[3][4] Alice and the 2010 Supreme Court decision of Bilski v. Kappos, another case involving software for a business method (which also did not opine on software as such[5]), were the most recent Supreme Court cases on the patent eligibility of software-related inventions since Diamond v. Diehr in 1981.

[8] The relevant claims are in these patents: In 2007, CLS Bank sued Alice in the United States District Court for the District of Columbia seeking a declaratory judgment that Alice's patents were invalid and unenforceable and that CLS Bank had not infringed them.

"[10] In so holding, the district court relied on Bilski v. Kappos[11] as precedent, in which the Supreme Court held that Bilski's claims to business methods for hedging against the risk of price fluctuations in commodities markets were not patent-eligible because they claimed and preempted (i.e., monopolized) the abstract idea of hedging against risk.

But the members of the Federal Circuit vacated that decision and set the case for reargument en banc.

The panel as a whole did not agree on a single standard to determine whether a computer-implemented invention is a patent-ineligible abstract idea.

[12] In the leading, five-member, plurality opinion written by Judge Lourie, joined by Judges Dyk, Prost, Reyna, and Wallach, the court stated a test that focused on first identifying the abstract idea or fundamental concept applied by the claim and then determining whether the claim would preempt the abstract idea.

[13] The analysis involved making four steps: The last part of the Federal Circuit plurality analysis "considers whether steps combined with a natural law or abstract idea are so insignificant, conventional, or routine as to yield a claim that effectively covers the natural law or abstract idea itself.

[15] Judge Rader also filed "additional reflections" to the ruling (not joined by any other judges) expressing his view of the patent statute as allowing very broad patentability under § 101, and his understanding that natural laws are restricted to "universal constants created, if at all, only by God, Vishnu, or Allah."

[17] The keen interest of the software industry and patent professionals in the issue was illustrated by many companies and groups filing 52 amicus curiae briefs urging the Supreme Court to decide the issue of software patent eligibility.

Relying on Mayo v. Prometheus, the court found that an abstract idea could not be patented just because it is implemented on a computer.

[23] In the first Mayo step, the court must determine whether the patent claim under examination contains an abstract idea, such as an algorithm, method of computation, or other general principle.

[25] In the second step of analysis, the court must determine whether the patent adds to the idea "something extra" that embodies an "inventive concept.

They were particularly critical of Justice Thomas's statement— In any event, we need not labor to delimit the precise contours of the "abstract ideas" category in this case.

"[36] Richard H. Stern defended the opinion as "the expectable price of unanimity in a nine-member tribunal," arguing that the "greater sensed legitimacy and precedential stability" of a unanimous opinion "outbalanced" the shortcomings of a lack of clear guidance as to details.

This commentator also asserted that "it is sensible to make narrow, incremental rulings as to software patent eligibility, because at present we are not so well informed that we can speak with confidence in very broad terms.

This is breathtaking given that the Supreme Court decision in Alice will render many hundreds of thousands of software patents completely useless."

Applying Alice, district court judges have found many of these claims to be patent-ineligible abstract ideas.

[41] Federal Circuit Judge William Curtis Bryson explained the high mortality rate when sitting by designation as a trial judge in the Loyalty v. American Airlines case:[42] In short, such patents, although frequently dressed up in the argot of invention, simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps.

In addition, because they describe the claimed methods in functional terms, they preempt any subsequent specific solutions to the problem at issue.