by Richard A. Epstein
April 02, 2014
On March 31, 2014, the Supreme Court heard oral arguments in Alice Corporation v. CLS Bank International. The case concerns the elaborate system for eliminating the so-called “settlement risk” that arises whenever two parties engage in electronic funds transfers in rapid succession. Alice’s system-designs and programs allow for accurate tracking of the “shadow risk,” so that a party can know that it has entered into a deal with a creditworthy partner. The concrete question in Alice is whether the proposed invention should be protected under the current law. This question comes before the Supreme Court because Federal Court decisions have followed a pattern of stripping away the physical elements in a particular patent in order to reach its abstract essence, which will almost always be found not to deserve patent protection. In Alice, the Supreme Court should protect software and business method innovations.