Like cloud computing in 2007, block- chain is todayâ€™s latest technology craze. Companies are rushing to develop and patent blockchain technology. Despite its rising popularity, there are several significant issues to consider before joining the blockchain patent â€œland grab.â€
Many implementations of block- chain technology may not be patent eligible. Alice Corp v. CLS Bank is an in- famous case where the Supreme Court determined that fundamental economic ideas cannot be patented simply because they are implemented by a computer. This means that simply implementing a known economic practice (i.e., a busi- ness method) using blockchain may not result in a patent eligible invention.
The basic idea of blockchain is not complicated. It uses mathematical prop- erties to verify a transaction or action that forms a link in the blockchain. Many patent applications have been filed that simply recite commonly known proper- ties of blockchain with known economic practices like purchasing goods, verify- ing transactions, trading stocks or ex- changing currency. However, merely adding blockchain or related buzz words to a patent application is often met with skepticism from the U.S. Patent and Trademark Office.
For example, U.S. Patent publica- tion US 2015/0170112 is a pending blockchain-based patent application for exchanging currencies. The USPTO initially determined that the claims in the application were not patent eli- gible because the claims were â€œsimilar to performing a financial transaction such as creating a contractual relation- ship.â€ Similar issues have appeared in several blockchain-based applications that merely implement blockchain into already established economic practices.
To make matters worse, the USPTO technology center that examines pat- ent applications related to business methods has allowance rates far lower than office-wide averages. The business methods art units include patent appli- cations related to e-commerce, health tech, and financial business practices.
As a result, when you file a patent ap- plication that uses blockchain technol-
ogy to improve e-commerce, a financial practice or another business practice, it is statistically unlikely you will get a patent should it land in these impossibly stringent areas of the patent office.
To overcome patent eligibility issues and low allowance rates, various patent strategies highlight the technical advan- tages of implemented blockchain tech- nology and necessary improvements to surrounding systems. By highlighting these technical advantages of the block- chain, you may be able to show that your application is significantly more than a fundamental economic idea being im- plemented with known blockchain tech- niques.
But OSS can create issues for pat- ent protection. By its nature, OSS source code is published to the public. If block- chain technology is developed based on open source code, one or more parts of that blockchain technology may be pub- lic knowledge. This public knowledge may be used as prior art to reject a patent application. Furthermore, even if one managed to get a patent based on open source code, she must still adhere to the open source licensing requirements. For example, certain implementations of the Gnu Public License may prevent a patent owner from taking action on any- one who uses the open source code or a derivative of the open source code.
GPL licenses are also viral licenses, which means the license follows the code and derivatives of the code. As a result, if a person develops a blockchain
technology using GPL licensed software, the blockchain technology may also be automatically governed by the same GPL license (i.e., so called copyleft re- quirement). Thus, a situation may arise in which a blockchain technology is pat- ented, but the patent may be unenforce- able according to an open source license. To mitigate this, blockchain developers should know which parts of the block- chain code utilize OSS and which open source licenses govern that incorporat- ed code. Once these issues are properly identified, a patent application may be drafted to describe the invention in such a way as to avoid open source prior art and open source licensing issues.
Even though there are traps for the unwary, the first-to-file system creates an incentive to file patents early and often for blockchain-based innovation. The U.S., like most of the world, today follows a first-to-file rule for who gets an issued patent. This is extremely im- portant for blockchain technologies, be- cause blockchain can be applied to dis- rupt just about every industry. It is likely that different innovators will indepen- dently think of implementing block- chain technology in similar ways. By
filing first, an innovator may secure and enforce a patent to prevent others from practicing a similar blockchain-based technique, potentially giving the prompt filer ownership of platform technology for that industry.
If you are developing a blockchain technology and have not filed a patent, you are behind the curve. Last year alone more than 1,248 blockchain-based pat- ent applications were filed across China, the EU, Japan, South Korea and the U.S., a huge jump over the prior four years. This explosive growth shows that enti- ties realize the value of patenting block- chain technology.
While it is certainly challenging, pat- enting blockchain technology is a viable option for those who act quickly with the assistance of experienced counsel. A carefully thought out patent and busi- ness strategy can make sure that the blockchain revolution does not displace your business from a transformed mar- ketplace. â€¢