Challenges to Patenting Blockchain Innovation

Written by Ben Esplin

I believe that “blockchain” technology will fundamentally transform human society, and have held that thesis since I learned of the technology in 2011. The first time I prepared and filed a patent application to help a client protect innovation in the space resulted in U.S. Patent No. 9,298,806, which issued March 29, 2016. Since then, I have counseled a variety of different companies on how to protect intellectual property associated with blockchain-based innovation. Effective patent protection for innovation on or associated with a blockchain is available in some situations, but only if attention is paid to some of the difficulties in obtaining and/or enforcing patents related to trustless systems.

As is the case with most computer-implemented inventions, patent applications to protect innovation in the blockchain space have been challenged by rejections under 35 U.S.C. § 101 as allegedly being directed to abstract ideas (see our previous blog post on our Success with Patent Eligibility Rejections here. However, this is only one of the challenges to patent protection for blockchain-based innovation. Two other issues that should be understood and addressed in considering whether to file patent applications for inventions in this space are the jurisdictional nature of patent rights, and the default rule that patent infringement must be attributable to a single actor.

One of the compelling features of blockchain technology is ubiquity and the transcendence, at least in some ways, of international boundaries and borders. A successful blockchain product is a global product. Patents, on the other hand, are strictly jurisdictional, as no nation has power to award a monopoly within another. In the U.S., the patent right prevents others from making, using, selling, offering for sale, or importing a patented invention within the U.S. A U.S. Patent will be ineffective at abrogating these activities outside the U.S. A patent application that effectively protects an invention within the blockchain ecosystem must anticipate how computational resources on one side or the other of an international border may be used by potential infringers to avoid or minimize infringement liability.

Another key feature of most blockchains and their ilk is decentralization. Many believe the technology derives power from its “trustless” nature, and this decentralization arguably provides myriad advantages over legacy systems that require centralized control, access, action, etc. For the most part, patent infringement in the U.S. requires a single infringer. If mapping the features and functions of a patent claim to a real-world implementation implicates the computational resources and/or actions of multiple parties, then that patent claim will likely not be found to be infringed. As a basic and fundamental example, a method claim that positively requires an infringer to maintain or provide a blockchain would likely not be infringed by or on any decentralized blockchain because multiple parties cooperate to maintain a decentralized blockchain through a consensus mechanism. A system claim that positively recites a blockchain (or computational resources providing a blockchain) as an element of the system would face similar obstacles.

These and other considerations are critical for innovators in the blockchain space to consider when deciding whether to incorporate patent protection into their intellectual property strategy. If you have questions about the points raised in this post, or would like to discuss the potential of patent protection for your innovations, please contact us to arrange a free consultation.