Blockchain, Bitcoins, and Patent Law

 

 

Bitcoin, Blockchains and Patents

Everyone has heard of the controversial BitCoin.  Whether you have money in BitCoin or not, many people watch the rise and fall and wonder with uncertainty about its’ future.   One takeaway from BitCoin for sure is Blockchain.

 

As Blockchain technologies expand exponentially, so will the patents behind them.  This can mean a lot for how businesses process transactions – in other words, how some businesses do business.  Will businesses be stifled in innovation by patent trolls? 

  

Blockchain is the amazing technology behind BitCoin and other cryptocurrencies.  Blockchain is a widely distributed and shared ledger system which provides transparency, security, history, and lower cost transactions.  Blockchain has potential in fields outside financial institutions.  Blockchain can be utilized anywhere a smart contract is required or more intelligent transactions are needed.  Companies everywhere are rewriting their software to change their transactional processing over to Blockchain or related technologies. 

 

Blockchain can be used for something as simple as autographs.  Imagine confirming the authenticity of that baseball you got signed through actual photos stored permanently in the Blockchain.  Provenance and ownership can be proven as well.  Music artists are signing on with companies that will utilize Blockchain technologies to prove ownership to digital music files people download.  These systems also help track royalties and allow for transferring ownership.

 

Blockchain is pervading all parts of our society, from video game content to the government using Blockchain to track marijuana grown.  Software has already been tested that electronically through Blockchain processes a real estate transaction in minutes vs. weeks at a fraction of the cost of a normal title company. 

 

There is a reason there is all of the hype surrounding the work blockchain, it is a very disruptive technology and everyone wants on the bandwagon.

Blockchain Patents

Gone are the days where people thought BitCoin technology was just used to buy drugs or do other nefarious things on the Dark Web. 

 

MasterCard recently filed a patent for a “Method and System For Instantaneous Payment Using Recorded Guarantees.”  This application is for a blockchain like system that offers instant payment.  The patent is based on a blockchain like ledger that would be widely available to store and manage international transactions in an instant.   All this while the CEO of Mastercard publicly attacks BitCoin and the technology behind it.

 

Bank of America has dozens of blockchain and bitcoin type related patent applications.  Every major financial institution has become involved in blockchain technology and intellectual property rights to protect their innovations.

Is the Blockchain even patentable?

Though patent applications are already proliferating, the immediate question is whether or not the Blockchain can be patented.

 

In a 2014 US Supreme Court decision: Alice Corp. v. CLS Bank International, 573 U.S. __, 134 S. Ct. 2347 (2014). The Supreme Court unanimously held that claims to a computer-implemented technique of mitigating “settlement risk” in financial transactions were ineligible for patenting.

 

Furthermore, the Court clarified that a claim directed to an abstract idea is not eligible for patent protection when it “merely requires generic computer implementation” or “attempt[s] to limit the use of [the idea] to a particular technological environment.” Subsequently, district courts have relied on Alice to invalidate patents that previously would have been litigated. The blockchain patent applications may likely be considered software patents, and under Alice, software patents that take an old idea and “apply it on a computer” or “apply it through the Internet” will be ineligible. Accordingly, a patent application that takes existing blockchain technology and comes up with a new use may be rejected.

 

As an example, in August 2013, JPMorgan Chase (another company with a CEO who slammed BitCoin) filed an application for an electronic mobile payment system with similarities to Bitcoin; however, all 175 claims were either canceled or rejected. By contrast, an application that improves the technological functioning or processes of a computer itself—such as improving efficiency or security—may be eligible.

 

It appears, that the US Court of Appeals for the Federal Circuit is attempting to draw the line for computer-implemented inventions. The blockchain technology has created a whole new playing field, and the game could yet be very hard-fought. It remains to be seen whether this becomes a winner-takes-all race and how the issue of standards for the technology will be managed.

How many Blockchain patent applications are there?

Data from the US Patent and Trademark Office (USPTO) database, analyzed by CoinDesk, indicates that there were 390 patent applications related broadly to blockchain technology published between January and July 2017.

 

Overall, this represents a 90% increase compared to the same period in 2016, when 204 applications were sent to the USPTO.

