State of the Union

Boycotting the Arts and Academia

The Russians are withdrawing. Not from Crimea and Eastern Ukraine, but from Washington D.C. where the Woolly Mammoth Theatre has just canceled its festival of four plays from Moscow. As the political climate chilled, the Moscow Cultural Ministry decided to pull its funds from the festival, and Woolly Mammoth was unable to make up the difference.

This is the second controversial play cancellation this season in the nation’s capital. Theater J was forced to cancel performances of The Admission, an Israeli play modeled on Arthur Miller’s All My Sons. Like Miller’s play, The Admission focused on a family haunted by possibly complicity in wartime wrongdoings.

After a sustained campaign by Citizens Opposed to Propaganda Masquerading as Art (COPMA) to shame Theater J’s donors into withdrawing their funds, The Admission had its run shortened, and the production was scaled back to a workshop, rather than a full staging. Ultimately, a local restaurant and another D.C. theater stepped in to keep the show going.

The partial victory won by COPMA is, presumably, the exact kind of tool the BDS movement (boycott, divestment, and sanctions) is hoping to bring to bear on Israel, although the two groups aim at completely different results. Like COPMA, BDS supporters aren’t confining their efforts to the business sphere but have moved on to the marketplace of ideas and culture.

In late 2013, the American Studies Association, an organization of American college and university professors, voted to boycott Israeli academic institutions. They became the second academic consortium to approve a boycott, following the Asian American Studies Association, which voted to intellectually divest in April 2013.

Conventionally, sanctions are a punitive tool of foreign policy that are intended to bring the offending country back to the bargaining table. Or, in extreme cases, to make life under the intransigent government so uncomfortable that the citizens push for regime change, whether democratically or otherwise.

An arts and academia boycott doesn’t quite fit the bill. The pain of restrictions on researchers or experimental theater companies is unlikely to trickle down to voters or up to politicians. But, even worse, when the time comes to broker some kind of détente, both sides will be worse off for losing the weak bonds of shared culture and learning. In the case of academic boycotts, the world as a whole will be worse off as researchers end up siloed and isolated from their peers, as mathematician Edward Frenkel was until he caught a lucky break.

Unfortunately, the United States has behaved just as shortsightedly as Russia during this crisis. While Moscow has held back artists, Washington has directed NASA to stop collaborating with their Russian counterparts. Extra-terrestrial blustering has been curbed a little by pragmatism; NASA is still allowed to coordinate plans for the International Space Station, and, of course, all launches of American astronauts, which will occur on Russian soil until 2017 at the earliest.

While boycotts and divestment can do good, both by putting pressure on foreign leaders and by singling out regimes on the world stage, bringing sanctions to the actual stage or to laboratories or lecture halls undermines both sides ability to understand one another and to be prepared to work together when negotiations resume.


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General Mills and Consumers’ Contracting Access to Courts

General Mills
General Mills

In films, signing a contract is a considered, deliberate affair. Pens are inked, notaries are summoned, and stamps thud down as witness. But, in the eyes of General Mills, rights could be signed away with the beep of a supermarket scanner or the click of a “Like” button.

With a new revision to its online terms of service, General Mills has informed its customers that redeeming a cereal coupon constitutes a binding agreement to give up their rights to sue the company. Instead, if they are unsatisfied with their Wheaties, they could only settle the complaint through private arbitration. In arbitration, the customer brings suit to a private court, chosen by the company, which is not bound by the ordinary legal system.

After a flurry of complaints, General Mills first clarified their policy, addressing concerns that their language was so broad, that it seemed like almost any interaction with the company, from a Facebook like to just purchasing their goods, might entail giving up rights to a day in court. In fact, according to the company, if you just plain like their products, and indicate as much on Facebook, you’re in the clear. But, if you receive a coupon in exchange for your “Like,” you’re out of luck in the case of a dispute.

When these statements failed to mollify consumers, General Mills dropped the new language completely. But although General Mills was forced to back down in less than a week, other companies have managed to make coercive contracts stick, even when the terms of the contract may be illegal.

