PATENTING BLOCKCHAIN: MITIGATING THE PATENT INFRINGEMENT WAR.

AuthorYanisky-Ravid, Shlomit
  1. BLOCKCHAIN PLATFORM TECHNOLOGY

    1. Is Blockchain Technology Already in Use?

      Blockchain is viewed by many as the next disruptive technology to transform a vast range of industries. (1) Deloitte, the consulting firm, predicted a few years ago that spending on blockchain technology would increase dramatically in the years to come. (2) The technology provides a secure platform that allows people (users) who have never met and likely never will, to conduct secure, permanent and trusted transactions without a central authority controlling, approving, or otherwise scrutinizing the transaction. (:!) While the technology is more widely known for its application to the cryptocurrency bitcoin, (4) blockchain is being used for many more purposes. (5) It can be used to sell tangible commodities, such as land and houses, as well as intangible assets, such as copyrighted works (for example, electronic books). (i) Additionally, blockchain platforms enable digital contracts between companies, individuals, and even sophisticated autonomous systems, such as Al systems. Smart contracts based on blockchain technology are already used for insurance agreements, sales contracts, and more. (7) Because of its unique features, such as being open-ledger, encrypted, decentralized, and accessible, blockchain technology has the unique potential to replace governmental registration systems such as those for land, copyright, trademark, and patents. (8) Additionally, it can be used to register healthcare data, education records, and the commercial transactions and source identifiers related to animals or food. (9) Both the general public and private entities, such as banks, construction companies, supermarkets, distributors, and insurance companies, can use the technology. (10)

    2. Blockchain Differs from Other Web Platforms

      Blockchain, a revolutionary technology that offers an innovative alternative to traditional tools used to conduct transactions. (11) has ten features that distinguish it from other systems. (12)

      1. "Open-Ledger"

        Blockchain maintains a distributed ledger, where recorded transactions are transparent and open to everyone, allowing the arrangement and verification of transactions by people who have no relationship with one another. (13) "Anyone at any time can verify transactions made on the blockchain." as a member with a specific role. (14)

      2. Peer-to-Peer

        Blockchain is built on a peer-to-peer network, which is a network of nodes (individual computers) that are interconnected. (15) Because it employs a peer-to-peer network, blockchain allows for "decentralized individual action[s]--specifically, new and important cooperative and coordinate action[s] carried out through radically distributed, nonmarket mechanisms that do not depend on proprietary strategies." (16)

      3. Decentralized

        Blockchain does not require a central authority to govern the interactions among peers in order to function and carry out transactions. (17)

      4. Consensus Mechanisms

        The transaction data is checked and validated by the peers or members of a blockchain network, following certain protocols set by the network. Transactions are validated to ensure that only legitimate transactions are recorded on the blockchain. (19) Only when peers on the blockchain reach a consensus on the validity of the transaction is a new block representing the transaction accepted and added. (20) A common validation mechanism is the Proof of Work consensus mechanism. (21)

        (5). Encrypted

        Blockchain provides a tamper-resistant chain of transaction records utilizing cryptographic hash functions. (22) Each block contains a unique hash code, created by the hash functions, as well as the hash of the previous block in the chain. (23) The combined hash values connect the blocks in a specific order, creating a chain that is encrypted in a secure manner. (24)

      5. Irreversible

        Each block is connected to the one before and after it via cryptographic hash functions, as noted above. (26) Since, in general, changes cannot be made, the blockchain is secure and tamper-proof. (26) This "crypto-proof aspect of blockchain further protects the stored data from manipulation, making it immutable.

