Blockchain is perhaps the most hyped technology of the past five years. The technology that allows us to create trustless immutable shared ledgers promises to bring transparency and honesty to commerce by disintermediating and decentralizing functions that rely on trusted third parties today. The promise and the potential are almost as big as the hype.
While still the early days, there are several applications that have already launched on blockchains — the first being the Bitcoin cryptocurrency payment protocol. Bitcoin is just a unit of account on blockchain. And more recently, with the implementation of smart contracts, code that is shared across the whole blockchain to execute conditionally with irrefutable results, we have the possibility to tokenize many new financial constructs on blockchains.
This has given rise to the ICO, a token-generation event whereby tokens are sold in order to raise financing for a blockchain project in which the tokens will serve some purpose. This innovation in finance changed the way startups raised funds in 2016, 2017 and 2018, with more than $18 billion dollars of funds pouring into blockchain startups in 2018 alone.
What has all this got to do with a patent war?
Everything. At the same time that the hype around blockchain has been growing, the number of patents filed has been growing, as well. What’s makes this technology different from past innovation explosions is that the startups are better funded than ever before.
Another very new factor is the ideology behind this innovation wave. A majority of these startups are founded on the basis of decentralization and open-source principals, meaning their code is open and they release it under the Apache 2.0 or similar open-source license. Philosophically, many project leaders are opposed to the very idea of intellectual property ownership such as patents.
This has several implications.
First, there are many technology startups working on cutting-edge innovations that are taking no precautions other than Apache Open Source licensing to protect their innovation. Many of these same startups have carried out ICOs and are now exceptionally well-funded with cash treasuries ranging from $10 million to $4 billion. There are several hundred young startup companies sitting on an average $25 million treasury that they are using to fund their development of open and freely accessible innovation.
Second, there is a small concentration of such well-funded startups that are patenting blockchain technology. That may be a precursor of future patent assertion entities (PAEs), commonly known as “patent trolls.” Effectively, the modus operandi of some of these entities could be called “patent hoarding,” filing patents on any patentable aspect of blockchain that they can with the intent to become “patent trolls” in the future. View More
