State of Innovation

Patents and Innovation Economics

CLS Reply Brief: Alice v. CLS Bank Supreme Court

CLS’s Reply Brief is not only illogical it is filled with intellectually dishonest statements.  The lack of logic is not surprising given the Supreme Court’s confused and disorganized thinking on the subject, but the intellectual dishonesty is inexcusable.  Despite this a careful reading of CLS’s brief shows that their argument fails on its face.  If you don’t have a winning argument, confuse and overwhelm them.

CLS’s arguments boil down to Alice’s patent claims preempt the idea of an escrow account and they are a non-practicing entity to boot.

The claims asserted by Alice recite the fundamental economic practice of intermediated settlement or escrow, in which a “middleman” stands between the counterparties to a transaction and effectuates the transfer of entitlement once all conditions are satisfied.

There are so many problems in this statement it is hard to know where to begin.  First of all ESCROW has a definition: it is money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.  The claims do not cover this situation.  The term ‘intermediated settlement’ does not have a well defined meaning.  You cannot find a definition for this term in the online finance dictionary.  So it clearly is not a fundamental economic concept.  CLS is using the charlatan technique of purposely blurring the definition of words.

Then CLS makes this statement:

Allowing patent claims like these would effectively foreclose the productive use of economic concepts and other fundamental principles in our increasingly computerized Information Age, in contravention of the Constitution and the Patent Act.

The claims are clear and if CLS wants to computerize an escrow arrangement it can do so.  This is just a lie that Alice’s patent preempts a fundamental principle and the lawyers who wrote this should be sanctioned for lying to the court.  Second the purpose of the Constitution is to protect the rights of Inventors.  No patent forecloses the productive use of any invention.  This is an attempt to confuse patent law property rights with anti-trust law.  Property rights provide for the owner the right to exclude others from using their property.  Ownership of a building or an invention does not foreclose economically productive uses of the property.

Here is another dishonest statement in CLS’s brief.

The economic concept of intermediated settlement is an abstract idea under the approach taken in Bilski and subsequently endorsed by the PTO.

Note the intellectual slight of hand here.  Alice did not claim the concept of an intermediated settlement.  Instead of dealing with the claims, CLS attempts to provide a broad generalization of the claims and then analyze the abstraction.  This is against the law and fundamentally dishonest.  The court must deal with the claims, not CLS’s self serving broad categorization of the claims.


Property Rights, Patents, and Monopolies

CLS and some judges are suggesting the blatantly false statement that patents are monopolies.  Patents are property rights.  Property rights are the result of creation, see John Locke.  This was recognized in common law and can be found in Sir William Blackstone’s Commentaries on the Laws of England.  For more information see Patents are Natural Rights

Antitrust law is never applied to a property right.  It only can be invoked based on how property rights are used.  Enforcement of one’s property rights in court cannot be consider a violation of antitrust law.  This whole line of reasoning is straight out of a Marxist text and should not be tolerated.  But on top of it Alice’s patents do not give it property rights in electronic escrow accounts.



I have often stated that using loose definition is the handmaiden of charlatans and tyrants and CLS seems to be quite good at it.

Laws of nature, natural phenomena, and abstract ideas are not patent-eligible under this Court’s established construction of 35 U.S.C. § 101. The asserted claims of Alice’s patents are ineligible under that standard because they attempt to monopolize the abstract idea of intermediated settlement.

First of all property rights do not monopolize anything.  This line of reasoning by CLS is straight from Marxist dogma.  CLS and the courts have thrown around the phrase abstract idea but failed to define it.  Perhaps Thomas or Scalia will demand a definition.

Let’s examine what a reasonable definition of an abstract idea would be.  Some of the potential definitions of “Abstract” from are provided below:

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.

Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  In the broadest sense of the word, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.

