Last week, the U.S. Supreme Court heard oral argument in Alice Corp. Pty. Ltd. v. CLS Bank Int’l (No. 13-298) to decide “[w]hether claims to computer-implemented inventions . . . are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101.” The government and practitioners alike hope that the Court’s decision will finally clarify the “abstract ideas” exception under Section 101. Based on the questions posed at oral argument, a number of Justices appeared to be troubled about the patent eligibility of Alice’s asserted claims directed to intermediated settlements.

I. BACKGROUND -

Alice’s patents relate to a computerized trading platform for exchanging obligations. Typically, these transactions require parties to exchange an obligation at a future date. To avoid the “settlement risk” that one of the exchanging parties may not perform the exchange, the patented invention makes use of “shadow accounts” that correspond to the parties’ real-world bank accounts. These shadow accounts are adjusted on a real-time basis to reflect the parties’ obligations. Because parties may only enter into obligations that they can settle later according to their shadow accounts, the patented invention eliminates settlement risk. When it is time to settle and honor the obligations, the patented invention issues irrevocable instructions to require the parties’ bank accounts to make the required transfers.