Alice v. CLS Bank: The Supreme Court Changed the Meaning of Clear Language in Section 101

I’ve delayed discussing Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208 (2014) (“Alice”) for one obvious reason: Not even patent examiners, judges of the Federal Circuit, District Court judges, and I suspect SCOTUS justices truly understand what the standard now is. Alice is applied with a light touch in some courts (a District Court in Texas come to mind), while it is applied as a flamethrower to torch patents in other courts (ND Cal, anyone?). So let’s start with the conclusion:

Section 101 used to mean that anything people invented that was novel and non-obvious was patentable. After Alice (and a few other cases I’ve delayed discussing for similar reasons), broad swaths of innovation are no longer protectable.

35 U.S. Code § 101 describes which Inventions are patentable – and it is very broad, encompassing (by the plain text, although the Supreme Court has since deviated significantly from that plain text in how they read it) almost anything that is new and useful:

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.

Diamond v. Chakrabarty, 447 U.S. 303 (1980) noted that the intent of Congress in writing Section 101 was to allow patenting of “include anything under the sun that is made by man.”

Alice carved out “abstract ideas”, but abstract ideas were always unpatentable. What Alice more specifically did was expand the definition of abstract ideas to include functional implementations of those ideas. Bear in mind that obvious inventions are unpatentable independent of Alice, so what Alice changed was the patentability of a novel, non-obvious implementation of a way to accomplish an invention that originated as an abstract idea.

So, what is the Alice two-step test? In a nutshell, the Supreme Court set out a two-part inquiry for patent eligibility under Section 101. It works like this:

1. Step 1 — Is it a Judicial Exception (of course, a “Judicial Exception” is an admission that it is an exception that Congress never adopted as the law)? First, ask what the patent is really “directed to.” Is the claim aiming to monopolize what Alice classifies as one of the building blocks of ingenuity — i.e. a law of nature, a natural phenomenon, or an abstract idea? If the answer is no (the invention isn’t just an abstract idea or natural law per se), then Alice isn’t a problem and the invention passes Section 101. But if yes — if the core idea sounds like an abstract idea or law of nature — we move to step two.
2. Step 2 — Is there “Something More”? When a claim is directed to an abstract idea (or other exception), the court then looks for an “inventive concept” — basically something extra in the claim that transforms the abstract idea into a patent-eligible application. The Supreme Court said you can’t just take an abstract idea and say “apply it on a generic computer” and call that an invention. You need specific additional features or a concrete application that adds enough to the idea so that you’re not effectively monopolizing the idea itself. In other words, the claim must include elements or a combination of elements that go beyond “well-understood, routine, conventional” activities in the field. If it does, the patent can survive even if it involves an abstract idea; if it doesn’t, it’s going to be ineligible under Section 101.

This two-step framework (often called the Mayo/Alice test, since it builds on an earlier case Mayo v. Prometheus) is now the standard –poorly defined and understood as it may be – for determining patent subject-matter eligibility. Applying  it has been anything but straightforward in practice.

Key Cases Shaping Section 101 Post-Alice

After Alice (2014) laid down the two-step test, courts and the USPTO grappled with how to apply it. Let’s walk through some influential decisions — Alice itself and cases before and after Alice — that have shaped how we understand Section 101 today:

