Are Blockchain-Backed Technologies Patentable?

One study has reported that Chinese companies filed 4,435 blockchain patent applications between January and October of 2020. This rise in blockchain patent applications is a result of an emerging technology that people are applying to a wide range of innovations and industries.

If you’re using blockchain-backed technologies in your innovations, then you should consider applying for patent protection. You’ll need to consider whether or not your usage of blockchain technology is patentable. If it is, then applying for a patent would afford you several benefits.

This guide will discuss what a blockchain is, whether or not it’s patentable, and who is already using patents to protect their blockchain technology usage.

What Is Blockchain?

The word blockchain gets thrown around a lot these days, but what does it mean? Blockchain is an immutable ledger for recording transactions and tracking assets. It’s a shared resource, which helps build trust.

The assets tracked could be tangible or intangible. Tangible assets include physical things like cars, houses, land, or money. Intangible assets include patents, copyrights, intellectual property, and branding.

Blockchain is most widely known for its use with cryptocurrency. Each transaction represents a “block” in the chain. These blocks get verified and then become a permanent part of the chain in the ledger.

This system eliminates the need for a central authority because the transactions are verified by multiple computers hosting the blockchain. This results in oversight through crowdsourcing.

How Blockchain Works

The transaction block represents the transfer of assets. It will include the data of your choice, including who, what, where, when, how much, and condition. As the assets move from one hand to the next, it creates a chain of data. Each link in the chain will record the exact time and date of the transaction.

The chain is secure because you cannot move backward in the chain to alter previous blocks’ data. You also can’t insert a block into a previously formed data chain. Each link in the chain strengthens the validity and security of the chain. If tampering does occur, it’ll be evident. The tamperproof nature establishes trust.

Patentability of Blockchain-Backed Technologies

While patent applications that mention the term “blockchain” now number in the thousands, approval is not automatic. Common obstacles include misinformation about blockchain technology, a lack of understanding of patents, and confusion over blockchain’s open-source nature.

The majority of blockchain patents are utility patents. These are patents that cover the functions, processes, and features of the technology. It protects the unique combination of components that go into the running of the platform.

Design patents are less common because they pertain to the ornamental design or look of the functional item. This would include the display, icons, layout, and user interface that are used when presenting the blockchain information.

How the 2008 Bitcoin Paper Affects Your Blockchain Patent

No one can patent Bitcoin itself. Satoshi Nakamoto’s Bitcoin paper, posted to a cryptography mailing list in 2008, publicly described the system for peer-to-peer electronic payments, so it is prior art against everyone. Anything new built on top of it is still fair game. To get yours approved, you need to show that your use of blockchain goes beyond that original paper and the systems that followed it.

More Than an Abstract Idea or Algorithm

Under the Supreme Court’s Alice test, claims that boil down to an abstract idea, such as recording or exchanging data, carried out on generic computers are not patent-eligible (Alice Corp. v. CLS Bank, 573 U.S. 208 (2014)). Many blockchain applications fail here. Work with an experienced patent attorney to draft claims around the specific technical improvement your system makes, showing the additional features that take it beyond well-known algorithms and conventional industry practice.

Novelty and Nonobviousness

Your invention must also be new and nonobvious, which are two separate tests (35 U.S.C. §§ 102 and 103). Novelty means no earlier public disclosure already describes it. Nonobviousness means a person of ordinary skill in the field would not have found it an obvious step from what was already known. Because blockchain development is so widespread, the prior art is crowded, so show how your approach differs from what other developers already know.

Patentable Core Technologies

Certain technologies are generally considered patentable; these applications often have to do with how your technology works. Below is a list of some of the more common technologies that have already received patent approval.

• Merchant services
• Digital wallets
• Security
• Exchanges
• Storage
• Data structures
• Transactional protocols
• Processing
• Validation methods

Time Constraints

A utility patent often takes two years or more to grant (USPTO pendency data). Blockchain technology is developing quickly, and that can render the patented blockchain technology obsolete by the time you receive patent approval. That doesn’t make the patent worthless: a carefully phrased application can cover fundamental functionality for long-term value. This protects your current and developing blockchain innovations by preventing someone from patenting your technology out from underneath you.

Open Source vs. Patenting

The very nature of open-source technology is that no one person can claim ownership of it and limit others from using it; however, open-source technology isn’t as new as blockchain technology. You can use open-source technology as a part of your patentable technology. The patentable part of the technology is the new feature or function that you build onto the open-source portion.

There is a real tension here. Bitcoin was built in the open, and much of the blockchain community still favors open-source development, while a patent gives you the right to exclude others for up to 20 years from filing. Some companies split the difference: members of the Cryptocurrency Open Patent Alliance, launched by Square in 2020, pool their crypto patents and pledge to use them only defensively (The Block).

Use of Existing Tools and Components

You don’t have to develop a wholly new technological innovation to be able to secure a patent. If that were the case, many inventions would not be able to receive approval. Instead, many patents are an improvement upon an existing technology or innovation.

When applying this to blockchain technology, you can use established components and elements as the basis for your innovation. To secure patent approval, you need to use them in a new and unique way, or you need to further develop and improve upon them.

Blockchain Patent Litigation

Blockchain patents are enforced like any other U.S. patent, through an infringement lawsuit in federal court. A frequent defense is that the patent claims an abstract idea and is invalid under 35 U.S.C. § 101. In Rady v. Boston Consulting Group (2024), for example, the Federal Circuit affirmed the dismissal of an infringement suit because a patent on recording gemstone identifiers to a blockchain claimed ineligible subject matter (Fed. Cir. No. 22-2218, nonprecedential). Patent assertion entities, often called patent trolls, which acquire patents only to license or sue, are another risk.

Blockchain Patent Leaders

Chinese companies are active U.S. filers too. A 2022 review of Lens.org data found that IBM was the single largest applicant for U.S. blockchain and distributed ledger patents from January 2021 to mid-2022, with 345 applications, while Alibaba-affiliated companies, counted together, were the most active filers and held the most issued U.S. blockchain patents (Herbert Smith Freehills Kramer).

Banks are prominent filers as well: Bank of America and Wells Fargo ranked among the top ten owners of issued U.S. blockchain patents in that review, alongside Microsoft and Pure Storage. Amazon has also patented blockchain-related ideas, including a 2019 U.S. patent on generating Merkle trees as proof of work (U.S. Patent No. 10,291,408).

Working With a Blockchain Patent Attorney

If you are using blockchain-backed technology to create an innovation that may qualify for patent protection, speak with an intellectual property attorney who’s well versed in blockchain. They will be able to tell you whether you have patentable technology and help you draft claims that hold up.

Don’t Wait to File

With so many developers working on blockchain, timing matters. The U.S. awards patents to the first inventor to file, so you need to file before anyone else to stake your claim. Once published, your application also counts as prior art as of its filing date, which helps keep others, including patent trolls, from patenting your work out from under you. Blockchain networks are global, so consider international patent protection as well.

Schedule a free consultation with one of our knowledgeable intellectual property attorneys to determine if you can patent your blockchain-run technology.