In this article, we’ll explain why the “patent war” in the enterprise blockchain space is important to watch. And why most of the digital currency market is asleep at the wheel.
What is a patent?
A patent is a type of intellectual property (IP) protection. Governments grant patents to inventors or their assignees. These patents must be novel, usefuland not easy inventions.
The process of applying for and obtaining a patent is complex and can involve several years (average of 22 to 30 months) and numerous negotiations. Patent systems provide inventors with a time-limited monopoly over their inventions. After which, they are then encouraged to disclose their findings to the public.
What’s happening with patents in the enterprise blockchain space?
The enterprise blockchain space has been heating up for years with its “patent arms race”. Competitors first wait for who can file the most patents, then wait to see who receives their submissions granted first.
In the West, IBM has filed over 1,600 blockchain patents, while Microsoft has filed over 500.
Companies such as Huawei, Xiaomi, Alibaba, Tencent and DJI are leading the race in the East. In 2019, President Xi Jinping asserted that technology would lead China’s next wave of digital transformation. This gave Chinese markets the extra firepower they needed.
These companies are all interested in protecting their intellectual property rights. However, there is one company that is still not talked about enough: nChain.
This new player, compared to its competitors, punches well above its weight. nChain and its chief scientist, Dr. Craig S. Wright, have filed key patents in the field since its inception.
For a complete list of patents issued by nChain, see here.
What do most of these patents cover?
The range of inventions is wide, but some of the most common applications include:
- Protect blockchain network security
- Managing the use of digital currencies
- Tracking the movement of goods and products
- Securing digital identities
And it’s not about Number of patents but also the quality.
In 2019, there were around 10,000 blockchain-based patent filings in China. Only a handful have been awarded. According to the Blockchain Global Patent Authorization, only 3,924 patents were granted worldwide in 2020. Alibaba held the highest number of granted patents, followed by IBM.
Some of nChain’s most recently granted patents cover the entire Bitcoin ecosystem of:
- NFT → EP3420669B1: Method and cryptographic system for the secure extraction of data from a blockchain
- Ethereum’s ERC721 → GB2561465B: A method and system for securing computer software using a distributed hash table and blockchain
- “DeFi” exchanges → 11182782: Tokenization method and system for setting up exchanges on a blockchain
It will therefore be interesting to see how the race for patents develops in the years to come, especially with how companies choose to enforce them in the future.
We are already seeing the application from big companies like Nike. An online resale platform allegedly used the Nike logo in a StockX NFT (or “Non-Fungible Token”). This was the company’s first trademark infringement in the NFT space.
Why digital currency startups, DeFi, Web 3, etc. don’t they neglect patents?
The simple answer is that most don’t know what they don’t know. Rules and regulations continue to form around the industry. Most startups have “built” with little or no due diligence. But that is changing.
There is a lot of attention around popular chains such as BTC, ETH (Ethereum) and even SOL (Solana). Despite their popularity, many of these channels have encountered scaling issues.
Outside the bath water
Most digital currency/tech startups tend to view patents as an obstruction, including Elon Musk. The irony is that small players who become big like Coinbase (NASDAQ: COIN) realize that they need to protect their IP.
So if you’re a small player, patents seem like a nuisance or even “patent trolling”. But if you’re a bigger player, you know how valuable they can be. Patents protect you from other (bigger) bad actors for certain industries – bad actors who would be more than happy to take advantage of your ignorance.
Fighting “patent trolls”
In September 2020, Twitter’s Jack Dorsey formed the Crypto Open Patent Alliance (COPA). This was to guard against perceived threats from one individual: Dr. Craig Wright.
The COPA alliance includes Twitter’s Square (Block), Coinbase, Kraken, and even Facebook (Meta). It’s amazing how one person can threaten so many businesses, isn’t it?
By “taking a stand”, COPA has the virtue of signaling that it is “protecting the community”. The irony is that this coordinated commercial attack tries to prevent Dr. Wright from claiming the real rights to his invention.
Dr. Wright has constructed various legal cases to prove that signing keys is not synonymous with identity. He believes that the signature alone should not be sufficient to prove ownership of Bitcoin since Bitcoin is not above the law.
If you use the analogy of a house and its keys, we all know that if you steal someone’s keys, it doesn’t mean you own the house. You can now access it, but it is theft or break and enter. Your will at home is what helps prove ownership and identity.
Now, we won’t go into the details of all the other ongoing lawsuits. But if you pay attention, follow patents, court wins and you will see Bitcoin as property.
Proprietary Rights, IP as Property, and Digital Currency Theft
Bitcoin is more than digital gold; it is also a property (for example, intellectual property). We all know that property has rights in almost every jurisdiction in the world. Intellectual property is a form of property often applied in the digital world. So if property has rights and intellectual property is property, then whoever created Bitcoin has the right to claim it.
that people want to believe that’s another matter. That’s why the whole controversy around Dr. Wright is interesting.
Who has the most to gain and who has the most to lose in all of this? Coinbase, Kraken, Facebook and many others all have a vested interest in seeing ownerless Bitcoin.
Why? Because it leaves the narrative open to manipulation. It’s like how the Catholic Church took the teachings of Jesus, turned them into organized religion, and then used them to amass power.
A potential solution
There is a way out of all of this for companies looking to protect themselves. This is by entering what is called the IPwe patent pool. This pool contains many blockchain patents from nChain.
Without protection, many startups can find themselves in legal battles as they grow. Blockchain is about the future of money. So you can bet your bottom dollar that the patent race will continue to heat up.
Since it takes so many years to process patent applications, it is only now that we are beginning to see its impact. Soon we will see the app.
As we witness digital currency upheaval in 2022, we see the ripple effects of weak foundations (e.g. LUNA/TERRA).
Those who stick to the basics may have the last word. And the enterprise blockchain patent space is one to watch closely amid the turmoil, as what happens there will determine what gets enforced — and by whom — over the next five years.
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