What Impact will Blockchain Patents have on Blockchain Development?

Here we are again at www.TheBlockchainAcademy.com[1] to bring some of the latest blockchain developments. A much hyped issue that has been a center of experts’ attention is blockchain patents and the impacts they will be having on blockchain. We want to highlight it in view of a patent’s land grab being developed in the blockchain space, which can potentially make business operations more challenging to handle for those seeking to build upon open source technologies in the future. Are patents going to be beneficial for blockchain adoption or they will they just be a hindrance? We will try to find the answer here.

Bank of America is leading the march in adoption of latest developments going on in the technology behind digital currency bitcoin, by having an increasing number of blockchain-based patents[2]. Blockchain functions like a massive decentralized ledger for bitcoin, the digital currency, which records each transaction and saves the information on a global distributed network so as to make it unalterable. Key financial institutions, including Bank of England[3], have issued numerous notes since 2015 on the potential of the blockchain technology and developed terms in their organizations to examine the ways for developing cryptocurrency.

By December 2015, the United States Patent and Trademark Office (USPTO) highlighted 10 of Bank of America’s (BOA) applications. The USPTO usually publishes patent applications after 18 months from the date of filing. However, the latest information depicts that the number of patents BOA has filed for and is trying to apply for, is much higher than expected[4]. The blockchain technology may be few years off prior to becoming a mainstream concept for banks, but financial institutions are adopting a collaborative approach to the technology, jointly working with start-ups and even their rival lenders. A consortium consisting of over 25 banks, led by fintech company R3 is, at present, developing architecture for applying the blockchain to the markets.

Ted Mlynar, belonging to Hogan Lovells in New York, as a partner in the intellectual property practice, states that everyone is attempting to stake their claim and develop their business strategies. As per him and his colleagues, a huge number of patents related to the bitcoin, blockchain, cryptocurrency and distributed ledgers, are pending. The records that are publically available show a solid interest in filing the patents related to blockchain technology. A search for blockchain on the United States Patent and Trademark Office website brought 60 hits, while searching for bitcoin shows over 500 pending patents[5]. All these are quite new tools in any type of patent litigation war, for those having patents or those fighting for patents. And the course of narrowing down the blockchain patents scope and the impending patent war would likely take a number of years.

The current state of affairs may be right around the corner, though. A number of start-ups and big financial institutions have shown excitement regarding the prospect of the launch of their blockchain products in 2017. As businesses, both small and big scale, gear up to launch their profit-oriented products, they are also gearing up to the patent war going to be intense in blockchain technology[6]. Blockchain patents litigation, at its simplest, usually goes one of two ways. At one side, a patent-holding start up may follow a big organization knowing it will have a scalable payout from it. Under another scenario, a big incumbent leader may initiate a lawsuit against small scale firms in an effort to tax the competition effectively, by way of court costs.

As per experts, the more plausible case is that people will get patents for particular uses cases or applications for bitcoin and other blockchains. For instance, the US Patent and Trademark Office (USPTO) issued a patent for the method of evaluating transactions on the distributed ledger, in September 2016[7]. However, it is still unclear how broadly and narrowly the scope of the blockchain patents will be impacting the blockchain development. For the time now, it seems that there would not likely be a patent for all of the uses of distributed ledger or of blockchain. Rather, they’ll be quite specific.

[1] TheBlockchainAcademy.com

[2] http://www.cnbc.com/2016/01/28/bank-of-america-is-going-big-on-blockchain-plans-to-file-20-patents.html

[3] http://www.cnbc.com/2014/09/11/bank-of-england-bitcoin-could-transform-stock-markets.html

[4] http://www.cnbc.com/2015/12/31/blockchain-what-the-big-banks-say-about-the-tech.html

[5] http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-bool.html&r=0&f=S&l=50&TERM1=blockchain&FIELD1=&co1=AND&TERM2=&FIELD2=&d=PG01

[6] https://ipcloseup.com/2016/09/08/will-blockchain-technology-fuel-a-new-patent-war-or-prevent-one/

[7] http://www.coindesk.com/looming-war-blockchain-patents/