IP1 0917 – A perspective on the Blockchain Patent Arms Race

  blockchain Credit: Sashkin / Shutterstock.com

With all the clamor surrounding Bitcoin and other cryptocurrencies, there has been a wave of patent applications related to the blockchain, one of the technologies behind Bitcoin. For many, blockchain is seen as the next disruptive technology, with applications not only in the financial sector but also through a surprisingly wide range of seemingly unrelated sectors. The result is a patent arms race, with companies pursuing blockchain-related patents in hopes of tapping into what should become a multi-billion dollar industry in the coming years

What Is a Blockchain?

Originally invented for the Bitcoin cryptocurrency, a blockchain is a public, decentralized and secure digital ledger used to record transactions between the parties. Instead of being stored in a central database, each computer node of a peer-to-peer network keeps its copy of the blockchain. When a new transaction is requested, the transaction is propagated across the network, where each node independently validates the transaction, merges the transaction with other transactions in one block and transmits the block to the other nodes in the network. If there is a consensus between the nodes that validate the transaction, the block is cryptographically linked to the last block of the blockchain to securely and permanently record the transaction. The process of validating and adding transactions to the blockchain for cryptocurrencies is called "mining". Because of the decentralized nature of the blockchain, no single entity must be invoked to handle transactions.

Many companies are starting to recognize the value of blockchain technology beyond cryptocurrencies. Blockchain technology can be used in any industry that requires secure transaction logging. Some interesting applications of the blockchain technology that have been proposed include the management of author rights in the distribution of digital music, the implementation of digital identifications, the tracing of the origin of diamonds and precious metals and the protection of electronic election platforms.

The Patent Rush

Similar to what was seen with e-commerce patents during the early days of the World Wide Web, we are now witnessing a race to file patent applications related to the blockchain. This is not surprising, since patents are considered fundamental to protect business operations and protect investments.

According to data retrieved from USPTO databases (US Patent and Trademark Office), the number of patent applications related to blockchain deposited in the United States has increased exponentially in recent years. A keyword search for patent applications containing the term "blockchain" filed with USPTO reveals that 382 patent applications were published in 2017 – from 90 in 2016, 24 in 2015 and two in 2014. If we consider the 18-month delay since a patent application is filed when USPTO publishes the application, there is likely to be a significant number of patent applications related to recently registered but not reported blockchains. , currently under development.

A similar upward trend can be found in the number of blockchain patents issued by the USPTO, in which 36 patents relating to the blockchain were released in 2017, from 10 in 2016, five in 2015 and zero in 2014

Because of its roots in the cryptocurrency space it is easy to see the application of blockchain technology to the financial services sector. This is reflected in the number of US patent applications related to blockchains deposited by financial services companies, with companies such as Bank of America, MasterCard and TD Bank among the leading filers. Furthermore, it is not surprising that technology companies such as IBM and Intel are an equally significant group of filers.

But what could be more interesting is that many non-technological companies are pursuing blockchain patents for applications beyond financial services. For example, Walmart recently filed the U.S. patent publication number. 2018/0181909 to monitor the distribution of retail items using blockchain technology. Live Nation Entertainment recently obtained the U.S. patent No. 9,792,742 for the control of access to electronic ticketing using blockchain technology. Skuchain has recently obtained US patent no. 9,641,338 for tracking products at various stages of a supply chain using blockchain technology

Challenges in obtaining patents related to the blockchain

To obtain a patent, an invention must be new , not obvious, useful and directed to the subjects eligible for patents. Of these patentability requirements, patent admissibility is probably the main obstacle in obtaining the patents related to the blockchain due to the Supreme Court ruling in Alice Corp. v. CLS Bank Int & # 39; l, which states that direct inventions abstracting ideas that are simply performed by generic computers are not eligible for patents. The Supreme Court, however, has refused to define what an abstract idea is, and the Federal Circuit – which has jurisdiction over patent cases – has provided little clarity. This led to a sharp decline in the number of patents issued by the USPTO, in particular for patent applications related to financial services. To be sure, the Federal Circuit found that inventions aimed at specific improvements in computer capabilities are not abstract ideas and are eligible for patents.

Therefore, to increase the chances of the USPTO to find the object of the invention as eligible for the patent it is essential that patent applications related to the blockchain are drafted with particular emphasis on the technical characteristics of the blockchain. , like the distributed peer-to-peer network and the cryptographically linked blocks, while minimizing any commercial or financial aspect.

Other Forms of Protection

Patents are the most popular method to protect an invention, as they provide exclusive rights to their owners. However, patent protection generally expires 20 years from the submission of the application and requires disclosure of the invention to the public. On the other hand, an invention can be protected as a trade secret, which may seem like an attractive option to avoid the uncertainty surrounding the admissibility of patents. However, while a trade secret lasts until the invention remains a secret, it does not prevent a competitor from decoding the invention or another inventor from the independent invention of the invention. The protection of trade secrecy is also lost once the trade secret has been disclosed, even if disclosure constitutes a breach of a confidential obligation.

In deciding whether to pursue the protection of an invention as a patent or a trade secret, careful consideration must be given to various factors that weigh in favor of one form of protection or the other. , including the ease of decoding industrial secrecy, the duration of protection and the costs of obtaining a patent or maintaining a trade secret.

Patent Execution [19659004] Although an invention is patented, there are challenges that may arise in enforcing the patent. By design, blockchain technology is distributed and decentralized through a peer-to-peer network of computer nodes. This can result in a divided violation, in which no contracting party violates every element of the invention. This may also entail an extraterritorial violation, in which one or more elements of the invention are performed by computer nodes located outside the United States. Both the divided and extraterritorial violation complicate the application of a US patent.

Patents relating to Blockchain may also be vulnerable to disability challenges, particularly given the uncertainty related to patent admissibility. Such disability claims may be filed before a district court or as a post-grant review before the USPTO. Regardless of location, disability challenges are expensive, typically costing hundreds of thousands of dollars, if not more.

Many blockchain technology applications are developed by computer programs distributed under an open source license, which can complicate the ability to enforce a patent related to the blockchain. An open source license generally allows anyone to view, use and modify the source code of a computer program as long as it allows others to do the same for their derivative work, thus promoting open collaboration. The terms of use of any open source source code used to develop blockchain technology should be carefully examined to evaluate its impact on the ability to enforce a patent.

While there have been no known cases attempting to enforce a patent related to the blockchain, given the increase in the deposits of patent applications and the money at stake, we expect it to change in the coming years.

Weinick is a member of Shahinian & Giantomasi Church in West Orange and is part of the company's intellectual property group. Cheng is an associate with the intellectual property group of CSG. Both are registered patent lawyers.

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