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Blockchain Platforms Grabbing Patents

Amy Tori

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When trying to measure the pace and scope of innovation in the blockchain world, look no further than the speed of patent applications in the field. Startups, established companies, researchers, and tinkerers all filed over 1200 blockchain patent applications (more than doubling 2016’s total) in 2017 in South Korea, the U.S., Japan, China, and Europe. In the U.S, patent applications have skyrocketed to over 700 as of early 2018, (though the number could be higher thanks to restrictions on public information about recent filings). China leads the world in blockchain patent applications.

Blockchain’s relationship with the patent system is a complicated, untested, and at times fraught one. At the same time, patents are driving essential innovation in the blockchain world.

Blockchain and Patents

Satoshi Nakamoto distributed the groundbreaking 2008 paper that first delineated blockchain architecture for free online, anonymously. This tradition of open information flow has resulted in many open-source blockchain projects over the years. As attorney Laura Majerus recently observed in a newsletter from the firm Fenwick & West LLP, the relationship between patents and open-source software can be complicated:

A business decision to release software under an open source license (or to incorporate such software in a proprietary product) may grant certain patent licenses to people who receive the software, and the patent owner cannot control who these receivers will be.

European applicants have struggled to receive approval thanks to ambiguity over whether blockchain is a business model or software platform (which are not patentable) versus a new technological invention. Data on the success of patent applications in the U.S. is still emerging, but successful applications have indeed been granted over the past year to entities such as CoinBase or Goldman Sachs.

As they are in virtually every other successful, lucrative, or trendy technological sphere, patent trolls are a threat to the blockchain world. Patent trolls file patents (often for vague concepts) with no intention of producing actual products, instead profiting from licensing or litigating with other companies. Some companies may in turn issue “defensive patents,” in which companies snap up patents to head off future litigation or misuse of the intellectual concept. The Blockchain Intellectual Property Council, an initiative from the Chamber of Digital Commerce, came together in early 2017 to navigate standards and anti-troll strategies and protocols for the blockchain world.

Many blockchain enthusiasts see patents as antithetical to the blockchain world, where decentralized information flow is supposed to replace data silos and exploitative gatekeepers. But the reality of patents entering the blockchain space is unavoidable. Moreover, patents can have genuine, positive effects on innovation when done right, incentivizing market-responsive creativity by rewarding successful innovators.

Even for open source devotees, patents can help protect beloved intellectual concepts from patent trolls and other malicious actors. Coinbase Founder Brian Armstrong used this logic when defending the exchange’s successful application for a patent on a private key security protocol:

The Bitcoin community was founded on ideals of openness and decentralization, so software patents feel especially bad in our industry. But that is not going to stop other large companies from going after bitcoin patents and using them offensively.

Legacy Companies to Promising Startups

Because the patent application process can be expensive, it’s not surprising that many established companies with robust resources are prominent in lists of blockchain patents. Part of this is a defensive strategy: large corporations, thanks to their revenue, are much more appealing for litigation-hungry patent trolls than startups without much cash to fight lawsuits. Large companies subsequently have both the resources and the incentives to move quickly to the patent application stage of innovation.

Financial services companies, in particular, are rushing to obtain blockchain patents. An early 2018 analysis of blockchain patents determined that Bank of America, with 43 blockchain patents or applications, had the most prolific blockchain patent profile in the U.S. IBM and MasterCard tied for second, with 27 patents each. Because of significant delay in public access to patent filing information, other companies might have exceeded these numbers by now or even back in January. But they still show the financial world’s intense interest in the blockchain space.

But so much of blockchain innovation doesn’t come from large companies. It comes from innovative startups and entrepreneurs who demonstrate openness to new ideas. While large companies might rack up higher patent counts, startups’ lynchpin positions in the blockchain community show in the number of startup-owned patents and applications. HIPAA-compliant healthcare startup BurstIQ filed a patent for a secure, mobile cryptocurrency wallet in late 2017. VChain, a startup launching a blockchain protocol for improving airport check-ins and security, also holds multiple patents. Deedcoin, a real estate startup using blockchain to make the process of buying and selling property more affordable and consumer-friendly, relies on a patent-pending system that enables efficient and secure transactions. These are just a handful of the startups who hold or are seeking blockchain patents.

Patents will likely always be a complicated part of the blockchain world. But used responsibly to protect genuine innovation, they can be a driving force in expanding blockchain’s reach.

 

 

 

 

 

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