• Mayo Collaborative Services v. Prometheus (2012): This Supreme Court case actually came before Alice and set the stage for the two-step analysis (think of it as a prequel to the confused Alice test). Mayo involved a medical diagnostic method: researchers discovered a correlation between drug metabolite levels in the blood and effective dosage. The Court struck down the patent, reasoning that the patent merely claimed a law of nature (the biological correlation) plus routine steps of administering the drug and measuring levels. Justice Breyer (who was always hostile to patents) famously wrote that you can’t just “apply it” and claim a natural law; you need a specific, inventive application of that law. Mayo introduced the idea that if a claim is essentially a natural law (or abstract idea) with only conventional steps added, it’s not eligible. This was a precursor to the Alice test and sent shockwaves particularly through the biotech and pharmaceutical fields (diagnostic method patents became much harder to get).
• Alice Corp. v. CLS Bank (2014): In Alice itself, the patent was about a computerized scheme for intermediated financial settlements — basically using a third-party intermediary to mitigate settlement risk. The Court unanimously held this was an abstract idea (a fundamental economic practice) done on a generic computer. Using the two-step test, the Justices found (Step 1) the concept of intermediated settlement was an abstract idea, and (Step 2) merely implementing that idea on a standard computer wasn’t an inventive concept. Alice didn’t invent the two-step, but it cemented it as the test for all types of inventions (not just laws of nature, but abstract ideas like many software and business method patents). After Alice, thousands of software and business-method patents were invalidated as being “abstract” — courts suddenly found whole categories of inventions ineligible, even if they were new and non-obvious, because they failed this new test. This case is the reason Section 101 went from a broad filter (“anything under the sun made by man” is patentable) to a buzzsaw that cut down many patents that would’ve been fine before.
• DDR Holdings v. Hotels.com (2014): Decided not long after Alice by the Federal Circuit, DDR Holdings was a rare instance where a software-related patent survived. It involved an e-commerce innovation for retaining website visitors when they click an ad (so they see a modified version of the third-party site framed by the original site’s look-and-feel). The Federal Circuit found the claims eligible, noting that they were not directed to a mere abstract idea in the internet business realm but instead solved a specific problem unique to the Internet. DDR was significant as a first sign that not all software patents were dead under Alice — if your invention was rooted in computer technology and solved a tech-specific problem, you had a fighting chance.
• Enfish, LLC v. Microsoft (2016): A Federal Circuit decision that gave more hope to software patentees. Enfish’s patent was on a new type of self-referential database table (a specific way of structuring data in a single table to improve search and storage). The court held that the claims were not “directed to” an abstract idea at Step 1. Instead of being some age-old business practice or idea, this was a concrete improvement in computer functionality (improving how databases work). Therefore, the court didn’t even need to reach Step 2. Enfish clarified that not every software invention is abstract — if your claims focus on a specific improvement in the technology (versus just using computers as a tool), you might pass Step 1. This case introduced the idea that Alice Step 1 can be a saving grace if the invention is sufficiently technical and specific.
• BASCOM Global Internet v. AT&T (2016): Another 2016 Federal Circuit case, but this one found eligibility at Step 2 of Alice. Bascom was about an Internet content filtering system. The basic concept — filtering internet content — might be an abstract idea, but the court found an “inventive concept” in how it was implemented. The patent placed the filtering tool on a remote ISP server and allowed individualized filtering for each user account. While each component was known, the non-conventional arrangement of these pieces was key. The court said this specific combination (remote filtering with customization) was not well-understood or routine, and thus it added something significant beyond the abstract idea. In other words, Bascom showed that even if you’re at Step 2, you can survive by pointing to an unusual or innovative combination of known elements — Alice’s “something more” doesn’t have to be a single magic ingredient; it can be the way pieces are put together.
• McRO v. Bandai Namco (2016): This case (often called the McRO or Planet Blue case) involved automating 3D character animations (like syncing lip movements to dialogue) using specific rules. The Federal Circuit here found the claims patent-eligible at Step 1, because they were not directed to a mere abstract idea of animating faces, but to a specific rules-based technological improvement in animation. McRO is frequently cited for the notion that using specific rules or algorithms to achieve a concrete result can be patent-eligible, as opposed to claiming the result itself. It helped clarify that not all algorithms are unpatentable abstractions — if they tie to a specific technical process, they might pass muster.
• Berkheimer v. HP (2018) and rehearing request: Fast forward to 2018 — Berkheimer was a Federal Circuit decision that became famous for making Alice Step 2 a question of fact (at least in part). The patent here was related to digital asset management, and some claims were found ineligible, but others had additional elements that the court thought might be inventive. Crucially, the Federal Circuit held that whether something is “well-understood, routine, and conventional” (the Step 2 inquiry) can involve underlying factual issues. This meant that you can’t always decide eligibility early on a motion to dismiss or summary judgment — if the patentee raises a factual dispute about what’s conventional in the field, courts might need evidence. Berkheimer (and a related case Aatrix that came out around the same time) has made it harder to invalidate patents quickly, and indeed after this case, the rate of patents being thrown out under Section 101 dropped noticeably (at least at early stages of litigation). Defendants now have to consider that a judge or jury might later find an inventive concept in elements that weren’t proven to be routine.
• Vanda Pharmaceuticals v. West-Ward (2018): This Federal Circuit decision is notable in the life-sciences arena. After Mayo, many assumed medical diagnostics and personalized medicine patents were doomed. But Vanda upheld a method of treating patients with a drug (iloperidone) based on a genetic test. The court distinguished Mayo by noting that the claims were not just about a natural correlation; they included specific treatment steps (adjusting the drug dose based on the test) that applied the discovery in a concrete way. Vanda signaled that method-of-treatment claims might survive Alice/Mayo if they go beyond merely stating a law of nature — essentially, if you tie the discovery to a specific therapeutic action, it could be eligible. (However, the law here remains complicated, and Vanda itself has a bit of a question mark since the Supreme Court declined to review it, leaving some uncertainty about how far it can be applied.)