If we use the definition of an Abstract Idea given above “a thought or conception that is separate from concrete existence or not applied to the practical”, then every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  The ABSTRACT IDEA exclusion to 35 USC 101 should be dropped, because any logical definition of an abstract idea is excluded by 35 USC 112, first paragraph.  It should also be dropped, because, Judges should not read into statutes things that are not there.

A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.


Another poorly defined term is used by CLS in this statement.

The claims asserted by Alice do not include “significantly more” than the abstract idea of intermediated settlement, such that they could be patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). Alice fails to come to grips with the analytical approach this Court articulated in Mayo, which requires an “inventive concept.”

First of all the patent statutes do not discuss an inventive concept.  Second of all, the phrase ‘inventive concept’ is not defined in the brief, statute, regulations, or by the Supreme Court or any other US court.  Courts do not have the right to reinvent statutes.  The requirements for a patent are clear and substituting another term for what the statute says is illegal and should cause any judge to be impeached for subverting the Constitution.


Another poorly defined term used to smear patents by CLS.

Petitioner Alice Corporation Pty., Ltd. Contends that the CLS system infringes “business method” patents that broadly claim a computerized form of intermediated settlement.

Every patent is part of a business and any method patent is therefore broadly speaking a business method patent.  The first patent issued in the US was a method of making potash.  Since making potash is/was a business the very first patent issued in the US was a business method patent.  The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.



CLS tries to paint Alice’s claims as being the same as Bilski.  This is nonsense.  Bilski admitted that their claims did not require a computer.  Alice’s claims specifically require computers and a communication network.

Note that a series of steps performed by hand can definitely be an invention.  The first patent issued in the US was for a method of making potash and all the steps were performed by hand.


Other Points Nonsensical Points in CLS Reply Brief

Alice suggests that its claims do not meet its chosen dictionary’s definition of escrow because they “do not prescribe that the electronic intermediary (or any other third party) receives any money or property.” Pet. Br. 47 (emphasis added). Of course, Alice’s claims do not preclude the receipt of money or property and thus would cover such activity. In any event, nothing in the concept of intermediated settlement requires the physical exchange of money or tangible property.

This shows a lack of understanding of patent law.  Either these lawyers should be fired as incompetent or they should sanctioned for lying to the court.  No patent claim precludes the use of something outside of the claim.  Alice’s claims do not cover the use of an electronic escrow.  Claims don’t preclude things, they define what is covered by the claim.  If my patent claim on a bicycle includes a shock absorber in the fork, it does not preclude having a solid fork.  It also means you can build a bicycle with a solid fork.  Here CLS is admitting that Alice’s claims do not preempt an escrow arrangement.  But like all charlatans they state it in such a convoluted way that it is hard to untangle the mess to see what it really means.


CLS quotes two Mark Lemley papers.  Mr. Lemley is not a patent attorney, has never written a patent claim in his life, is not legally or factually competent to practice patent law.  Mr. Lemley is a charlatan who spouts off recycled Marxist ideology applied to patents.


February 28, 2014 - Posted by | -Law, -Philosophy, News, Patents | , ,


  1. It would have helped if this post had included a link to the CLS brief:

    With that said, you are correct,
    the brief is full of deceit and misdirection.

    That was not at all “the question presented”.
    The fact that Alice is an NPE is irrelevant.
    That certainly is a lot of meaningless mumbo jumbo that CLS brings to the table:

    “Alice’s claims do not satisfy this requirement. They recite only off-the-shelf computer components performing routine and conventional functions, which neither add to nor subtract from patent eligibility. The claim elements, considered separately and as an ordered whole, do not contain enough to transform the underlying ineligible abstract idea into an eligible invention.”

    Add, subtract, take the cube root of? WTF?
    And of course SCOTUS will buy all of this, hook, line and stinker (misspell intentional)

    Comment by step back | February 28, 2014 | Reply

  2. Probably – but didn’t you love their argument that the claims do not preclude holding the money?

    Comment by dbhalling | February 28, 2014 | Reply

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: