Alice Corporation Pty. Ltd. is the assignee of United States Patent Nos. 5,970,479, 6,912,510, 7,149,720, and 7,725,375. These patents disclose schemes to manage financial risk. The invention enables the management of risk relating to specified yet unknown future events. It relates to methods and apparatus, including electrical computers and data processing systems applied to financial matters and risk management.
The claims relate to a computerized scheme for mitigating settlement risk. Settlement risk is the risk that only one party to an agreed-upon financial exchange will satisfy its obligation. The patents claim a method for exchanging financial obligations between two parties by using a computer system as a third-party intermediary. The intermediary creates shadow credit and debit records that mirror the balances in the parties' real-world accounts at exchange institutions. The intermediary updates the shadow records in real time as transactions are entered. This allows only those transactions for which the parties' updated shadow records indicate sufficient resources to satisfy their mutual obligations. At the end of the day, the intermediary instructs the exchange institutions to carry out the permitted transactions.
In 2007, CLS Bank International and CLS Services Ltd. filed suit against Alice Corporation in the United States District Court for the District of Columbia. CLS Bank operates a global network that facilitates currency transactions. CLS Bank sought a declaratory judgment that the claims at issue are invalid, unenforceable, or not infringed. Alice Corporation counterclaimed, alleging infringement of the patents.
Following the Supreme Court's decision in Bilski v. Kappos, 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 ineligible. A divided panel of the Federal Circuit reversed. Upon rehearing en banc, the Federal Circuit affirmed the District Court's judgment. The Supreme Court granted certiorari.
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