These cases (among others) illustrate the patchwork approach forged from differing judicial interpretations of Alice. Each gave us a piece of the puzzle: Mayo gave us the groundwork for the two-step test; Alice applied it rigorously to software/business methods; DDR, Enfish, Bascom, McRO showed ways to overcome the abstract idea hurdle with sufficient specificity; Berkheimer made it harder to nix patents without fact-finding; and Vanda and others tried to carve out a path for life-science inventions post-Mayo.

How Alice Changed the Patent Eligibility Landscape

It’s hard to overstate how much Alice (and its progeny) changed patent law. Before these decisions, Section 101 was a relatively easy hurdle — if your invention fit in one of the broad statutory categories (process, machine, manufacture, or composition of matter) and wasn’t a complete law of nature or abstract principle of the kind nobody could ever patent, you were usually fine. Patent exams and litigation focused more on “Is it new? Is it non-obvious?” (Sections 102 and 103) rather than eligibility per se. A common observation after Alice is that a pure law of nature or abstract idea will almost always be obvious.

After Alice (and the earlier Mayo for biotech), Section 101 became a gatekeeper issue. Suddenly, courts were invalidating patents left and right under this test — especially in software, e-commerce, and biotech diagnostics. A software patent that in 2012 might have been enforced without question was, by 2015, potentially struck down as an “abstract idea”. Likewise, diagnostic methods (like detecting a gene or a biomarker to diagnose a disease) that might have been patentable pre-Mayo were now often deemed to be just natural phenomena plus routine steps.

There is also a resounding risk that critical research will stop under Mayo/Alice. For example, an antibiotic discovered after spending billions of dollars analyzing soil samples may be held unpatentable as a phenomenon of nature or natural law — and there mere chance that it is not patentable will chill research into new antibiotics. The Federal Circuit already invalidated the patent on a massive breakthrough that eliminated the need for most amniocentesis (together with the amnio risk of miscarriage) because it measured the body’s innate response to carrying a baby (paternal DNA present in the baby leaks into the blood plasma of the mother, allowing identification of fetal DNA in the blood plasma). The incentive for investing in critical medical research has been eliminated in many cases – and many uncertain in nearly all cases.

In the first few years after Alice, statistics showed very high invalidation rates — many defendants who got sued for patent infringement raised Alice in motions to dismiss, and a large percentage of those patents got tossed out early. This was especially true in software cases: courts found things like methods of organizing information, matchmaking people, filtering content, etc., to be unpatentable abstract ideas. Over time, the Federal Circuit started to refine the analysis (with cases like Enfish and Bascom providing some balance), but uncertainty remained.

