divided 5-5 vote (per curiam), but could not agree on a rationale. Chief Judge Rader’s plurality opinion, joined by three others, would have held the system and media claims patent-eligible while the method claims were not. Judge Lourie’s concurrence, joined by four others, applied a more rigorous step-by-step analysis concluding all claims were directed to the abstract idea of clearing obligations. Other judges would have ruled differently on various subsets of claims or urged entirely different analytical frameworks.
The per curiam affirmance had no precedential force on the reasoning: only the outcome — that the specific Alice patents were invalid — was binding, and that only by virtue of the equally divided vote. The court had been asked by order to resolve three specific questions about software patent eligibility, and it produced no answers with majority support.
Key Takeaways
- The en banc Federal Circuit could not agree on any standard for determining when computer-implemented inventions are patent-eligible under § 101, producing a per curiam judgment with no controlling rationale.
- The decision effectively signaled to the Supreme Court that the Federal Circuit’s internal divisions on software patent eligibility required resolution at the highest level.
- A per curiam affirmance by an equally divided en banc court is the outcome with precedential force, but the underlying reasoning has no binding authority on future panels.
- The case led directly to the Supreme Court’s landmark Alice Corp. v. CLS Bank International (2014), which established the two-step framework now universally applied in § 101 cases.
Why It Matters
CLS Bank v. Alice (Federal Circuit 2013) is historically significant not because it resolved anything, but because it demonstrated that the Federal Circuit could not resolve the foundational question of software patent eligibility on its own. The seven opinions running in different directions attracted enormous attention from technology companies, patent practitioners, and commentators who recognized that the lack of a clear standard created massive uncertainty for the entire software industry.
The Supreme Court granted certiorari and issued Alice Corp. v. CLS Bank International in June 2014, unanimously holding that abstract ideas implemented on a generic computer are not patent-eligible. That ruling — which established the now-ubiquitous Alice/Mayo two-step framework — is among the most consequential patent decisions in decades, reshaping the patent portfolios of software companies large and small and giving defendants a powerful new weapon against software and business method patents. The Federal Circuit en banc fracture that preceded it is a critical part of the story.