December 2017
Blockchain-based patent applications started as a trickle, beginning with a few applications being filed in 2014. It has now exploded, with a few big filers jumping into the market in hopes of creating licensing opportunities in the future, but also many companies in the blockchain space that are filing with a more defensive posture to protect their inventions.

The Alice Factor: Covered Business Methods and Blockchain

The fallout from the Supreme Court’s Alice decision has been widely discussed, but implications to blockchain are less well-known. As technology utilizing blockchain evolves, companies must be careful about either new inventions or modifications to existing business methods being perceived by the patent office as simply taking an existing business process and implementing it on the blockchain. Owners of all business- and financial-related patents should be aware of this issue. Legal counsel can assist with strategies to avoid having your financial technologies on the blockchain interpreted as abstract ideas by the USPTO or the courts, including drafting entirely new patents as necessary to protect business innovations on the blockchain.

Where is the Brightline?

Currently, the technology industry is in a big learning curve when it comes to blockchain – many companies are programming and working on blockchain technologies, but it’s in a mode of research and development or new technologies being implemented for the first time. In this mode of innovation, companies should be aware of when improvements to either programming or business processes that utilize blockchain technologies cross over from being mere computer implementation of existing business processes into new intellectual property that should be separately protected.

An example: a hospital wants to take medical records and store them on a blockchain. This would allow a person to have a single blockchain for all their medical records for their entire life – a huge improvement in patient management. Taking medical records onto the blockchain is an idea that has been identified generally for a few years, but if the hospital invested heavily in-house to obtain records, match diverse records to a single patient, create an interface for users, and so forth (basically to crack the code on how to get it done), then the details of how to solve specific problems of adapting the concept to the blockchain likely crosses a brightline into patentable innovation. When implementers of blockchain technology solve specific problems to make a program work, that is where protectable IP exists.

What Should General Counsel Be Doing Now?

Most blockchain-related innovation is generated by software programmers. As a professional community, programmers often lean toward a culture of collaboration across the industry and may not always operate with IP protection at the forefront of their mind. While a friendly ecosystem and encouragement of innovation is important, general counsel should create environments within their own company where programmers are aware of the brightlines around patentable innovation and incentivized to disclose their advancements for protection as necessary.

Additionally, companies should be aware that while there is much talk across the technology industry about free collaboration or blockchain being a non-proprietary concept, their competitors are likely quietly patenting their own innovations for defensive purposes. Don’t get caught the trap of thinking that everyone wants a free-wheeling, no-patent environment; if you have valuable innovation, or if investors are paying you to build a company and you’re creating new solutions to solve problems on the blockchain, you should work to actively protect your valuable business assets.