The Nexus between Blockchain and IP
By Sivadas Neelima, R&D ENGINEER (Content Developer),
The Context: Every year on 26th April, the world observes Intellectual Property Day, fostering creativity and celebrating the contribution of creators. Interestingly, there has been an escalated growth of IPR filings globally. As a frontier technology with revolutionary footprints, blockchain has proliferated across multiple domains. Lately, industries have been leveraging the decentralised and immutable nature of the technology in IP management platforms to enhance their commercial value and competency. A lot has been discussed in this regard. On the other hand, a number of blockchain-based applications are driving towards patent filings. This article discusses the promises and concerns for blockchain-based applications while securing their IP rights.
Intellectual Property Rights (IPR) represent the intangible right to one’s creativity. The different forms of IP include patents, trademarks, geographical indications, copyrights, industrial designs, and trade secrets. Early registration of IPs is a prerequisite to ensure one’s innovation is secured ahead of the competition. Interestingly, over the past few years, there has been a drastic increase in patent filings for blockchain-based applications. However, with blockchain defined as “ a decentralised distributed ledger,” one would wonder whether blockchain-powered use cases would even qualify for filing IPRs. Well, the glaring answers can be found through the following data.
The prerequisites for Patenting..
Novelty and non-obviousness are two primary criteria that make an invention patentable. The novelty requirement prescribes that a patent can be granted for an invention only if it is not publicly available or disclosed anywhere in the world. Further, an invention should be distinct from the ones available before ( also called prior art) to meet the non-obvious criteria. To understand these two requirements, let us consider two different scenarios.
Scenario 1: A business entity A invents a blockchain wallet that secures and manages cryptocurrencies and other digital assets.
Scenario 2: A business entity B invents a blockchain consensus algorithm that aims to upgrade the fault tolerance capacity and TPS (transactions per second).
At first glance, the inventions mentioned above in both scenarios may appear patentable. However, it may not be so. In scenario 1, the invention may qualify for the novelty criteria as it is newly developed. However, it may not satisfy the non-obviousness requirement as the invention merely replicates the same functions performed by any other wallet. In the second scenario, however, the invention claims to be novel and non-obvious by proposing technical improvements from the existing ones ( also called prior art). Based on the above observations, it may be inferred that the invention defined in scenario 2 may be a prospective patent over the one described in the first scenario.
To sum up, foundational blockchain concepts, such as the ledger system and cryptography, do not qualify for patent protection. Only those aspects that promise incremental improvements are patentable.
The Alice Two-Pronged Test
Over the last decade, the number of blockchain-based patent applications filed has drastically increased. The judiciary has devised different interpretations pertaining to the claim filed in each of the applications. One such landmark judgement pertained to Alice Corporation v. CLS Bank International, where the US Supreme Court remarked that a claimed invention has to be more than an abstract idea to be patentable. Further, the US Patent and Trademark Office revised the patent eligibility guidelines and proposed the two-pronged Alice test. This test answered some of the complex queries while proceeding with patent filings of blockchain-based applications.
Step 1 of the test verifies whether the claim stated in the patent application directs to a process, machine, manufacture, or composition of matter. If the answer is yes, the test proceeds to the second step. The second step confirms that the claim presented in the applications does not direct to an “abstract idea” and provides additional elements that are significantly more than the abstract idea.
The flowchart below analyses the patentability of a subject matter with respect to the Alice test. The invention proposed here is a mobile application that claims to contain functionalities that enhance the security of the device.
Overcoming Patent Litigation
Patent litigation is a procedure where a patent-holding entity files a lawsuit against another for allegedly infringing/misusing the former’s patent rights. With patent filings drastically increasing, patent litigations are quite unavoidable. However, there are some preventive measures recommended for the businesses which includes:
- Diversifying patent portfolios: A blooming organisation should strengthen its IP portfolios by including utility patents, design patents, trade secrets, trademarks, service marks, copyright, and IP agreements
- Deliberating open source defences: Some of the prominent open source software used in blockchain applications have specific restrictions on their usage policy. For example, General Public License Version 3 or GPLv3, a popular open source software utilised in public blockchains, has significant control over developers in source code modification and distribution. Hence, businesses need to assess the breadth of open source licenses incorporated in their applications so as to avoid the possibility of their patent claim being blocked by open source restrictions.
- Participating in patent pools: Patent pools represent membership-based organisations that hold a desired number of patents. The strategy here is to acquire the patents and pay a reasonable license fee for the members in the pool. These patent pools, to a great extent, are capable of counteracting patent litigations filed by NPEs or Non-Practicing Entities that simply hoard patents.
- Venturing into cross-licensing agreements: A prudent organisation with a good IP portfolio would engage in cross-licensing agreements with the dominant players in blockchain, and compete for quality over damaging patent tussles.
- Countering litigation using the Alice test: The parties/entities countering false claims can benefit from the grounds elaborated by the Alice test that validate a patent based on concrete technical proofs.
The Way Ahead
The World Intellectual Property Organisation (WIPO), the top agency for promoting and protecting Intellectual Property across organisations, is presently designing a new WIPO standard that supports potential applications of blockchains within the IP ecosystems. This feat depicts that blockchains have a formidable role in transforming businesses on a global scale. The intertwining of blockchains and IPs is gradual and poised to prosper.
References:
- https://www.globallegalinsights.com/practice-areas/blockchain-cryptocurrency-laws-and-regulations/blockchain-and-intellectual-property-a-case-study/
- https://www.bitlaw.com/blockchain/blockchain-patents.html
- https://www.bitlaw.com/source/cases/patent/Alice-Corp.html
- https://www.wipo.int/edocs/mdocs/cws/en/cws_12/cws_12_11.pdf
- https://www.wipo.int/export/sites/www/cws/en/pdf/blockchain-for-ip-ecosystem-whitepaper.pdf
- https://www.wipo.int/web/wipo-magazine/articles/blockchain-and-ip-law-a-match-made-in-crypto-heaven-40267
