Blockchain
technology is basically a type of technique or platform used to implement
public ledger system. The blockchain is an indestructible digital ledger with
respect to economic transactions that can be programmed to record not just
financial transactions but virtually everything of value. Data can be sent
across a network securely by implementing
blockchain’s ledger methodology and cryptographic techniques. The technique
will ensure that the data is from the correct sources and that there are no
interim obstructions interim. If this
technology is used more widely then the probability of hacking can be decreased.
In contrast to conventional centralized
data management system, blockchain technology integrates data in a unique
ledger while maintaining consistency even with a decentralized management. The benefit of decentralized control
is that it eliminates the risks of centralized control. With a centralized
database, anybody with sufficient access to that database can destroy or
corrupt the data within. Therefore, no
centralized version of this information exists for a hacker to corrupt. Hence,
decentralization is the essence and strenght of blockchain technology.
With
the increasing popularity of cryptocurrency and other block chain/public ledger
system based applications, block chain technology is attracting a lot of
attention. The growth in prices of cryptocurrency is evidence of popularity of
block chain technology. With increasing popularity of technology, there is a steep
rise in filing of patent applications claiming invention based on block chain technology.[1] The
innovators of block chain technology are still confused about patentability of
inventions based on block chain technology.
Generally,
inventions covered in patent application are required to satisfy the test of
novelty, non-obviousness and industrial applicability. There is no doubt about
industrial applicability of block chain technology in areas like cryptocurrency,
logistics, asset management, insurance, peer to peer lending platforms,
Internet of Things, etc. Hence, the main issues in determining patentability of
block chain-based inventions are:
- Whether the invention is anticipated by prior art (patent literature or non-patent literature published before filing of patent application) or product already in use or offered for sale before filing date?
- Whether invention is obvious to person ordinarily skilled in the art looking at state of art or closest prior art?
With
respect to the first issue, there are assumption in the industry that block
chain technology per se has limited
novel features because innovators are merely using existing technology for
making transactions.[2] However,
the implementation of technology at large scale has posed new challenges and
problems. There is no doubt that block chain technology in its current form
needs improvement considering high power usage, latency in execution of
transaction, inefficiency in storage of records, efficient distribution of proof
of work among miners, etc. This provides innovators in the field of block chain
with opportunity of coming up with new solutions.[3]
With
respect to second issue, it needs to be examined whether new techniques
proposed for improving efficiency or security in block chain technology implementing
public ledger system are similar to one existing in traditional platforms other
than block chain (existing applications like electronic payment systems and
other fin-tech technology) and whether it is obvious for person ordinarily skilled
in the art to apply same technique in block chain technology. In such
evaluation of similarity of proposed invention with existing technology, the
focus should be whether such existing (known) platform is independent of
trusted central entity for validation which is key feature of block chain
technology. If the inventive feature of proposed inventions are implemented in
existing platforms which is independent of trusted central entity, then
proposed invention will not be considered patentable being obvious to person
skilled in the art.
Apart
from novelty and non-obviousness, the other key issue involved in patentability
of block chain technology which is implemented as software platform is whether
invention will be considered as patentable subject matter under Section 3(k) of
Indian Patent Act which prohibits patentability of computer programme per se, algorithm, business methods, etc.
The parallel provisions under US patent law is 35 USC Section 101 which
prohibits patentability of business methods and abstract ideas.
In November 2008, Bitcoin’s creator, known by the
pseudonym Satoshi Nakamoto, published a paper via the Cryptography Mailing List
titled “Bitcoin: A Peer-to-Peer Electronic Cash System” where he described
blockchain. The bitcoin network is in operation since 2009 and qualified as “prior
art” hence it is against any new attempt to get patented but important
additions and variations which results in new utility can be patented.
In
Alice Corp v CLS International[4],
US Supreme Court held that computer implemented methods of assessing settlement
risk in financial transaction are ineligible for patent protection, and that laws of nature, natural phenomena, and abstract ideas
are not patentable because they are “the basic tools of scientific and
technological work.
Such
limitation may create prejudice against block chain technology in fin-tech
industry considering its implementation as method for performing financial
transaction. However, the invention covering techniques which improves
functionality of technology, processes or security of payment system may be
considered eligible for patentability.[5] In addition, where the invention is
merely proposing the use of existing block chain technology with new business
model, the proposed invention will not be considered patent eligible subject
matter.[6]
Further,
the claims for patent application claiming block chain technology-based
inventions need to be drafted considering that such platforms involve multiple
parties (e.g. in case of cryptocurrency, miners implement validation of public
ledger records, cryptocurrency exchange provide platform for trade of
cryptocurrency, cryptocurrency wallet manufacturers provides security solution
for cryptocurrency traders) and all components of the invention might not be
implemented by each party. Therefore, separate independent claims need to be
drafted for each of the prospective invention keeping in mind entities involved
in implementation of technology. Alternatively, separate patent application can
also be filed for separate inventions, if these inventions are unique and
distinguishable.[7]
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