The uncertainty that Alice brought is well illustrated by the wild variability of Alice-based invalidation between different district courts. The Western District of Texas held 80% of patents before it valid under Alice. By contrast, the neighboring Eastern District of Texas held 56% of patents valid, while the Northern District of California held only 29% of patents valid. These are decisions made by Presidentially appointed, Senate-confirmed United States District Court judges with immense resources at their fingertips (recent Ivy League law grads as clerks should not be underestimated). Yet somehow district courts vary so wildly in outcomes that it is difficult to understand why the Supreme Court hasn’t stepped in to clarify things in light of clear and convincing evidence that judges are confused and applying different levels of rigor and different interpretations of Alice in invalidating patents.

In the immediate post-Alice era, roughly 70% of patents challenged at the pleading stage were found invalid under Section 101, but after Berkheimer, that rate fell to about 45%. Similarly, at summary judgment, the invalidation rate went from about 59% pre-Berkheimer down to 40% after courts recognized that factual questions could be involved. In short, Alice opened the floodgates for eligibility challenges, and many patents didn’t survive, though recent years have seen a slight tempering of that trend.

Another huge change has been in Patent Office (USPTO) practice. After Alice, the USPTO struggled with how to instruct examiners on Section 101. There were waves of guidelines attempting to explain what counts as an “abstract idea.” Examiners began rejecting a lot of applications as ineligible. By 2019, partly in response to Enfish, McRO, Berkheimer, etc., the USPTO issued new guidelines that categorized abstract ideas and asked if the claim integrates the idea into a practical application. Under these guidelines, if an invention is integrated into a practical application (for example, using an abstract idea in a useful way in a particular field), the examiner can find it eligible at Step 1 without even needing an “inventive concept” inquiry. This was the Patent Office’s attempt to get closer to how the Federal Circuit was allowing certain software patents. But here’s the kicker: the courts are not bound by USPTO guidelines, and sometimes an examiner might allow a patent that a court later invalidates, or vice versa. This divergence has added to the uncertainty — patent practitioners have had to draft applications with an eye toward both the USPTO’s evolving tests and the potentially different interpretation that might occur in court.

Overall, Alice and its progeny narrowed patent eligibility in ways that fundamentally changed patent strategy. Industries like tech and finance saw lots of business-method and software patents invalidated. In the biotech realm, companies became wary of investing in diagnostic tests that might not be protectable. On the flip side, some large tech companies and open-source advocates cheered Alice for allegedly helping eliminate vague, overly broad patents. It’s a classic case of balancing innovation incentives: depending on who you ask, Alice either saved the system from bad patents or threw a bunch of good inventions into uncertainty.

Critically, tech giants have billions of dollars available to spend trying to invalidate patents. By contrast, startups and independent inventors are often unable to afford to fight invalidation efforts. This further tilted the patent landscape in favor of wealthy megacorporations.

Critiques, Uncertainty, and the “101” Chaos

Unsurprisingly, the Alice decision and its aftermath have drawn heavy criticism and concern from many corners of the innovation world. Here are some of the key critiques and issues that have emerged:

