Patenting the Blockchain

Written by: Usman Javed, Summer Law Student

Blockchain, described as the “the future for financial services infrastructure,” is the underlying technology behind the recent boom of cryptocurrencies such as Bitcoin and Ethereum. The potential of Blockchain extends much further than financial services, from smart contracts and health care to voting and land registry systems, it has the power to revolutionize the way people order their affairs.

Currently, Blockchain technology is an innovation system born within the open-software community which prides itself for sharing information. However, with the increasing interest in Blockchain patents, this open-source protocol may not remain for much longer.

Financial companies such as Goldman Sachs, Bank of America and Visa, retailers like Walmart, and technology companies like IBM are seeking patents related to Blockchain. According to Coindesk, the number of Blockchain patent applications in the US nearly doubled in 2017 compared to 2016, a number unlikely to decrease anytime soon considering the ever-increasing curiosity in the technology.

Given that the core of Blockchain is technological in nature (defining specific data structures, algorithms and network configurations), patenting Blockchain raises the question whether computer-implemented inventions are eligible for patent protection, a topic subject to ongoing debate in various jurisdictions.

In the US, patenting Blockchain means overcoming the hurdles set by the 2014 US Supreme Court decision of Alice which held that an abstract idea is ineligible for patent protection when the idea “merely requires generic computer implementation. Instead, a method that is a “technological” advance and not simply a “fundamental economic practice” could be considered to be something more than a “mere abstract idea.” The recent interpretations of Alice by the lower US courts have looked favourably upon patents relating to computer-implemented technology and have signalled that inventions involving innovative database technologies that improve a network of computers may be within the confines of patentable subject matter.

In Canada, the Federal Court of Appeal’s decision in Amazon’s one click case remains the main guidance over the patentability of computer-related subject matter. Accordingly, while a mathematical formula alone that is programmed into a computer would be unlikely to be granted a patent, a computerised element, if combined with other patentable elements in a novel combination, may indicate that the invention is something more than a mere abstract idea and thereby eligible for patent protection.

Despite the uncertainty surrounding the patentability of computer-related subject matter, Blockchain patents have received some attraction in recent years. While this may be good news for those who were granted patent protection, it may mark the beginning of the end of the open-source nature of Blockchain.

Patent trolls have had their eyes set on Blockchain patents and there is a genuine fear in the crypto community that patenting Blockchain may lead to a patent war similar to the one that emerged in the 1990s during the dot-com boom. However, other more optimistic observers view the patenting trend as a sign that the technology is moving into the corporate mainstream – reflecting the technology’s immense potential and the markets faith in the innovation.

It will be interesting to see whether legal frameworks, such as patent protection, can keep pace with the fast moving and ever evolving Blockchain technology and whether this trend marks the start of a potentially innovation-stifling patent war or a promise of greater innovation in the industry.