The digital asset industry has seen remarkable technological progress, even during periods of market fluctuation. Innovations continue to emerge across various sectors, including Layer 2 scaling solutions for major blockchains like Ethereum and Bitcoin, more efficient crypto mining hardware, and novel applications for NFTs, DeFi protocols, and DAOs.
While open-source development remains a foundational principle within the cryptocurrency and blockchain ecosystem, companies driving these innovations should also consider protecting their intellectual property. Obtaining patents for inventions that complement or build upon decentralized public ledgers can provide significant competitive advantages and safeguard core business assets.
Current Patent Landscape for Blockchain Technology
Patent activity related to cryptoassets and blockchain technology has shown interesting patterns over recent years. After several years of consistent year-over-year growth, filing rates have somewhat stabilized, indicating a maturing landscape.
Major Players in Blockchain Patenting
Large established corporations have been particularly active in securing blockchain-related patents. The landscape is dominated by:
- Major payment processors including Mastercard, VISA, and Alipay
- Financial institutions such as Bank of America and Capital One
- Various retail giants and technology conglomerates
This trend demonstrates that traditional industry leaders recognize the transformative potential of blockchain technology and are investing heavily in protecting their innovations in this space.
Patent Strategies for Smaller Companies
While larger corporations dominate the patent filings, smaller companies and startups shouldn't overlook the importance of intellectual property protection. For early-stage companies, securing patents for core technology can be crucial for:
- Attracting investment and partnerships
- Establishing market position
- Creating defensive protection against larger competitors
- Generating potential revenue streams through licensing
Critical Lessons From Recent Patent Disputes
Though patent litigation involving blockchain technology remains relatively uncommon compared to other sectors, several cases offer valuable insights for companies considering patent protection in this space.
The Rady Case: Patent Eligibility Challenges
In March 2020, Rady Technologies accused Boston Consulting Group and De Beers of infringing U.S. Patent No. 10,469,250, which described using blockchain technology to record identification signatures of physical items with unique random properties, such as gemstones or artwork.
The patent claims focused on using spectral analysis and 3D scanning to determine unique signatures for authenticating and tracking items through supply chains without central authority.
The Section 101 Challenge
Defendants successfully moved to dismiss the case by arguing the claims were invalid under Section 101 of the Patent Act. They contended the patent was directed to the abstract idea of collecting, processing, and storing data to track physical items—merely using blockchain as a storage mechanism.
The court agreed with defendants, finding that blockchains, like other components in the patent claims, represented "well-understood, routine, conventional activities" similar to the computer hardware in the landmark Alice Corp. v. CLS Bank International case.
Key Takeaways from Rady
This case demonstrates that patent eligibility remains a significant threshold issue for blockchain-related innovations. To withstand such challenges:
- Draft claims that emphasize technical contributions beyond conventional blockchain uses
- Provide detailed specifications explaining how the invention differs from well-known applications
- Ensure sufficient technical detail and authority in the patent description
Proper documentation of innovative aspects can help withstand eligibility challenges both during patent prosecution and potential future litigation. 👉 Explore patent strategy resources
The Lancium Case: Inventorship Disputes
Lancium owns patents related to adjusting power consumption during cryptocurrency mining operations (often called "demand-response and curtailment" technology). The company asserted its U.S. Patent No. 10,608,433 against several defendants engaged in crypto mining.
While Lancium's infringement assertions were underway, a separate inventorship dispute emerged. In April 2021, Bearbox LLC and its CEO Austin Storms sued to add Storms as a co-inventor on the '433 patent.
The Inventorship Timeline
The court analyzed a complex timeline of events:
- Storms developed his "Bearbox system" (containers housing crypto miners with source code for demand-based operation) from late 2018 to 2019
- Lancium filed its patent application in January 2018 and was operating 120 miners using off-the-shelf software by Fall 2018
- The parties met at a conference in May 2019 and discussed potential collaboration
- Storms subsequently emailed specifications and diagrams of his system to Lancium
The court found that Storms hadn't communicated any of the claimed inventions before Lancium's independent conception and ruled in Lancium's favor.
Key Takeaways from Lancium
This case highlights how inventorship can present complex legal and factual issues. Companies can avoid such disputes by:
- Implementing robust procedures to document invention development
- Using employee and consultant agreements with strong IP assignment provisions
- Establishing clear collaboration agreements that properly allocate IP rights
- Maintaining contemporaneous records of inventive contributions and their timing
Additional Patent Considerations for Blockchain Technology
Beyond the issues raised in the Rady and Lancium cases, several other important considerations arise when patenting blockchain and digital asset technologies.
Divided Infringement Scenarios
Blockchain systems often involve multiple parties performing different steps of a process, which can create "divided infringement" scenarios where no single entity performs all steps of a method claim. Patent drafters should consider:
- Crafting claims that capture actionable infringement by individual parties
- Considering system claims that might be more easily enforced against single entities
- Potentially pursuing joint infringement theories where appropriate
Extraterritoriality Considerations
Given the global nature of blockchain networks, extraterritoriality issues frequently arise in patent disputes. Considerations include:
- Where specific steps of a method claim are performed
- How to handle systems with nodes distributed across multiple jurisdictions
- The location of miners, validators, or other network participants
- Where transactions are ultimately recorded on the ledger
Open Source Considerations
Many blockchain projects incorporate open-source elements, creating potential tensions between patent protection and open-source philosophies. Companies should:
- Carefully review open-source licenses for patent provisions
- Develop clear strategies regarding which elements to protect versus keep open
- Consider defensive patenting strategies that align with community expectations
Frequently Asked Questions
What types of blockchain inventions are patentable?
Blockchain inventions must meet the same patentability requirements as other technologies: novelty, non-obviousness, and utility. Patentable subjects might include novel consensus mechanisms, unique cryptographic techniques, specific hardware improvements for mining, or innovative applications of distributed ledger technology to solve technical problems in new ways.
How does the Alice case affect blockchain patents?
The Alice decision established stricter standards for software-related patents, requiring that claims do not merely implement abstract ideas on generic computers. For blockchain patents, this means inventions should demonstrate technical improvements beyond simply using blockchain as a database. Examples might include specific technical solutions to blockchain scalability, security, or interoperability problems.
Should startups prioritize patent protection?
For startups with limited resources, patent strategy should align with business goals. Core technological innovations that provide competitive advantages often warrant protection. However, startups should balance patent costs against other priorities and consider provisional applications as a cost-effective first step. 👉 Learn more about IP protection
How can companies avoid inventorship disputes?
Clear documentation is crucial. Maintain detailed lab notebooks or digital records of development progress. Implement robust employment agreements that address IP ownership. When collaborating with external parties, use well-drafted agreements that explicitly address inventorship and ownership rights from the outset.
What makes blockchain patent drafting unique?
Blockchain patents often involve describing decentralized systems, which requires careful claim drafting to address potential divided infringement issues. Additionally, because blockchain combines multiple technical fields (cryptography, distributed systems, game theory), specifications should provide sufficient technical detail across these disciplines to support claims.
How important are technical specifications in blockchain patents?
Extremely important. Given the heightened scrutiny under Section 101, blockchain patents require detailed technical specifications that clearly explain how the invention represents an improvement over conventional technology. Specifications should include algorithmic details, system architecture diagrams, and technical implementations rather than focusing solely on business outcomes.
The blockchain patent landscape continues to evolve as both technology and legal standards develop. Companies investing in blockchain innovation should develop comprehensive IP strategies that protect their investments while navigating the unique challenges of this rapidly advancing field.