• “Abstract Idea” is Too Vague: One of the biggest complaints is that nobody knows exactly what an “abstract idea” is, in the patent sense. The Supreme Court in Alice didn’t define it clearly — they gave a few examples (like long-standing business practices – something clearly obvious and not patentable anyhow, fundamental economic concepts – also clearly obvious and not patentable, methods of organizing human activity – likely obvious and not patentable, etc.), but beyond that it’s been judge-made common law. This has led to the feeling that courts know an abstract idea when they see it (to paraphrase an old phrase about obscenity), but there’s no consistency. As a result, whether a given invention is deemed “abstract” can seem subjective. Two different judges might reach opposite conclusions on the same patent. This vagueness is frustrating for inventors and companies, because it’s hard to predict what is patentable and what isn’t until you try (or until litigation happens). Indeed, many patent professionals will tell you that once the three judge Federal Circuit panel has been picked to determine validity of a patent, you can very accurately predict the outcome based on each judge’s known feelings about patents.
• Blurring of 101 with 102/103 (Inventiveness): Another critique is that the Alice test has effectively imported a novelty/non-obviousness inquiry into Section 101, which was supposed to be a separate threshold test. Step 2 asks if there’s an “inventive concept” beyond the abstract idea — but assessing what is “well-understood, routine, conventional” can sound a lot like judging if something is new or obvious. Detractors say that by using terms like “conventional” in the eligibility test, courts are doing a mini-102/103 analysis without the safeguards of those sections (like considering prior art in full, or the level of ordinary skill). Even some judges have noted this tension. In one case, a judge quipped that the way Alice was being applied was “in contravention of the explicit distinction between Section 101 and Section 102”, because patents were being invalidated as “abstract” essentially for lacking novelty. This overlap creates confusion — are we rejecting this invention because it’s an abstract idea or because it’s obvious? Ideally, those are different questions, but Alice entwined them.
• Inconsistent Court Decisions: The Federal Circuit (the court that hears all patent appeals) has been all over the map on 101. Some panels take a strict approach, invalidating patents by deeming them high-level ideas (e.g., many healthcare diagnostics or fintech patents have been killed this way). Other panels find ways to uphold patents by focusing on specific technical improvements or factual disputes. Even as of today, patent eligibility is considered “one of the most hotly contested and unpredictable areas of U.S. patent law”. The Federal Circuit’s decisions have been “criticized for inconsistency, leading to unpredictability”. It’s basically a coin toss depending on which judges you get. This drives lawyers and clients nuts — it’s hard to advise someone if their invention is patentable or if their patent will survive a challenge, because the case law has examples of both outcomes with seemingly similar facts.
• Uncertainty at the USPTO: The Patent Office has its own guidelines, which evolved post-Alice. They even came up with examples and flowcharts to help examiners. While this helped somewhat, there’s still quite a bit of inconsistency among examiners. Some examiners became very quick to slap a 101 rejection on any software-related application, whereas others are more forgiving if you frame the invention in technical terms. The USPTO’s 2019 guidance (following Berkheimer) was supposed to reduce arbitrary decisions — and it did improve allowance rates for software patents — but the underlying tension between USPTO and the courts remains. A patent could be granted because an examiner thought the claims had a practical application, yet that same patent could be invalidated later in court if a judge sees it differently. This uncertainty can be costly: companies may invest in patenting and then not actually get effective protection if the courts disagree.
• Chilling Effect on Innovation: Many patent practitioners and industry groups argue that Alice has had a chilling effect, especially in areas like medical diagnostics, personalized medicine, and certain software fields. For instance, if you discover a new biomarker that indicates a disease, under Mayo/Alice you likely can’t patent a simple diagnostic test for it — and without patent protection, investors might not fund the development of that test, meaning it never reaches patients. Moreover, if analysis can be done privately in a single lab, it may be held as a trade secret, depriving researchers of the knowledge necessary to build on that invention. Similarly, small software startups with innovative algorithms might decide not to bother filing patents (or investors steer them away from patents) because they fear the patents won’t hold up. In short, critics say Alice undermines the predictability and reliability that the patent system is supposed to provide, and that in turn can stifle innovation in critical areas.
• Endless Litigation and Cost: The uncertainty has also led to a lot of extra litigation on the 101 issue. Almost every patent infringement suit now includes a Section 101 defense (if the patent is even vaguely in a field that could be considered abstract or naturally occurring). That means more motions, more experts, more appeals — basically more time and money spent on determining if you even have a patentable subject matter, before getting to whether the patent is valid over prior art or infringed. The courts have expressed some fatigue at this “threshold” fight happening so often. Judges have openly called the state of patent eligibility law a “mess” and begged for higher guidance. In fact, various Federal Circuit judges have written separate opinions imploring the Supreme Court or Congress to clarify what should be patentable, because they find the current jurisprudence confusing and contradictory.

