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Cracking codes

Technology | The Supreme Court must decide when software programs are eligible for patents

Issue: "Coat of many dollars," May 3, 2014

The nine justices of the U.S. Supreme Court are chewing on a patent lawsuit that could have big implications for the software industry. In the case, banking conglomerate CLS Bank International has challenged the validity of patents held by Alice Corp., an Australia-based licensing company, for software that manages financial transaction risks. 

CLS Bank uses such a software system to handle foreign exchange transactions worth $5 trillion a day. It works by clearing deals and blocking transactions that exceed certain risk rules. At dispute is whether a set of seemingly straightforward payment rules, transcribed into computer code algorithms, qualify as an invention or instead represent abstract ideas that shouldn’t have been patented in the first place. The Supreme Court has previously ruled that mathematical formulas aren’t eligible for protection.

Several big technology companies—Google, Microsoft, Dell, Hewlett-Packard—have sided with CLS Bank. They’re concerned so-called patent trolls, companies that merely file patents instead of manufacturing products (like Alice) and then collect license fees from competitors, are creating a legal quagmire in the technology sector and stifling innovation. They would like the justices to issue a broad ruling further defining what types of software can or can’t be patented.

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So far, the judiciary has struggled to draw clear lines. When a federal appeals court took up Alice Corporation v. CLS Bank International last year, 10 judges wrote a total of seven different opinions that observers said left the situation as hazy as ever.

On March 31 the Supreme Court justices spent an hour debating oral arguments in the case, and their questions suggested skepticism of Alice’s financial trading patents. “It sounds like you’re trying to revive the patenting of a function,” Justice Sonia Sotomayor said. Justice Stephen Breyer noted that allowing patents on any type of software could reduce tech company innovation to “competition on who has the best patent lawyer.”

A ruling in favor of Alice Corp. would likely encourage more patent lawsuits, but might encourage more software startups as well. If the justices rule against Alice, they may offer specific principles to outline the limits of software patents. Or they may simply throw out the Alice patents, and leave the broader questions unanswered. They’ll decide by midsummer.

Eyes behind

Justin Sullivan/Getty Images

Under a rule the National Highway Traffic Safety Administration announced in late March, all new vehicles under 10,000 pounds must be equipped with backup cameras by 2018. Many vehicles already come with the technology, which displays a view from the back bumper on a dashboard screen (nearly half of 2012 model vehicles did). Although a rearview camera adds $130 or more to the price of a car, regulators say the cameras should prevent nearly 70 deaths per year from backup accidents, many involving young children. —D.J.D.

After-school activities

Courtesy Sandra Stratton/AP

Riley Stratton, a 15-year-old from central Minnesota, won a $70,000 settlement from her school district in March. Two years ago Minnewaska Area Middle School officials gave Riley a detention and forced her to divulge her Facebook password after she made a disparaging comment about a teacher’s aide on her account and engaged in a sexually themed online chat with a boy. But since both incidents occurred from Riley’s home, her mother argued the school overstepped its bounds. —D.J.D.

Daniel James Devine
Daniel James Devine

Daniel is managing editor of WORLD Magazine and lives in Indiana. Follow Daniel on Twitter @DanJamDevine.


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