In 2010, a British gaming company parodied the contractual creep of end user license agreements (EULAs) by adding a clause to theirs that stated that customers must sign over their souls in order to play; some companies have slipped in language almost equally absurd. Dentists using contracts from a company called “Medical Justice” inform their customers that, in order to have their teeth cleaned, they must surrender their ability to write bad reviews of the practitioner. As one Ars Technica reporter discovered when he went in for his checkup:

[I]t asked me to “exclusively assign all Intellectual Property rights, including copyrights” to “any written, pictorial, and/or electronic commentary” I might make about Dr. Cirka’s services, including on “web pages, blogs, and/or mass correspondence,” to Dr. Cirka. It also stipulated that if Dr. Cirka were to sue me due to a breach of the agreement, the loser in the litigation will pay the prevailing party’s legal fees.

Some banks have gone even farther than that dental contract, stipulating that the customer was responsible for all of the banks “losses, costs, and expenses” even if the customer wins the lawsuit. A 2012 report by the Pew Charitable Trusts (which I worked on while employed there) found that four of the 12 largest banks in the United States included these kind of “if you win, you lose” agreements.

Each of these provisions is about as unenforceable as the gaming company’s claim on your soul, but the legality of the language only matters if a customer actually plans to contest the contract in front of a judge. A suited representative from the company saying, “You did sign” can have a chilling effect on victims, who back away from a dispute and never learn that the provisions would have been voided. Read More…

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How to Fix the Census’s Obamacare Errors

Can you cook the books by using more accurate statistics?

That’s the question hanging over the Obama administration, now that the Census bureau has decided to change the way it assesses the number of Americans without insurance in the middle of the Obamacare rollout.

The basic problem the Census has been struggling with is how, exactly, to define “Americans without insurance.” If you ask your survey respondents “Do you currently have health insurance?” the percentage answering “No” will be a lot lower than the number of people who would say “No” to “Have you been uninsured at any point in the last year?” If you change your question to “Were you uninsured for all of last year?” the “Nos” will plunge accordingly.

The Census’s Continuing Population Survey has struggled for years with the phrasing of this question, and, when compared to other surveys of insurance coverage, has persistently overestimated the number of Americans without insurance. However, its numbers have still been commonly used, since CPS is the only survey that produces state-by-state insurance numbers across the nation.

The Census bureau did the right thing and has been investigating how to improve the accuracy of their numbers. Yuval Levin describes one of the error checks the CPS ran, and the surprising results.

In 2000, for instance, the CPS supplement introduced a simple verification question: If people had answered “no” when presented with a list of possible options for different kinds of insurance coverage on the questionnaire, then the interviewer, rather than just note them as uninsured, would say “So does this mean I should record you as uninsured?” They found that an amazing 8 percent of respondents answered “no,” and only in the wake of this verification question (which, for those who answered in the negative, was followed again by a list of insurance options) reported that they were in fact insured.

The CPS has finally found a new question, that they trust to produce reliable data, but, since they’re switching over just as Obamacare goes into effect, the methodological change may obscure the effects of Obama’s signature legislation.  As reported in the New York Times:

In the test last year, the percentage of people without health insurance was 10.6 percent when interviewers used the new questionnaire, compared with 12.5 percent using the old version. Researchers said that they had found a similar pattern in the data for different age, race and ethnic groups.

But Ezra Klein of Vox isn’t worried that the changes in the survey will make it impossible to measure the impact of the Affordable Care Act. According to Klein, the CPS changed their methodology just in time.

Politics aside, there’s a technocratic logic to this timing. The Census Bureau’s change begins with data for 2013 — meaning it starts before Obamacare does. By making the switch in 2013, there’ll be a baseline to compare obamacare to, and that baseline won’t fall apart in year two or three or four.

Unfortunately, a baseline data point is a lot less valuable than a baseline trend. The test for Obamacare isn’t just if it brings the numbers of the uninsured down, but if the new policies cause more people to sign up faster than historical data would predict. The 2013 datapoint may be a baseline measurement of coverage, but it can’t serve as a baseline for the changing trend of coverage.