The upshot is a patent system where nobody is completely happy and innovation is discouraged: inventors find it harder to get and defend certain patents, patent attorneys struggle to draft claims that will withstand Alice, and even big tech companies that benefited from Alice’s weeding out of bad patents are now unsure about the patentability of their own innovations in AI or medical diagnostics. It’s chaos, and most agree something needs to be fixed — they just don’t agree on what or how. That said, big tech companies will keep making money even without a patent system – and likely prefer unenforceable patents because it lets them simply steal the intellectual property of less well funded companies and individuals without risk.

Calls for Reform and The Path Forward

Given the widespread hand-wringing over Section 101 post-Alice, there have been many calls to fix the system — either by the Supreme Court reversing course (which it hasn’t) or by Congress stepping in to clarify the law. Inventors should consider joining US Inventor, a lobbying group that advocates for independent inventors. Here’s where things stand on potential reforms:

• Supreme Court’s Reluctance: One might think the Supreme Court would notice the turmoil Alice created and step in to refine the test. Indeed, numerous litigants have petitioned the Court to take up new cases to clarify Section 101. However, the Supreme Court has repeatedly declined to grant certiorari in these cases — even in big ones like Sequenom (which involved a groundbreaking prenatal test deemed ineligible) or more recently Athena Diagnostics, Ameranth, Tropp, CareDx, etc., where petitioners specifically asked for clarification. The Court seems uninterested in reopening the 101 Pandora’s box, at least for now (or, more likely, the Court with no justice having any scientific training would rather avoid these hard and scientific questions). This has left many people frustrated, as each denied cert petition is a lost opportunity to get some clarity from the top. At the same time, the lack of scientific understanding among the justices raises the risk that revising Alice may make things worse.
• Proposed Legislation (Congress to the Rescue?): Over the past few years, there have been high-profile efforts in Congress to reform Section 101. Because Alice was primarily an interpretation of Section 101, Congress could clarify things with a simple bill. In 2019, a bipartisan group (including Senators Coons and Tillis) held hearings with lots of stakeholders (from industry, lawyers, academics) and floated a draft bill to rewrite 101. It didn’t go anywhere at that time (too many competing interests to get consensus). But in 2022, Senator Thom Tillis introduced the Patent Eligibility Restoration Act of 2022 — a bill specifically designed to overturn Alice (and Mayo) by rewriting Section 101. This bill proposed to eliminate the confusing judicial exceptions and instead define a shortlist of things that are not patentable. For example, it would explicitly exclude “mathematical formulas, mental processes, or processes that occur in nature” when claimed as such, and also exclude “unmodified” natural genes or natural materials. But importantly, the bill says anything else is eligible “subject only to the exclusions” and the other conditions of patentability. In plain terms, that means if the invention is a practical application and not literally just a math formula or law of nature itself, it could be patented. This is a much more inventor-friendly framework — it would restore patent eligibility to many things (like software and medical diagnostics) as long as they meet the usual novelty and non-obviousness requirements. The 2022 bill didn’t pass in that Congress, but it was a major sign of the appetite for reform. In 2023, lawmakers have continued to discuss similar reforms, and at the time of writing (2025), the push for legislative action is still very much alive.
• Support and Opposition to Reform: The debate around these reforms is intense. Many patent professionals, inventors, and industry groups (especially in pharma/biotech and independent inventor communities) support clarifying Section 101 to roll back the Alice/Mayo restrictions. They argue it will increase innovation and investment in R&D if patents are more reliable. On the other hand, some big tech companies, along with advocacy groups like the ACLU and Electronic Frontier Foundation (EFF), have opposed certain reform efforts — they worry that weakening the abstract idea exception could bring back “bad patents” on basic ideas or algorithms (the EFF and ACLU seem to ignore the fact that individual innovators are a dying breed thanks to Alice). For instance, the ACLU was involved in Alice and Myriad (the gene patent case) because they believe overly broad patents can impede free speech or research. 
• Academic and Practitioner Ideas: Outside of Congress, plenty of smart people have proposed their own fixes. Some suggest going back to basics: make Section 101 a simple categorical test (like in Europe, where they say “if it has a technical character, it’s eligible” and deal with breadth/obviousness separately). Others propose codifying definitions of “abstract idea” or requiring the courts to consider the invention as a whole and not kill patents at a high level of abstraction. There’s also a push for the USPTO to further refine its examination guidelines to be more in line with any new case law — essentially to reduce the disconnect between getting a patent and keeping it valid. Patent practitioners often advise drafting applications differently now: for example, emphasizing technical improvements in the specification (to satisfy Enfish step 1 analysis) and adding fallback dependent claims with specific features (to have something potentially inventive for Berkheimer step 2). These are workarounds until a bigger fix happens.
  • One of my “practitioner/inventor” ideas has been to broaden patent eligibility to what it was pre-Alice, while at the same time changing patent terms to reflect the “inevitable invention” date. That is, for some inventions, it is inevitable that the invention would have been made by somebody else during the patent term. As an obvious example, an internal combustion engine car without a muffler is way too loud. If the first cars were released without a muffler, countless people would have noticed the need to make cars quieter, and the muffler would have inevitably been invented within just a few years of the release of the first car. By tying patent terms to the date on which an invention would inevitably have been developed (plus some extra term as appropriate to incentivize rapid innovation), rapidly moving fields would not have to contend with two decades of patent licensing. Of course, some invention would not have been inevitable, and for those some maximum patent term could be identified. One of Alice’s big concerns is locking up technology necessary to innovate further (beyond the patented invention) — a concern that is addressed in a less destructive way by changing patent term rather than patent eligibility.
• What the Future Holds: As of mid-2025, we’re still in a holding pattern. The Supreme Court could, at any time, agree to hear a new case and potentially change the Alice/Mayo test (either by clarifying the definition of abstract ideas or perhaps doing away with the two-step approach entirely). And Congress could pass an amendment to Section 101 — which would be the first significant legislative change to patent law since the America Invents Act. Many experts believe something has to give because the status quo isn’t sustainable long-term. The question is, who will act first: the Court or Congress? And will the solution be a modest tweak or a sweeping overhaul? Count me a cynic, but I don’t see reform happening until there is a true disaster – like running out of antibiotics to fight bacteria with antibiotic resistance and having nothing in the pipeline because without patents, research into the field cannot be monetized.

