Blockchain is perhaps the most publicized technology of the last five years. The technology that allows us to create unchanging and trust-free shared registries promises to bring transparency and honesty to the disintermediation and decentralization of functions that today rely on trusted third parties. The promise and the potential are almost as big as the hype.
While still in the early days, there are several applications that have already been launched on blockchains: the first is the payment protocol for Bitcoin cryptocurrency. Bitcoin is just a unit of account on blockchain. And more recently, with the implementation of smart contracts, shared code on the whole blockchain to be executed conditionally with irrefutable results, we have the opportunity to make many new financial constructs known on blockchains.
This has given rise to the ICO, a token generation event through which tokens are sold to raise funding for a blockchain project in which the tokens will have some purpose. This innovation in the financial sector has changed the way startups raised funds in 2016, 2017 and 2018, with over $ 18 billion in funds invested in blockchain startups only in 2018.
What all this has to do with a patent war?  Whatever. At the same time the clamor surrounding the blockchain grew, the number of registered patents also grew. What makes this technology different from the bursts of past innovation is that startups are better funded than ever before.
Another very new factor is the ideology behind this wave of innovation. Most of these startups are based on decentralization and open source principles, which means their code is open and released under Apache 2.0 or similar open source license. Philosophically, many project leaders are opposed to the very idea of intellectual property such as patents.
This has several implications.
First, there are many technology startups working on cutting-edge innovations that do not take different precautions from Open Source Apache Licenses to protect their innovation. Many of these same startups have built ICO and are now exceptionally well funded with cash treasuries ranging from $ 10 million to $ 4 billion. There are several hundred young startups with an average $ 25 million treasure they use to finance the development of open and freely accessible innovation.
Secondly, there is a small concentration of well-funded start-ups that are patenting the blockchain technology. This may be a forerunner of future patent assertion entities (PAEs), commonly known as "patent trolls". In fact, the modus operandi of some of these entities could be called "patric hoarding", depositing patents on any patentable aspect of blockchain that can with intent to become "patent trolls" in the future.
There has never been a case where a lot of floating money is readily available in startups just waiting to be attacked.
Increasingly, large companies are patenting blockchain technology, even though their patents tend to revolve around their core businesses; for example Visa, has filed patents on blockchain payment service technologies as they would cover the use of credit cards and UPS has filed the patents for blockchain technology in the shipment.
Finally, putting these together we have an interesting modeling of the battlefield on up.
There are big companies that will defend their core business by stating their patents against challengers that threaten their revenue streams. This is a typical behavior and is often derided because patents can slow down innovation.
The most interesting players are the new ones. On the one hand you have very well funded startups that have taken little or no precautions to protect their innovation. On the other hand you have very smart and agile PAEs, patent trolls, which are also well funded and will use these resources to attack any startup that could be considered remotely as a violation of their patent portfolio.
There has never been a case of so much floating money that is readily available in startups just waiting to be attacked. This could become an advantage for PAEs, a massacre for idealistic and well-financed startups and lead to massive transfer of funds from startups to PAEs in the coming years. This would be a very sad result for innovation.
Everyone has, of course, the right to express their opinions on the value of patents and if their company should make a request. But regardless of your position, we as a community must recognize that there are others in this world who are getting blockchain patents exclusively for their profit motives. For example, Erwe Spangenberg of IPwe has publicly stated: "… It is a curious path as it ended up here a collection of misfits, geeks and wonks – but we will destroy it and make a fortune …" You can read more about Intentions of Erich here.
For this reason, it is important to take intellectual property very seriously. Strive to identify and patent your innovations. To this end, it is possible to join LOT Network, a non-profit organization founded to allow patent holders to protect each other from the possibility that their operating patents fall into the hands of an EAP. This will improve security and help protect network members from EAPs. Consider it as your "patent for flu".
More blockchain innovators come together to protect and nurture our innovation, the better it is for our ecosystem. We all agree that patents in the wrong hands will damage our industry and the speed with which others embrace the blockchain. We all have to take responsibility and be good corporate citizens when it comes to IP. By removing the uncertainty arising from EAPs, we can avoid the turbulence and costly disputes we have seen playing in the smartphone and semiconductor sectors. If we remove the friction, we can accelerate the adoption of blockchain technology. This tide will make all boats go up.
Regardless of whether you are an investor or an entrepreneur in blockchain projects, you should seriously consider the way your projects manage their intellectual property and take careful care to ensure that your interests are not threatened by potential patent battle.