The ideal solution might have been to run both questions, the old and the new, in parallel on the CPS for a period of five to 10 years. Instead of posing the improved question to all respondents, the Census employees could randomize assignments, so that a third to a half of all those surveyed answered the old, biased question, while the rest answered the new, improved question. Read More…

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McArdle’s Guide to Failing Well

In The Up Side of Down: Why Failing Well Is the Key to Success, Megan McArdle, a columnist with Bloomberg View, makes a compelling case that America has failed to find a way to cope with setbacks and upheavals. McArdle draws on business case studies, academic research, and, for perspective, anecdotes from her own life to identify the individual and institutional barriers to bouncing back.

She looks at high school students terrified of taking challenging classes, for fear that a B will scupper their chances at college, the inertia and fear that lead GM to delay their inevitable restructuring, and her own tumultuous attempts to restart a relationship with an old flame rather than admit defeat. In each of these cases, a bad relationship with failure has enormous costs, even before the failure has occurred. If failure is always catastrophic, we’ll try to protect ourselves by taking minimal risk and innovating as little as possible.

But, in Hawaii, she finds a failure success story in the Hawaii’s Opportunity Probation with Enforcement (HOPE) program. HOPE is a parole program that deals out small punishments reliably for every violation of parole. Most parole systems let minor infractions slide—due to negligence or overwork—until there’s a truly egregious problem, and the parolee is sent back to jail, sometimes for years.

The HOPE program gave former prisoners consequences to learn from, but made sure that a parolee could still recover from the initial penalties meted out. The reliability of the system helped parolees confidently anticipate the consequences of their choices. Prisoners randomly assigned to the HOPE program were three times less likely to have their probation revoked as those in the regular program. Jail time and drug use plunged as well; and, although increased oversight was more expensive, the state made the money back by not having to pay the costs of incarcerating these parolees.

But these reforms haven’t caught on in other states. McArdle hypothesizes that these parole reforms remain counterintuitive because of two cognitive biases: an overactive Agent Detection system and the the Just World hypothesis. Agent Detection refers to humans capacity to recognize other agents—creatures that are capable of having goals and pursuing them. It helps us distinguish the results of blind chance or impassive processes like the weather from actions that are the results of other humans’ choices. Pair that with the Just World theory, where most things happen according to some kind of fair plan, and it’s easy to see every instance of failure as the exposure of a secret fault in a rational actor, rather than the result of chance. Read More…

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Can’t Staunch a Heartbleed

If you’ve used the internet in the last two years, there’s a very good chance that your personal data has been exposed. Any website that you log in to is likely to have been compromised by Heartbleed, a serious bug in the way sites verify your secure connection.

When you visit a site that begins with “https://” or see a little padlock icon in your address bar, you’re supposed to be connecting securely. All information that you send to the site (password, text of emails, etc.) and that it sends to you (account numbers, client information, etc.) is encrypted, so someone can’t tell what you’re doing by just snooping on your internet connection.

The Heartbleed bug is potentially a lot more serious than the occasional security lapses that result in leaks of usernames and passwords or even the breach at Target that compromised over 40 million credit card numbers. Instead of one site exposing data, Heartbleed left a loophole in the protocol the majority of sites use to secure their users’ information.

OpenSSL, a protocol that handles all this encryption and decryption turns out to be broken, and has been leaving back doors for two years undetected. The Heartbleed bug works like a peephole into that stream of supposedly encrypted data. An attacker can’t browse your traffic at will, but they can keep peering in, seeing random snatches of whatever happens to be being transmitted at that moment.

That means malicious actors can spot your user name and password, as one tester did for Ars Technica, skimming login credentials from Yahoo Mail, but they might also pull in the full text of the email you’re sending. Heartbleed affected about two-thirds of all servers, and although a patch has been released, each website must fix the bug individually.

