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Blockchain | Friend or Foe of the Patent System?

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Published Date: October 23, 2018

The rise of blockchain technology, and particularly cryptocurrencies, has influenced various aspects of the global economy and the technological landscape.  The concept of a blockchain was invented in 2008 to serve as a public transaction ledger for the Bitcoin cryptocurrency. However, blockchain technology is not limited to Bitcoin and other cryptocurrencies. Since then, the principles of blockchain technology have been applied in various fields, such as financial services, retail, digital rights management, anti-counterfeiting, medicine and real estate.

Growing interest in blockchain technology also has an impact on the patent system.  Innovation in a certain field of technology typically leads to an increase in the number of patent applications filed in that field.  The number of patent applications filed for blockchain-related inventions is on the rise and the overall number of patent applications for 2018 is expected to be well over a thousand.  Unsurprisingly, financial firms are among the top blockchain-related patent applicants.

However, not all inventions are patentable.  In order to be patentable, an invention must be new and inventive, and must also not be excluded from patentability based on its subject matter.  In most jurisdictions, inventions that relate purely to abstract ideas or business methods, or which relate to computer programs as such, are not patentable.  This is a grey area in South African law, as there is not yet any reported case law to provide guidelines with which to determine how “technical” a claimed invention should be to avoid falling foul of the subject matter prohibitions in our law.  Our courts are likely to follow the European approach which requires the invention to provide a novel technical solution to a technical problem.

Blockchain technology could also be used to improve the structure and efficiency of the patent system itself by enhancing its record-keeping and transactional capabilities.  For instance, consider a public digital ledger with trusted records of patent-related transactions, such as transfers of ownership.  More broadly speaking, the technology could be applied in intellectual property registries to facilitate actions such as identifying fake registration certificates, providing evidence of creatorship or providing evidence of use of a trade mark.

While blockchain technology could benefit the patent system, it may also challenge the patent system or hurt its credibility.  Some experts believe that blockchain-related patents will eventually result in the next smartphone-style patent war in which entities will fight to monopolise the implementation of certain digital ledger technologies.  To make things worse, non-practising entities, more commonly known as patent trolls, may enter the fray with aggressive tactics in an attempt to profit from blockchain-related patents which they own, but do not actually use.

The issue of patent infringement and enforceability should also be considered.  A patent is territorially limited, while blockchain systems are inherently distributed.  It may therefore be difficult to enforce, say, a South African patent, against an alleged infringer whose system is spread out across several territories and who carries out only certain aspects of a patented method in South Africa.

At this stage, the nature and scope of the influence of blockchain technology on the patent system is not yet clear.  When the dust settles, it will certainly be interesting to see whether the patent system is flexible enough to embrace the benefits offered by advances in blockchain technology, while also coping with the resulting challenges.

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