Conclusion

The saga of Alice v. CLS Bank shows how a single Supreme Court case can cast a long shadow over an entire field of innovation. What began as an attempt by nine justices — each with no science background — to prevent truly abstract ideas and natural laws from being monopolized ended up creating a complicated test that changed the meaning of the clear words of Section 101. Instead of “anything under the sun made by man” being patent-eligible (as the legislative history touted), we now have a murky landscape where inventors and lawyers must navigate the Alice two-step, shifting court interpretations, and evolving USPTO guidelines.For IP professionals and inventors, the key takeaway is to stay informed and be adaptable. If you’re seeking patents, draft your applications with Alice in mind — be explicit about technical improvements and specific applications. If you have patents in these gray areas, know that their validity might be challenged, and there are strategies to defend them (leveraging the latest case law like Berkheimer). And if you’re advocating for policy, keep pushing — there is broad agreement that we need more clarity. Whether it’s through the courts or new legislation, the hope is that in a few years we’ll have a more predictable and innovation-friendly patent eligibility standard. Until then, we’re all a bit like Alice in Wonderland, navigating a curious and confusing world of Section 101, hoping that at some point, we’ll wake up to clearer rules that strike the right balance between freeing basic ideas and protecting true inventions.

Appendix: Can AI Translate Complex Legal Text to Plain English?