That means you shouldn’t rush to change your all passwords. Your bank or email or company may still have left the digital stable door open. You can check whether any particular website is broken using this tool, and, if you get the all-clear, make the change. But, although you can see which sites have been fixed, there’s no way to look up whether your own information has been skimmed.

There’s no easy undo button for this kind of insecurity. There’s no guarantee to cover your losses, like the fraud protection for Target customers. There’s no one to punish and no way to retroactively protect yourself.

Heartbleed is a reminder of the fragility of the complex systems that surround us and our own powerlessness to make ourselves safe from every kind of harm. It’s worth auditing our old failsafes, but the Heartbleed bug, like the iOS vulnerability revealed and fixed earlier this year may just be the collateral price we pay for the convenience of software.

There is no indication that this flaw was deliberate, like the NSA’s subversion of encryption tools, or negligently handled, like GM’s fatal ignition switches. We can work to increase oversight and try to build antifragility into our security systems, but, online and off, there’s a limit to our ability to “Do something!”


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Captain America Skips Politics, Stays Personal

Captain America: The Winter Soldier / Marvel Studios
Captain America: The Winter Soldier / Marvel Studios

This review contains spoilers for Captain America: The Winter Soldier.

Kevin Feige, the mastermind behind Marvel’s movies, said that Captain America: The Winter Soldier was a chance to expand the range of comic book movies, since the sequel would really be “a ’70s political thriller masquerading as a big superhero movie.” But, despite the clear references to the overreach of the NSA’s surveillance state and the CIA’s unauthorized abuses, little in the movie treated man (or superman) as a political animal.

Although Captain America/Steve Rogers (Chris Evans) is warned by S.H.I.E.L.D. director Nick Fury (Samuel L. Jackson) that he should trust no one, the movie never forces the squeaky-clear hero into the same kind of suspicious attitude that characterizes his enemies.

The grand conspiracy isn’t revealed through an act of deduction or infiltration, but through the monologue of a very accommodating villain. When the organization that Rogers has served turns out to be tainted, there’s no attempt at investigation or truth and reconciliation. The heroes just leak all the classified files and disband S.H.I.E.L.D. altogether. And, when they infiltrate the base of their erstwhile allies, Captain America has a very simple heuristic for distinguishing friend from foe:

Falcon: How do we tell the good guys from the bad guys?

Captain America: If they’re shooting at you, they’re bad!

Charlie Jane Anders, reviewing the film for io9, argued that Captain America’s greatest power isn’t his superstrength or his shield, but his certainty.

[Y]ou reach a point where you realize that’s Captain America’s true superpower — he makes things simpler, for everybody. Everybody else in the movie changes, at least in part because of their connection to Steve Rogers. He’s a catalyst, as well as a leader. This film is simplistic because Steve Rogers’ worldview is simplistic. And if you only let him, Steve Rogers will allow you to live in his world where everything is black and white.

Usually, when Americans are characterized as thinking in black and white, it’s because we’ve divided the world or just our nation into “us” and “them” and are out to get rid of them as in President Bush’s statement, “Either you are with us, or you are with the terrorists.”  But when Captain America divides the world into light and dark, he has more in common with John Winthrop, who referenced Matthew 5:14 to tell his fellow colonists that the eyes of the world are upon them, and they must shine out, as a city on a hill.

The forceful optimism that Captain America exemplifies is most moving when the stakes of the movie get lower. When Captain America faces his childhood friend Bucky Barnes, who has been transformed into the robotic Winter Soldier, he offer Barnes his weakness, not his strength. Rogers drops his shield and stops putting up a fight. He’s asking his friend to show mercy, instead of removing the choice, and it’s easy to for the audience to hear echoes of a Martin Luther King Jr. sermon, “I love you. I would rather die than hate you.”

That makes it all the stranger that, in order to make his way to Barnes, Captain America punches his way through approximately fifty mooks. Maybe he was carefully doing non-lethal damage, but, more likely, the film didn’t expect us to care, since it had already told us that all of Rogers’s antagonists were fanatics and Nazi-collaborators. There were limits to the movie’s mercies.