 

To get an idea of how many blockchain related applications have been filed around the world, one can search on keywords “blockchain”, “distributed ledger”, “Ethereum”, “Bitcoin”, and “smart contract”.  The following graph shows the number of related patents applied for by country and by year.  Though the US leads the way, China has had a significant uptick in the number of patents filed in the last few years.  Since patent applications are costly, this upwards trend would indicate that the assignees are placing a very high importance on the market.

 

 

Blockchain used for Intellectual Property?

As mentioned, blockchain applications can be used for IP like artwork and digital music files.  The blockchain is critical to securing IP because it guarantees the validity of a transaction by recording it on a main centralized register as well as a publicly distributed system of connected registers.  The transactions are also timestamped and provide history.  Since this data is public and distributed everywhere, the transactions are transparent and can not be corrupted or modified.  A hacker could not just hack one ledger, he would have to hack every computer keeping a ledger in the world, something not easily done and that would be transparent as it was happening.   Likewise, information can not be lost because every computer with the ledger in the world would have to go down.  Thus, the information cannot be lost or changed.

 

Blockchain technology will be increasingly used to register IP rights, and to store and catalog original works.  The transparency of the system allows any third party to view the chain of ownership and see any assignments or licenses associated.

 

The digital currencies attached to blockchain technology also allow for a method of collecting and distributing revenue to those with intellectual property. 

 

Some examples include sports celebrities and stars – their primary IP is their likeness and name.  Not only can they sell their IP through the blockchain, they can monetize blockchain based securities through celebrity endorsements.

 

As an example, Floyd Mayweather was the first paid celebrity digital currency sports endorser for Stox.com.  After going through bankruptcy court, “50 Cent” discovered he had over a million dollars in BitCoin from where he was the first musician to accept Bitcoin payment for a new digital release.  Billionaire genius and Shark Tank favorite Mark Cuban is backing a US e-sports betting platform Unikrn which utilizes blockchain technology to gamble on e-sports in regulated markets.

Future of Blockchain

Whether BitCoin survives or not, Blockchain and related technologies are here to stay.  Not only has blockchain disrupted the financial sector, new cases are emerging daily.  From land registries that are tamper proof, to tracking individual diamonds and gemstones, to licensing digital assets – blockchain will become a pervasive technology in everyone’s life whether they realize it is behind the scenes or not. 

 

Blockchain has extended to in-car cryptocurrency payments as well as shareholder voting software.  Blockchain / BitCoin mining derivatives are now seeing a rise in patent applications as well.

 

Blockchain is a disruptive technology and where there are disruptive technologies, there tends to be a tsunami of patents.  This includes the infamous patent trolls.

 

To stop patent trolls, the Chamber of Digital Commerce launched the Blockchain Intellectual Property Council (BIPC) this year. BIPC’s goal is to develop a global, industry-led defensive patent strategy that will nip blockchain patent trolling in the bud.  The BIPC executive committee members are the “who’s who” list of blockchain stakeholders, including Chain, Digital Asset, IBM, Microsoft, CoinDesk, Blockstream, Bloq, Civic, Cognizant, Deloitte, Digital Currency Group, Ernst & Young, Gem, Medici Ventures, T0.com, TMX and Wipfli.

 

Aside from establishing a repository of blockchain-specific patent information, BIPC will be exploring various IP protection models that have worked in other sectors, such as:

 

  • Non-aggression agreements – where industry players agree not to assert patents against each other.
  • Developing patent pools – where cross-licensing options are available to all pool participants.
  • Reducing inventory – where groups form (like the LOT Network) and the members agree not to sell patents without first granting a license to all group members.

 

With growing interests from both public and private sector, the data supports the notion blockchain is experiencing a research and development boom.  

If you have a novel idea for a Blockchain patent or related technologies and would like to consult regarding a patent, please call our Intellectual Property office today and let us help you with your Blockchain patent.  Do you have Intellectual Property you would like to protect or is someone infringing on your innovations?  Contact our office for help today.

 

Reference articles:

http://www.ipwatchdog.com/2017/04/28/patent-rights-blockchain-technology/id=82223/

https://techcrunch.com/2017/11/14/mastercard-has-filed-a-patent-on-its-own-blockchain-based-money-transfer-solution/

Blockchain, BitCoins, Patents and Intellectual Property

The latest news in patents for blockchain technology, cryptocurrencies, intellectual property and patent trolls.

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