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CANADIANLAWYERMAG.COM/INHOUSE JANUARY/FEBRUARY 2018
Intellectual Property
By Stacy Rush and Meika Ellis
C
ryptocurrencies, like Bitcoin, are changing
how the world interacts with respect to
value transactions. With an increased
global interest in cryptocurrencies,
questions of patentability are surfacing as
institutions, companies and individuals seek to profit
off inventive applications of the underlying technology
of cryptocurrencies — the blockchain.
Blockchain is a system in which "direct" digital
transactions occur without relying on a single
centralized database. In other words, blockchains
avoid the trusted middleman that most transactions
require by having the authentication performed over
a peer-to-peer network. Blockchain technology allows
participants to create an immutable record in a public
ledger on multiple computers, so that participating
entities can agree on and be certain that a particular
event has occurred. The decentralized nature — with
no single data centre — is highly appealing, particularly
in the context of value transactions given the difficulty
for attackers to disrupt or corrupt the entire system.
While institutions continue to discover the benefits
of blockchain technology — which is showing
potential for myriad other uses including in smart
contracts, health care or voting — it remains largely
open source. However, the loom of patent wars dangles
in the air as innovators question whether blockchains
are patentable.
The backbone of what makes up blockchain
technology is in the public domain, remaining
unprotected by intellectual property. The 2008
publication of the core blockchain and Bitcoin
technology by the listed author, Satoshi Nakamoto
(understood to be a pseudonym of one or more persons),
acts as a bar to any patenting of what was disclosed in
their publication. Patents may, however, potentially
be granted for new and inventive improvements or
implementations.
To obtain a patent for blockchain technology, another
issue to consider is subject matter. A mere abstract
idea or an implementation of a mere abstract idea in a
software algorithm is not patentable subject matter. In
Canada, s. 2 of the Patent Act defines subject matter
as an "invention" or any new and useful art, process,
machine, manufacture or composition of matter or
any new and useful improvement in any art, process,
machine, manufacture or composition of matter.
The pivotal 2011 Canadian Federal Court of Appeal
case Amazon.com Inc., Re interpreted s. 2 of the Patent
Act to potentially include business methods. The court
suggested two ways in which patent examiners may view
the business method at issue (Amazon's one-click method
of completing an online purchase): as an algorithm — a
mathematical formula — that is, a computer programmed
to produce specific steps to accomplish the method; or
as an algorithm plus other essential patentable elements
claimed in a novel combination.
What does this actually mean? A mathematical
formula alone that is programmed into a computer
would likely not render claims patent-eligible. However,
a single computerized element when combined with
other patentable elements in a novel combination may
indicate that the claims are directed toward something
more than a mere abstract idea. A similar issue was
raised in the United States, where the Supreme
Court held in Alice Corp v. CLS Bank International
that an abstract idea could not be patented without
significantly more. A method that is a "technological"
advance and not simply a "fundamental economic
practice" could be considered something significantly
more and patentable.
Turning to the patentability of blockchain
technology, there has been an upward trend of patent
application filings worldwide since 2008. The number
of blockchain patent applications in the U.S. alone
nearly doubled in 2017 as compared to 2016, according
to CoinDesk, with at least one patent formally issued.
If the advances in blockchain are considered by
the patent office to be merely an abstract idea, then
obtaining patent protection may prove challenging.
In order for blockchain to be considered sufficiently
tied to one or more computers, technical focus can
be made on the interaction between the multiple
computers that define the public ledger, how and what
they communicate, the authentication processes or
interaction with other devices.
IH
Patenting blockchain technology
The number of blockchain patent applications in the
United States alone nearly doubled in 2017 compared to 2016.
Stacy Rush is an
associate in the Toronto
office of Ridout &
Maybee LLP and
Meika Ellis is an
articling student in the
Ottawa office of Ridout
& Maybee LLP.