But Winter Soldier would have been a stronger film if it had taken a lesson from a different blockbuster franchise and admitted that “the world isn’t split into good people and Death Eaters.” In order to be a political thriller, instead of an interpersonal one, we need to see how Cap’s idealism scales up.

What are the limitations on charity and compassion when it’s expressed through an institution, instead of an individual? What sacrifices can Rogers choose for himself, but not the nation? The Winter Soldier, with its simplistic plot, doesn’t have any serious critique of American policy, but Steve Rogers still offers a powerful call to small-scale heroism to the American people.


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Mozilla and the Art of Culture War

In the first paragraph of Mozilla’s blog post announcing Brendan Eich’s resignation, the company offered an apology of its own: “We know why people are hurt and angry, and they are right: it’s because we haven’t stayed true to ourselves.” Continuing to keep an unrepentant Eich on board would, for Mozilla, would violate their integrity.

The developers at Rarebit, who began the boycott, expressed their surprise that their movement had forced Eich out of the company he founded, when there was such an easy solution available.

We never expected this to get as big as it has and we never expected that Brendan wouldn’t make a simple statement. I met with Brendan and asked him to just apologize for the discrimination under the law that we faced.

Eich had already promised to maintain Mozilla’s anti-discrimination policies, in letter and in spirit, but, for the Rarebit developers and other critics, repentance was required. The Rarebit developers stressed that Eich was free to keep his personal beliefs but that he should apologize for supporting this law. But apologies aren’t a realistic end condition for most political fights.

When the Supreme Court finally rules on the Hobby Lobby case, there’s no reason the victors have any obligation to apologize to the losers. The owners of the company don’t owe their employees an apology for trying to strike contraception from the company insurance plans, and the employees don’t need to beat their breasts and ask forgiveness for desiring it. Not all policy disputes have to be settled with personal reconciliation, and, if they are, that repentance won’t come in a pro forma memo.

Rote repentance or destructive dialogue is all that is possible, when the inferential distance between cultural combatants is too large. As America secularizes, the new “Nones” are particularly vulnerable to mischaracterizing religious opponents. In a recent issue of the New Yorker, Malcolm Gladwell offers a new look at how similar errors in judgement lead to the Waco massacre in 1993.

[T]he religious scholar Nancy Ammerman interviewed many of the F.B.I. hostage negotiators involved, and she says that nearly all of them dismissed the religious beliefs of the Davidians: “For these men, David Koresh was a sociopath, and his followers were hostages. Religion was a convenient cover for Koresh’s desire to control his followers and monopolize all the rewards for himself.” … Because the F.B.I. could not take the faith of the Branch Davidians seriously, it had no meaningful way to communicate with them.

In a pluralistic society, we need to learn how to communicate with the people whose beliefs we abhor, even if only for pragmatic reasons, to avoid the kind of confusion that led to tragedy at Waco. When antagonists refuse to engage the logic behind views that they find repugnant opportunities for engagement are limited on both sides.

In The Art of War, Sun Tzu warned military commanders, ”When you surround the enemy always allow them an escape route. They must see that there is an alternative to death.” Demanding public self-criticism, or conversions-expressed-as-apologies doesn’t leave a way for enemies to coexist or retreat. By treating apologies as trivial concessions and objections as irrelevant, those ascendant may find that they turn their enemies into David Koreshes and Thomas Mores.


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The Flash Boys vs. the Market Machines

Imagine if, every time you tried to place an order on the stock market, someone snooped on your transaction, and bought up the share before you could. Then, when you noticed that the stock was sold out at its original price, that sneaky trader turned up, all smiles, to sell you the shares he happened to have on hand, at a price just pennies above what you would have originally paid.

