In a recent case decided by the U.S. District Court for the Southern District of New York, the plaintiff, Max Rady, alleged that he developed a method to "record to a blockchain the individual identification signatures of physical items that have unique random properties." Mr. Rady's method involves:

  1. 3D spatial mapping and spectral analysis to determine each individual identification signature
  2. recording these signatures into a blockchain to allow "users to guarantee the authenticity and provenance of each item's location and source throughout the supply chain, even where significant modifications are made to that item"

This method, according to Mr. Rady, allows the authentication of gemstones, such as diamonds, "without the need to confirm with central authority no matter how many times the gemstone is cut, polished, or otherwise modified." He claimed this technology in U.S. Patent No. 10,469,250 but maintains other aspects as alleged trade secrets.

Mr. Rady filed suit, alleging infringement of his patent and misappropriation of his trade secrets. Defendants moved to dismiss the patent claims, arguing that the patent claims ineligible subject matter.

The defendants argued that the '250 patent is directed to the idea of collecting, analyzing and storing data. Looking specifically to the computer elements, they stated that the claims for network nodes, processing devices, storage device, communication subsystems and blockchains "are similar to the computer hardware in Alice" and that "tracking physical elements do not make Rady's claims any less abstract."

Mr. Rady contended that the patent uniquely records gemstone data and logs this data in a peer-to-peer network maintained by blockchain authentication – in effect, a "fingerprint for a gemstone." This, according to the court, was collecting, analyzing and storing data – a common ineligible abstract idea. Consequently, the court agreed with the defendants and found the '250 patent to be directed to ineligible subject matter.

Specifically looking at the blockchain discussion, the court found that the patent "is not improving the functionality of storing and processing data on a blockchain. Importantly, a blockchain is merely a ledger maintained and verified through a peer-to-peer network, and Plaintiff does not describe how the patent improves blockchains." In short, the court found that the patent claims were directed to "the abstract idea of collecting, storing, and processing data" without improving the functionality of computers themselves. The court, accordingly, dismissed the patent infringement count from the case.

Claim 1 of the '250 patent reads:

1. A network node comprising:

one or more processing devices;

a storage device, coupled to the one or more processing devices and storing instructions for execution by at least some of the one or more processing devices;

a communications subsystem, coupled to the one or more processing devices, to communicate with at least one or more other nodes of a peer-to-peer network; and

item analysis components coupled to the one or more processing devices, the item analysis components comprising at least one imaging device configured to determine spectral analysis data and 3D scan data from measurements generated by the item analysis components;

wherein the one or more processing devices operate to configure the network node to:

analyze an instance of a physical item using the item analysis components to determine a unique signature for the instance, the unique signature determined using 3D spatial mapping to define the unique signature from the spectral analysis data and 3D scan data generated by the item analysis components for the physical item;

determine, using the unique signature, whether the instance of the physical item is previously recorded to a blockchain maintained by the peer-to-peer network to provide item tracking and authentication services, comparing the unique signature generated by the network node to previously recorded unique signatures using 3D spatial analysis techniques, rotating in virtual space features of the physical item defined in the unique signature to determine a match with features defined in the previously recorded unique signatures; and

record the instance of the physical item to the blockchain in response to the determining whether the instance is previously recorded.

The case is Rady v. De Beers UK Ltd., et al., No. 1:20-CV-02285 (ALC), 2022 WL 976877, (S.D.N.Y. March 31, 2022).