Tensions heat up over patent applications for Blockchain Technologies Blockchain About to Become a Patent War Battleground
“If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today.”
Microsoft co-founder Bill Gates said this in 1991. He seemed to have foreseen the current situation.
Now, as Blockchain-related (distributed ledger technology) patent applications increase , it looks as if a patent war is about to break out.
According to the report of the USTPO (US Patent and Trademark Office), the number of Blockchain-related patent applications as of June 2016 exceeded 200, of which 48 were published as approved.
Since patents take 18 months or longer to be approved, it is logical to assume that there are a lot of patent applications waiting for approval.
Situation by Country and Companie
Source: Big Law Business
The graph above shows the number of US patent applications for Blockchain from 2011 to 2017. For 2016, the total was more than 250 if approved ones are included.
The number of US applications in 2017 declined, however, since China joined in the rivalry. The number of patent applications filed in China in 2017 came to 225 and the number almost equals that of US applications in 2016. Patent applications for Blockchain are another example of a competitive trade battle between the top two rivals, the United States and China.
The following graph shows the number of Blockchain-related patent applications ranked by companies in each country. This also illustrates how the top two continue to battle.
Source: Bitcoin Patent Report
Patent bullies are getting active behind patent wars
A patent guarantees exclusive rights for an idea, and needless to say a patent generates a lot of profits.
There are people who try to dominate those profits. One such patent manipulator is Mr. Craig Wright, a controversial figure in the cryptocurrency economy, in part because of his widely disputed claims to be Satoshi Nakamoto, the anonymous inventor of Bitcoin.
Wright’s motives for obtaining patents are not to use them for their original purposes, but to demand large payouts from companies wishing to use that Blockchain technology instead.
Mark Kaufman, co-chairman of the Blockchain Intellectual Property Council at the American Commerce Council, told Fortune,
“His tactics and activities have all the marks of being a patent assertion entity or what’s pejoratively known as a troll. I’m not aware of his companies having any products.”
Issues of Blockchain and Open Source Patents
Another problem for Blockchain technologies is that they are based on open source software components. Patent and Open Source Software issues have always been controversial. So, to what extent patents can be approved remains uncertain.
Community leaders such as Richard Stallman, Alan Cox,Bruce Perens and Linus Torvalds, companies such as Red Hat and MySQL, and community groups such as FSFE, IFSO, all believe that patents cause problems for free software, according to Wikipedia.
Furthermore, computer engineers do not have knowledge of the patent application process.If Mr. Satoshi Nakamoto himself had applied for a patent on blockchain technology, this problem would not have expanded to this extent. Even if engineers had understood how patents are granted, they would not have applied for them for the sake of technology advancement .
In addition, they would have let other companies use technologies free of charge even if they had applied and obtained patents.
Blockchains are technologies that have not yet made inroads into mainstream society. Patent applications for Blockchain technology may further inhibit the evolution and acceptance of technology.
Patent bullies stymy innovation
There is no doubt that many companies will continue to apply for patents in search of profits, and we are going to see patent trolls active behind this trend. However, most patent applications are for technologies based on private (centralized) blockchains, and it remains to be seen what will happen to development of public (distributed) blockchains related to IoT and Big data.
Patent application battles are highly likely to have a negative influence on the development of the public blockchain, further hindering the evolution of technology. Companies and patent manipulators who are desperate to prey on profits are preoccupied with cryptocurrency, and they may not see future possibilities created by Blockchain.
Meanwhile, in Japan, administrative guidance of the Financial Services Agency has strengthened since the "Coincheck hacking incident"with negative effects. Japan used to be called a"cryptocurrency superpower", but not anymore.
However, there are many companies and communities that are striving to create world-class blockchain technology in Japan.
As CTIA, we will continue to put forward suggestions at every opportunity to contribute to the development of blockchain technology and call on regulatory authorities for their appropriate responses.