Alice Corp. v. CLS Bank: Supreme Court Restricts Software Patents, Reducing Patent Troll Leverage Over Abstract Business Methods

The Supreme Court unanimously rules in Alice Corp. v. CLS Bank International (573 U.S. 208) that abstract ideas implemented on generic computers are not patent-eligible under 35 U.S.C. § 101, establishing a two-step framework for patent eligibility. Justice Thomas delivers the opinion holding that Alice’s patents for a computer-implemented financial settlement system merely automate an abstract idea without adding an ‘inventive concept’ that transforms it into patent-eligible subject matter. The Court establishes that ‘an abstract idea does not become eligible for a patent simply by being implemented on a generic computer.’ This decision significantly curtails business method and software patents that patent trolls used for extraction: USPTO data shows business method patent issuance dropped by more than half in months following Alice. While initially celebrated as anti-troll, the decision creates uncertainty: the ‘abstract idea’ test proves vague and inconsistently applied by courts, chilling some legitimate software innovation while still permitting aggressive patent assertion in areas deemed non-abstract. The ruling represents rare judicial pushback against patent system capture, but reveals the difficulty of using case-by-case adjudication to fix systemic problems. Patent trolls adapt by focusing on hardware-adjacent claims and other Alice-resistant patents. The decision illuminates the tension between two forms of capture: patent trolls extracting rents through overbroad business method patents versus legitimate software innovators losing protections. The real beneficiaries are large tech platforms (Google, Amazon, Facebook) who gain defensive protection against patent suits while maintaining their own patent arsenals.