In his new book, Flash Boys, Michael Lewis builds a case that high frequency traders have been pulling a slightly more complicated version of this trick with no consequences. He’s hawking a solution, too, IEX, a new stock exchange designed by his protagonists and opened in late October of 2013. Lewis’s book introduces the lay reader to a complex topic with all his usual flair and clarity, but the book leaves the reader in suspense; the publication date means the fate of IEX and HFTs aren’t resolved by the end of the book.

By skimming tiny margins off of trades, Lewis argues, high frequency traders (HFTs) have reaped profits in the billions of dollars without providing a real service to investors. What is more, he claims, HFTs have shaped the infrastructure of our markets, so that stock exchanges are now designed to serve the interests of HFTs rather than other traders.

The NASDAQ and other trading floors have abandoned, well, their trading floors in favor of warehouses that look more like a Google server farm, full of HFT machines plugged into the exchanges from just feet away, to minimize waiting times and get the jump on ordinary consumers. IEX tries to restore the old balance, by introducing deliberate delays and simplifying the kinds of orders that can be placed, thus eliminating many of the advantages that HFTs enjoy at other exchanges.

But, as Lewis goes on a media tour that feels as much like an infomercial for IEX as for his book, some critics are raising questions. Felix Salmon thinks Lewis overstates the relevance of HFT to ordinary investors while Mark Levine, a columnist at Bloomberg View, thinks that, in a different Michael Lewis book, these high frequency traders, and the coders who support them would be perfect Lewisian heroes.

In my alternative Michael Lewis story, the smart young whippersnappers build high-frequency trading firms that undercut big banks’ gut-instinct-driven market making with tighter spreads and cheaper trading costs.

The numbers-driven, confusing-the-old-guard HFT teams do bear a certain resemblance to Billy Beane’s team of sabermetricians, who upended baseball in Moneyball. By building models and trusting statistics, the Oakland A’s stole a march on the other major league baseball teams. However, once the A’s tricks caught on, they lost their advantage. They had found a market inefficiency, but others applying their data-driven approach patched it, and left them once again out in the cold.

Lewis thinks that HFT are creating inefficiencies, not fixing them; they’ve been able to hang onto their advantage because no one else in the market understands how they’re being bilked. Lewis finds no shortage of bankers and traders at reputable firms who have been wrong-footed to the tune of hundreds of millions, and, this time, his sympathies are with the old guard. Read More…

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New Leaks Show CIA’s Contempt for Congress

An interrogator isn’t just focused on extracting information, but on controlling it. When a closer sits down with a prisoner, she wants her prey to be entirely dependent on her for information about possible sentences, news of the outside world, or even the time of day, so she can manipulate or bargain with the truth as serves her needs.

As revelations from the Washington Post show, this is precisely the relationship that the CIA has been cultivating with Congress throughout the War on Terror. The recent allegations that the CIA hacked into the computers of Congressional staff and tried to erase damaging documents is only the latest salvo in the agency’s war of obfuscation. The CIA has overstepped its authority and then lied to Congress, to prevent the people’s representatives from reining the operatives in.

Current and former U.S. officials spoke anonymously to the Washington Post about the content of the classified report that the CIA has tried to sideline. Although the report on CIA detention and interrogation was completed in 2012, it has been tied up in bureaucratic red tape, and not one page of the 6,300 has been declassified. The Senate Intelligence Committee is expected to vote this Thursday to recommend that Obama declassify the executive summary of the report.

Until then, judging by the leaks, it looks more and more like the CIA was engaged in unlawful practices. Not just the morally unlawful practice of waterboarding, which was nevertheless approved from on high, but other forms of torture that had no official sanction. The Washington Post describes the CIA’s treatment of the nephew of Khalid Sheik Mohammed:

At the secret prison, [Ammar al-]Baluchi endured a regime that included being dunked in a tub filled with ice water. CIA interrogators forcibly kept his head under the water while he struggled to breathe and beat him repeatedly, hitting him with a truncheon-like object and smashing his head against a wall, officials said.

