Source: 01Caijing

In May of this year, China’s Ministry of Industry and Information Technology (“MIIT”) released the 2018 White Paper on China’s Blockchain Industry (“white paper). This document provides an in-depth analysis on various areas such as the overall development of China’s blockchain industry, the growth patterns of its specific facets, the development of its application in finance, the development of its application in the real economy, industrial development trends as well as legal policies and standards. The white paper provides a comprehensive introduction to both the current stage of development of China’s blockchain industry as well as the future trends of that industry.

I. Legal Protections for Blockchain Technologies

The white paper defines the nature of blockchain technology and affords it the same protections as those granted to computer technologies. As such, only three instruments of protections are granted to blockchain technologies: patent, trade secret and that which deals with criminal law. The document arranges the legal protections afforded to blockchain technology into four categories and analyzes them accordingly; these are one, copyright protections; two, patent protections; three, trade secret protections; and, four, criminal law protections.

  1. Copyright Protections

According to the Measures Governing the Protection of Computer Software, an individual who holds a copyright to a certain software program is to be considered the rights holder to all computer applications as well as all relevant documents and shall enjoy legal protections the moment that the copyrighted software is fully developed. These protections differ from those afforded to patent applicants in that an individual applying for copyright protections for computer technologies benefits from a less rigorous examination process as well as a shorter examination time. For example, a developer of a piece of blockchain technology can generally obtain approval within two months of having applied for examination. Meanwhile, the term of copyright protection is longer. For software copyright entitled to by an entity or other organization, the protection term ends on December 31 of the 50th year after publication for the first time.

There is, however, a rather significant drawback to copyrighting a blockchain technology. Given that the requirements for novelty under the examination process for copyright protections are less vigorous vis-à-vis those for other protections, another blockchain enterprise seeking to apply for copyright protections for a computer technology need only slightly modify an existing technology in order obtain copyright protections for what would be considered a “new” technology.

  1. Patent Protections

According to the newest version of the Patent Examination Guidelines released by China’s State Intellectual Property Office (“SIPO”), computer languages, algorithms and computer programs themselves fall under the category of “rules and methods for mental activities” and thus are ineligible for patent protections under the Patent Law of the People’s Republic of China.

A computer application which falls under the scope of patent protections refers to a computer application which is based partly or entirely on process flows and uses these flows on which to execute its functions, which are to provide a solution which entails the controlling or processing of the external or internal objects of a computer.

For example, the purpose of a computer program is to implement an industrial process, take measurements or to test process controls. A computer may, through executing an industrial process control program, complete a series of controls on various stages of the industrial process in accordance with the laws of nature, and, in accordance with those same laws, the program can achieve the effect of industrial program control. Thus, the kind of solution realizable by the computer program falls under the category of a "technical solution," which can be afforded patent protections.

Generally speaking, what characterizes blockchain technology is an optimized industrial chain process gained through decentralization and distributed ledger technology, characteristics which are in line with the definition of the aforementioned technical solution. Be that as it may, the actual results of cases in which protections were applied for still need to be analyzed according to the specific circumstances of each case. As such, not all blockchain technologies can meet the conditions for patentability.

The advantage of patenting an invention is that the level of protection that it affords that invention are rather high. Similarly robust are the rights given to rights-holders, which can be said to hold a monopoly via their patents within a specified period. However, extending patent protections to an invention does come with rather obvious drawbacks. One such drawback is that the rather stringent standards that an invention must meet in order to secure examination. Furthermore, the term in which an assignee enjoys patent rights is rather short. For example, a patented invention only enjoys twenty years of protections.

Another issue is that the scope of protections afforded to a patented invention is dependent on the patent claims . As such, should a blockchain technology enterprise provide an incorrect description as to the application of a piece of technology, then that enterprise would find itself in a situation in which the protections for its technology is absent.

  1. Trade Secret Protections

China has yet to perfect its trade secret protections system, although related provisions pertaining to the protection of trade secrets can be found within Contract Law of the People’s Republic of China, the Anti-Unfair Competition, the Labor Law of the People’s Republic of China and the Criminal Law of the People’s Republic of China. As such, given the current state of China’s legal development in this area, there exists difficulties utilizing trade secret protections to blockchain technologies. It is advisable to review the circumstances of each blockchain technology on a case-by-case basis for a tailored solution.

  1. Criminal Law Protections

The fourth and final area of protections which one can apply to blockchain technology lies within criminal law. Besides the aforementioned civil law measures that one may take to protect intellectual property, protections for holders of blockchain technology can be found within the Criminal Law of the People’s Republic of China (“Criminal Law”), the corresponding penalties for those which infringe the intellectual property rights of such holders are also the most stringent vis-à-vis the three aforementioned civil protections. In cases where the infringement being committed against a rights-holder is serious enough and a rights-holder is unable to obtain adequate legal protections under the copyright, patent or trade secret protections regime as wished, the rights-holder may seek for protections under the Criminal Law, which will be afforded to the rights-holder according to the methods and the degree of severity in which the rights-holder’s rights are being violated.

II. Blockchain Industry Standards

The White Paper also mentions the progress in China regarding the setting of standards for the blockchain industry.

  1. The China Electronics Standardization Institute called for the most influential blockchain enterprises in China to launch the “China Blockchain Industry and Development Forum” in October 2016, where, after conducting the relevant research, it published two guidelines – the Blockchain Reference Architecture and the Blockchain Data Format Specification.
  2. In October, 2017, the Reference Architecture for Information Technology Blockchain and Distributed Ledger Technology was completed by a research team led by the China Electronics Standardization Institute, becoming the first document to set a national standard for blockchain technology.

The industry is currently in need of concrete and practical technical standards. This is especially important because China, being at the forefront of research in this area, should prevent the abuse and misuse of blockchain technology. Meanwhile it should assure to safeguard the proper use of valuable technology by law.