IP monitor: Patenting blockchain innovations

The following are practical tips from over nine years of experience successfully obtaining blockchain patent grants from dozens of patent offices around the world.¹

General guidance – computer-implemented inventions

Blockchain and distributed ledger technologies are a specific implementation of computer inventions and, accordingly, are subject to the same general guidance relating to software and hardware patent applications. The competing policy and economic rationales of a patent system established before the information age make patenting software and computer inventions especially challenging.  

Generally, software inventions and other types of computer-implemented inventions are patentable, but subject to strict application of various, and sometimes inconsistent, “abstractness”-type subject matter prohibitions of the patent examining jurisdictions. Every application experiences a timing issue as examination will typically occur one-and-a-half to two years after filing, under a future guidance regime that may have changed since the time of drafting. To address these issues, it is important to be aware of and anticipate changes, and worth spending the time to explain implementation details and variations to handle a stricter standard than the prevailing standard. 

Grounds for rejection can also include a typical prior art-related grounds of rejection and a sufficiency of written description rejection. 

Specific commentary for blockchain / distributed ledger innovations

A starting point is to examine the proposed blockchain / distributed ledger innovation to identify specific areas of innovation that are good candidates for patent claims.

Blockchain / distributed ledger Innovations can be software-based innovations:

• Data structure / encryption approaches that provide valuable technical improvements to security, non-repudiability, ease of traversal, improved storage characteristics, scalability, or improved throughput. Innovation examples include sharding, Merkle tree-based data structures, improved random number generation, cryptographic proofs, zero-knowledge proofs, and cascaded hashing.  
• Consensus, mining / inflation, transaction recording mechanisms can differ between different blockchains / distributed ledger systems and can be a ground of innovation. These can include modifications to proof of work, proof of stake, and how agreements and disputes between proposed transactions are resolved automatically by the nodes. Implementation examples include fault tolerance mechanisms, consensus threshold paradigms, and mining system adjustment schedules.
• Smart contracts and smart contract execution environments are also good candidates for patenting, including how the state machines operate and propagate updates with every smart contract interaction. The structure and underlying state transitions of the smart contracts are also potentially patentable. Examples of smart contract innovations include secure multi-party computations, improvements to de-centralized execution for applied use cases (e.g., storage, insurance, identity / authentication, application programmable interfaces), and execution simplification mechanisms to reduce overall energy consumption costs.
• Node operation and distributed ledger traversal / interactions can also be a source of innovations, such as innovative approaches to operating a node with greater efficiency, or unique methods to interrogate or traverse the distributed ledger to yield a technical improvement. Innovation examples can include improved client software, wallet implementations, off-chain solutions, transaction confirmation mechanisms, and block analysis tools.

Blockchain / distributed ledger innovations can be hardware innovations or mixed software / hardware innovations:

• Performance-based hardware innovations for optimizing compute and hash rates, or thermal performance to reduce overall environmental footprint or electricity consumption. Examples of innovations include application-specific integrated circuits, field-programmable gate array technology, heat distribution / management components, and form-factor modularity and miniaturization.
• Privacy-based hardware innovations for improving key storage or enhancing security levels for encryption / decryption. Examples of innovations include quantum-resistant hardware, enhanced key storage, hard-copy key manufacturing, and trusted execution environments. 
• Edge computing innovations for shifting processing load to more efficient processing resources to improve performance characteristics. Innovation examples include edge computing infrastructure specifically designed for low latency, low bandwidth usage, redundancy systems, and improved security.

Example blockchain-related cases

In Rady v. The Boston Consulting Group, Inc., the Federal Circuit considered an applied use of blockchain for gemstone authentication in US Patent No. 10469250, entitled “Physical Item Mapping to Blockchain Framework,” directed to mapping unique, random properties of physical items analyzed using spectral imaging to recorded blockchain records.  

In this decision, the Federal Circuit affirmed the dismissal of a patent infringement lawsuit, ruling the patent owner's claims related to blockchain technology for tracking physical assets were not patentable under 35 U.S.C. § 101 because they were directed to an abstract idea. The patent described scanning a physical item, determining its unique pattern of imperfections, and recording that "signature" to a blockchain. However, the court found that this process, while potentially useful, did not improve the functionality of storing and processing data on a blockchain and therefore did not qualify for patent protection.  

In In re: Haim S. Raiz, the Federal Circuit considered a patent application, Patent Application No. 16/536,175, which was directed to computer software for effectuating bank transaction operations on a blockchain network. 

However, the claims only claimed “means for [functionality]” at a high level of generality, including “means” for creating state transaction dialog data, “means” for employing hash code […] to obtain real time confirmation, and “means” for settlement, among others. The examiner rejected the claims as being directed to patent-ineligible subject matter under 35 U.S.C. § 101 and as indefinite under 35 U.S.C. § 112(b). The court considered the issue of indefiniteness under 35 U.S.C. § 112(b), finding the specification’s disclosures regarding the contract software did not provide sufficient structure for executing settlement of contracts and transference of completion code, rendering the claim indefinite. Consequently, as the claim was also considered invalid, the court did not consider the issue of invalidity for patent-eligible subject matter under 35 U.S.C. § 101.

A number of patent-eligible examples can be found on the PTAB database (search the PTAB Decisions for blockchain AND 101 or blockchain AND 112, and filter by Board Decision Reversed). A pattern emerges that the claims that satisfy the Patent Trial and Appeal Board have significant technical features recited in the claims that are incorporated into practical applications to provide specific improvements, such as security, transaction throughput, or computing efficiency. The PTAB often supports its analysis by referring to additional details from the patent specification that describe how the approach works and expand on the technical benefits.  

From a Canadian perspective, while our experience has included obtaining substantial granted patent rights for our clients’ blockchain technologies, there have not yet been significant patent litigation or publicly available patent appeal board decisions relating to blockchain or distributed ledger technologies from Canadian courts or the CIPO. Therefore, PTAB and Federal Circuit decisions can serve as a proxy for guidance at this time.