If we are going to be fair, the cryptocurrency idea dates back to almost forty years ago. In an article published in the Wall Street Journal on August 19, 1977, Friedrich Hayek — the economist and philosopher whose work on a theory of money earned him a Nobel Prize — anticipated that many different types of money would eventually co-exist. Hayek foreshadowed a “Free Market Money”, where private forms of currency would outcompete the public form, as private industry incrementally increased its participative role in issuing money.
Blockchain technology created a new type of money, a new tradable value. In other words, it created a way for there to be digital cash. Blockchain consists of a series of computer protocols that form a computer network, which allows value to be moved from point A to point B — just as the internet allows us to move information from point A to point B. These protocols move value around in a complete new way: it is unique because the technology allows for permission-less transactions. It is decentralized and does not require a bank or intermediary to facilitate the trades. You just do it yourself. The economic attractiveness and the innovation at the core of the Blockchain technology suggests that this could be one of the most important inventions of the twenty-first century — if only its mysterious inventor, who goes by the alias Satoshi Nakamoto, had not made the blockchain technology widely available to the public.
With its components in the public domain, any person of ordinary skill in the art can build on top of the pre-developed computer protocols and duplicate the technology in the digital world. The open-source nature of this project may be one understated obstacle in the race for blockchain patents. Tech-innovation moves as endless ripple, with the waves of innovation building one on top of the other. A higher tech-innovation wave will require entrepreneurs to rely on the swells previously built on top of one another by other entrepreneurs.
Bitcoin, a forerunner in blockchain technology, was initially conceived as an open-source project made available to all. It worked as a template for other different tokens, which created more forms of decentralized transactions by way of “new” secure online systems. Ethereum, for instance, also implemented its open-source code by streamlining and building on top of the leading public blockchain technology Bitcoin, which has prompted the conception of 700 other cryptocurrencies. Since much of the technology underlying Blockchain has been placed in the public domain and the number of inspired projects has grown exponentially, some lawyers suggest patents are unpredictable in this field.
In fact, blockchain-related inventions may easily fall under the category of unpatentable abstract ideas applied to computer-related inventions. The Federal Court of Appeal has nonetheless explained that, although abstract ideas alone are not patentable, software and business methods are not excluded from patentable inventions altogether. With this in mind, it is not surprising that the number of tech-companies filing patent applications has sky rocketed. However, both the issuance and the enforceability of patents on this technology are still uncertain to predict.
Assessing the likelihood of success in procuring IP rights for innovations or improvements to the blockchain technology may require more than a clear understanding of the underlying technology and the state of the law. Lawyers may have to expand their perspective if they want to provide their clients with a more realistic prediction. This incremental step may entail an assessment of the current state of the Blockchain industry from a business perspective.
To this end, it is important to understand that there is a strong tendency in the patent offices, courts, and within the industry itself, towards bolstering new innovations. And a patent aggression environment — where IP is used as a weapon to shut down competitors — slows the pace of scientific and technological progress. As a result, those who are more sympathetic to the intentions of the pioneers of blockchain for having the technology available to the public, might admonish developers to avoid the “innovation theatre” pretext to assert exclusive rights over the technology.
Another understated aspect which might become a hurdle in the race for blockchain patents is the propensity of the tech-companies to amalgamate into consortiums. This phenomenon accelerates the growth on blockchain. The idea is to figure out what is the corporate answer to blockchain transactions and to create standards that will allow the various token applications to become interoperable and tradable amongst the different networks, by borrowing their open-source codebases from one another. Corda Consortium, HyperLedger and Ethereum Enterprise Alliance are examples of existing collaborative relationships between leading banks and tech-companies.
Tech companies are involved altogether in discerning the purposes for which the myriad of crypto-currencies and token applications can be used. That is how they compete and there is a lot of room for competition yet — which translates into more challenges to the IP practitioners in helping their clients protect the code upon which other token applications may be built.
Bruna D. Kalinoski is a contributing editor for the IPilogue and an LLM candidate in the Osgoode Professional Development Program at York University.