This practice of near drowning and beating has never been authorized as an interrogation procedure. But, according to the Human Rights Watch, other prisoners at the same secret prison received the same treatment. CIA doctors stood by during these abuses, carefully checking the health of the prisoner, but serving the interests of the agency, helping the torturers push the bodies of their prisoners as far as they could go without killing anyone, presumably to avoid paperwork and oversight.

These acts of abuse did not result in useful intelligence. The Congressional report makes it clear that some prisoners were waterboarded after giving up useful data, and, although the brutal treatment produced no new information, the original revelations were used as evidence for the necessity of the technique. According to one of the Washington Post‘s anonymous sources:

“The CIA described [its program] repeatedly both to the Department of Justice and eventually to Congress as getting unique, otherwise unobtainable intelligence that helped disrupt terrorist plots and save thousands of lives,” said one U.S. official briefed on the report. “Was that actually true? The answer is no.”

The CIA might be able to claim it concealed the full scope of its activities from the American people due to national security reasons, but it’s very hard to believe that briefing Congress honestly would give terrorists an edge.

The evidence suggest that the CIA has gone rogue—imprisoning and torturing suspects, misleading their superiors, and trying to hide the evidence. The declassification of Congress’s report can’t come soon enough, so we can assess the damage the agency has done, and decide how to keep it under proper supervision and surveillance.


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SCOTUS Debugs Software Patents

Today, the Supreme Court hears arguments in Alice Corporation Pty. Ltd. v. CLS Bank International, a case that could massively overhaul the rules for software patents.

First, a brief patent primer. Adding one number to another is blatantly unpatentable, but a specific calculator that carries out addition (and a good deal more) is eligible for a patent. The question at the heart of Alice v CLS is whether a company could patent the idea of writing a calculator program, provided no one else had staked a prior claim. Under this system, whether or not Alice Corp built a calculator or even wrote the code might be irrelevant. As long as they were the first to think of using software to carry out this everyday operation, they would retain an intellectual property claim.

Alice Corp didn’t patent something quite as old as addition, but what they did patent—escrow, the practice of reducing the risk of a transaction by having a third party hold the goods to be exchanged until both sides have paid up—considerably predates Alice Corp’s 1993 patent filing. Alice Corp didn’t try to patent the idea of escrow, but the idea of managing it through a computer. A general description of the idea was all that was needed to file the patent; Alice Corp wrote no code and built no prototype.

In 2002, CLS built a working program to manage escrow-secured transactions in foreign currency markets, and Alice Corp, which had never put its patents into practice, sued for infringement. The case has been working through the courts ever since. When it reached the U.S. Court of Appeals for the Federal Circuit, it produced an exceptionally messy result. The ten judges hearing the case en banc produced seven different opinions.

The case law becomes very complicated, very fast, as, in order to decide if Alice Corp is patenting an “abstract idea” as CLS claims, the justices need to wade into very abstract questions. Alice’s lawyers contend that, by the logic of Mayo v. Prometheus the only kind of ideas that are too abstract to patent are “those preexisting fundamental truths, such as mathematical formulas, that are ‘equivalent’ to a law of nature and that ‘exist in principle apart from any human action.’”

By this logic, escrow may be a universal idea, but it’s not built into the nature of the physical world, so it’s fair game for patents. Certifying such a broad range of ideas open to patent could legitimize the actions of patent trolls, who file claims to a broad range of ideas they have no intention to develop, in order to shake down companies for settlements.

On the other hand, striking down Alice Corp’s claim might open the patent system to other forms of gamesmanship and abuse. If the courts take a very broad view of “laws of nature” most software patents could be on the chopping block. After all, who’s to say that Match.com’s dating algorithms aren’t simply a software implementation of certain universal heuristics for compatibility?

And a very limited ruling may just pave the way for more snarled rulings like the en banc hearing, which revealed the legal uncertainty that could deter companies from entering markets covered by ambiguous patents.

The opinion of the justices will need to thread a very delicate needle if they wish to keep software patents in existence but resilient in the face of abuse. And, unlike Alice Corp, the Supreme Court won’t be able to get away with simply asserting that a solution to this abstract problem exists.


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