Abstract: A touch panel system using modulated light beams to enable the system to detect when one or more of the light beams are blocked even in bright ambient light conditions. The system has a "touch sensitive" display surface with a defined perimeter. Surrounding the display surface are a multiplicity of light emitting elements and light receiving elements. These elements are located so that the light paths defined by selected pairs of light emitting and light receiving elements cross the display surface and define a grid of intersecting light paths. A scanning circuit sequentially enables selected pairs of the light emitting and light receiving elements, modulating the amplitude of the light emitted in accordance with a predetermined pattern. A filter generates a blocked path signal if the currently enabled light receiving element is not generating an output signal modulated in accordance with the predetermined pattern.