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Blockchain: patent counsel reveal approaches to decentralised ledgers

In-house lawyers from Citigroup, Nevro and Etsy share their thoughts on blockchain strategies and how registrations might be disrupted by eligibility issues

 Blockchain is a hugely promising technology and businesses are keen to develop their IP strategies around it, according to counsel at Citigroup, Nevro and Etsy.  

Kindon Olson, IP counsel at medical device company Nevro in California, says that businesses are slowly finding real world applications for blockchain.

“Bitcoin, which is based on blockchain tech, allowed people who had no trust in the financial system to do commerce,” he says. “Instead of relying on a costly system with a central ledger, you are using a decentralised system that works independently.”

While sources say that blockchain presents considerable cost-saving benefits to businesses, the true value of the technology may not be the blockchain itself but the data it contains.

Moshe Malina, chief patent counsel at Citigroup in New York, says that the hype around blockchain started to subside two years ago and that people realised the real value was in the data and the algorithms that fintech companies could not patent.

“Hedge funds aren't seeking to file patents to protect their own algorithms. Looking at the data is more important. Algorithms can be bought, but if you are in the marketplace and can get data others can't, then that gives you the competitive advantage,” says Malina.

Malina further comments that for fintech companies, patenting is more of the exception than the rule when it comes to blockchain. “In many cases, the tech is going to be black-boxed and it is very hard to see what algorithms people are using unless they are publishing papers,” he says.

Doug Hudson, assistant general counsel at e-commerce site Etsy in New York, notes: “You'll see blockchain a lot in risk management – including IP risk – in a world where everything is becoming e-commerce and massively decentralised.

“I think machine learning and artificial intelligence (AI) will become a big part of that, and I think blockchain will verify some of these systems.”

Blockchain, AI and machine learning are a few of the recent technologies that are changing IP strategies across many different sectors. These topics were discussed at Managing IP’s US Patent Forum in April.

Blockchain is an encrypted, distributed ledger of data that allows entities to record information securely. The new way of securing transactions and building trust has revolutionised the way many are doing business. The technology can be used for everything from vote counting to securing transactions made with a smartphone because it is almost impossible to hack and has reduced the need for transactional intermediaries.

Disruption 101

Sources say that developing blockchain patenting strategies may be tricky in the US until the Section 101 eligibility pendulum stops swinging.

Guidelines issued in January this year tried to define judicial exceptions by grouping claims into mathematical processes, human activity, or mental processes.

“How the examiners decide a patent claim is still a bit of a mystery. I still don’t think the guidelines make things very clear, and most people would agree it’s a hot mess,” says one industry source.

Human activity is a very broad term that can include everything from a marriage proposal to a key piece of software that connects driverless cars to each other. Malina points out that any piece of code, including that which forms the basis of blockchain, is based on a mathematical formula.

One source says that he had the pleasure of participating in the EPO's conference, towards the end of last year, where he realised that the EPO is taking a completely different approach to the subject matter than the USPTO.

“Basically if there is a computer involved in innovation, you've cleared subject matter eligibility. So it's really not an issue at all in the EPO.”

With blockchain effectively black boxing data, it has become increasingly more difficult to detect infringement. This has rendered patents around software a little less useful. One end result of the Section 101 guidelines is that some industries might move more towards using trade secrets for their innovations rather than patenting them.

“I am seeing where the world is going and I am shying away from software patent protection and moving towards trade secrets,” says Olson at Nevro.

While the advances and repercussions of technology have always been the best guess of academic soothsayers, one certainty is that blockchain will continue to cause shockwaves across multiple industries and the IP that protects them.

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