I provided the following prompt to ChatGPT o3, together with a pdf of Alice: “I’ve attached the case Alice v. CLS Bank. I’m experimenting with translating cases into something people with no legal background can understand. Please translate this case into language that can be processed and understood by an average college graduate. You should explain concepts that are present but not explained in the opinion. You should make it easy to understand.” This is the output:

Plain-Language Guide to Alice Corporation Pty. Ltd. v. CLS Bank International (U.S. Supreme Court, 2014)

---

1. What was going on?

• The dispute. Alice Corporation owned four U.S. patents covering a computerized method for making sure that, when two parties trade money or securities, both sides actually perform as promised.
• The real-world problem. In finance this is called “settlement risk”—the fear that Party A will pay but Party B won’t (or vice-versa).
• Alice’s idea. Put a computer in the middle as a neutral “referee.” The computer keeps “shadow accounts” that mirror each party’s real bank account, approves only the trades that each side can cover, and at the end of the day tells the banks to move the actual money.
• CLS Bank’s response. CLS already ran a global currency-settlement network. It sued Alice for a declaration that Alice’s patents were invalid; Alice countersued for infringement.

2. The narrow legal question

Are Alice’s patent claims the kind of invention that U.S. patent law (§ 101 of the Patent Act) is even willing to consider?
Section 101 says you can patent a process, machine, manufacture, or composition of matter. But the Supreme Court has long carved out three implied exceptions—laws of nature, natural phenomena, and abstract ideas. You cannot patent those building-block concepts themselves.

3. Two-step test the Court used (from Mayo v. Prometheus, 2012)

1. Step 1 – Is the claim directed to one of the forbidden categories?
2. Step 2 – If yes, does the claim add enough extra features—an “inventive concept”—to transform the forbidden idea into a practical application that deserves a patent?

4. Applying Step 1: Is the idea “abstract”?

The Court said yes.
What Alice really claimed, stripped of computer jargon, was the age-old commercial practice of using an intermediary (clearinghouse) to guarantee both sides of a trade. That concept—called “intermediated settlement”—is a “fundamental economic practice,” just like hedging, adding numbers, or balancing a checkbook. Fundamental economic practices are “abstract ideas” under earlier cases.

5. Applying Step 2: Is there “something more” than the abstract idea?

The Court said no.

• Why the computer didn’t help. The patents merely told you to (1) store account balances, (2) update them when a trade request comes in, and (3) send instructions to the banks. All of those steps are routine computer functions—electronic record-keeping, basic arithmetic, and automated messaging.
• No technological improvement. Unlike earlier cases where software controlled rubber-curing machinery (Diehr), Alice’s claims did not improve computer technology or any other technology—they just used a generic computer as a notepad and calculator.
• Form over substance rejected. Writing the same idea three ways (as a method, as a computer system, and as a computer-readable medium) doesn’t matter. Drafting tricks can’t turn an abstract idea into a patent.

6. The holding (bottom line)

Because all of Alice’s claims are directed to an abstract idea and add nothing inventive beyond saying “do it on a computer,” they are not patent-eligible under § 101. Alice’s patents are invalid.

7. Why this case matters

• Software and fintech patents. Alice is now the leading precedent used to invalidate software or business-method patents that rely on generic computers.
• Patent examination. The U.S. Patent & Trademark Office and lower courts routinely apply Alice’s two-step test to decide whether new claims—especially in artificial intelligence, e-commerce, or financial technology—are true inventions or just abstract ideas dressed up in code.
• Innovation policy. The decision attempts to balance rewarding genuine technological advances with preventing monopolies over basic concepts that everyone needs in order to innovate.

8. Key terms explained

Term	Plain meaning
Settlement risk	The chance one side of a trade pays while the other side defaults.
Clearinghouse / Intermediary	A neutral third party that sits between traders, netting and guaranteeing payments.
Abstract idea	A disembodied concept—like a mathematical formula or a basic economic practice—that is too foundational to belong to any one person.
Inventive concept

It is interesting that the Federal Circuit and the US District Courts seem to have systematically applied Alice in a more aggressive way (against patents) than the Supreme Court argument and opinion seemed to contemplate.