      6. Trustable

        Blockchain's secure validation by its peers' verification process keeps fraudulent data off the system and creates a trustable system. (27) In other words, user trust is achieved through the validation and verification process. (28)

      7. Accessible to All

        Anyone can read the chain in a blockchain, make changes, and register a new block on the blockchain, as long as they follow the rules and protocols of the specific blockchain. (29)

      8. Fast

        Due to the technology and the absence of the need for a central authority to approve transactions, a faster and more transparent way of recordkeeping is possible. (30) For example, cryptocurrencies, such as bitcoin, allow global payment systems, whereas traditionally it would take several days for a transaction to clear through banks and regulatory authorities. (31)

      9. Global

        Blockchain can be accessed by anyone globally with a simple computing device, a password (a digital key) and an Internet connection. (32) Digital currencies that utilize hlockchain technology have a global transactional reach without the need to go through a central authority, as explained above. (33)

        To summarize, hlockchain technology is unique among web platforms because it creates a trusted, secure ledger through a mix of peer-to-peer technology, cryptographic functions, distributed storage, and decentralized consensus mechanisms. (34)

    3. Misconceptions About Blockchain Platforms

      One of the main attractions of blockchain technology is the ability to conduct transactions without a central monitoring authority, such as government. (35) Bitcoin quickly became popular because it relied on the decentralized nature of blockchain. which negated the need for a central authority in digital currency transactions. (36) Important information, such as property ledgers and monetary transactions traditionally overseen by government entities, can now be stored without such central authority. (37) Prior to blockchain. centralized authorities played a role in social order through various intermediaries: "banks acted as central referees, who kept ledgers managing the inflow and outflow of wealth," thereby promoting commerce; centralized legislative and judiciary systems permitted the establishment of laws and dispute resolution; and centralized businesses managed the production and distribution of products and services. (38) Blockchain negates the need for such authorities, promoting a peer-driven, transparent, decentralized, and collaborative global system.

      Other open-source technology development has followed a similar pattern, enabling technological development on an open, decentralized, and collaborative global manner, allowing "coopetition," or in other words, cooperative competition. (39) Technologies that are developed in an open-source environment are typically given open-source licenses that allow the technology to be freely used, modified, and distributed, with a condition that any improvements to the technology under the same license be made freely available to others as well. (40) Industry players have embraced the open-source benefits of decreased development time, community supported development, community code review, and platform adoption. (41) The decentralized, collaborative approach of the open-source community laid the foundation for the rapid development of innovative and robust programs such as the Linux operating system. (42) Large corporations, ranging from financial services to retailers, now build their businesses around such community-based technology, marking a shift in the industry away from the information-technology-dependent services of the past. (43) Blockchain technology shares the same similar approach of collaboration and decentralization to solve problems.

      Following this peer-driven, transparent, decentralized, and collaborative approach, many blockchain applications are being developed under open-source licenses. For example, the Hyperledger project provides a platform for blockchain application development and releases its blockchain software under an open-source license in an effort to advance cross-industry blockchain technologies in a global collaboration effort. (44) LUKSO provides an open-source blockchain development platform specifically for the fashion and lifestyle industry. (45)

      But the collaborative premise of blockchain technology and its decentralized, no-central-authority nature creates a misconception that one need not worry about intellectual property (IP) rights when developing or using blockchain technology. To the contrary, there has been a recent uptick in the blockchain patent race. (46)

      1. PATENTING BLOCKCHAIN

    4. Blockchain Patents

      According to a recent study, the number of blockchain patent applications filed at the United States Patent and Trademark Office (USPTO) the past several years has grown exponentially. (47) The number of patent applications have jumped from 6 in 2011 to 540 in 2016, and the number of patents issued have jumped from 3 in 2011 to 62 in 2016. (48) The basic concepts of blockchain technology were published by Satoshi Nakamoto in 2009, (49) and that publication serves as prior art barring one from being granted a patent on the same basic building blocks of blockchain technology. (50) Fundamentally, blockchain is a technique for storing information. A new corporate blockchain-use law signed into law by California Governor Jerry Brown on September 28, 2018, defines blockchain as "a mathematically secured, chronological, and decentralized consensus ledger or database." (51)

      Little has been written about the patentability of blockchain technology, (52) beyond the consensus that improvements and/or additions to the core building blocks of blockchain may be patented. (53) Thus, patents have already been granted for...

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