INSUBCONTINENT EXCLUSIVE:
Jed Grant
Contributor
Jed Grant has more than 25 years of experience in technology, finance and security
He is the founder and CEO of Peer Mountain, a decentralized P2P ecosystem of trust, and the founder of KYC3, one of the original regtech
companies in Luxembourg.
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
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 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
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
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.
There has never been a case of so much free-floating cash being readily available in
startups just waiting to be attacked.
Increasingly, large corporations are also patenting blockchain technology, although their
patents tend to revolve around their core businesses; for example Visa, has filed patents on blockchain technologies related to payment
services as they would relate to credit card usage, and UPS has filed patents for blockchain technology in shipping.
Finally, putting these
together we have a very interestingpatent battlefieldshaping up.
There are large corporations that will defend their core business by
asserting their patents against challengers who threaten their revenue streams
This is typical behavior and is often derided as the reason patents can hold back innovation.
The more interesting players are the new ones
On the one hand you have very well-funded startups that have taken little to no precaution to protect their innovation
On the other hand you have very clever and agile PAEs, patent trolls, that are also well-funded and will use these resources to attack any
startup that could be remotely considered to be infringing on their patent portfolio.
There has never been a case of so much free-floating
cash being readily available in startups just waiting to be attacked
This could become a boon for the PAEs, a slaughter for the idealistic and well-funded startups and result in a massive transfer of funds
from startups to PAEs in the coming years
This would be a very sad outcome for innovation.
Everyone is, of course, entitled to their own views on the value of patents and whether
their company should file for them
But regardless of your position, we, as a community, must acknowledge that there are others in this world who are obtaining blockchain
patents purely for their own profit motives
For example, Erich Spangenberg of IPwe has stated publicly, &… It is a curious path how a collection of misfit trolls, geeks and wonks
ended up here — but we are going to crush it and make a fortune…& You can read more about Erich intentionshere.
Because of this, it is
important to take intellectual property very seriously
Make an effort to identify and patent your innovations
To that end you can joinLOT Network, a nonprofit founded to allow patent holders to jointly protect each other from the eventuality that
their operating patents will fall into the hands of a PAE
This will improve your protection and help protect fellow network members from PAEs
Think of it as your &patent troll flu shot.
The more blockchain innovators join together to protect and nurture our innovation, the better
We all agree that patents in the wrong hands will hurt our industry and the speed at which others embrace blockchain
We all must take responsibility and be good corporate citizens when it comes to IP
By removing the uncertainty that comes from PAEs, we can avoid the turmoil and costly litigation we saw play out in the smartphone and
If we remove friction, we can accelerate the adoption of blockchain technology
This tide will raise all boats.
Whether you are an investor or an entrepreneur in blockchain projects, you should strongly consider the
manner by which your projects handle their intellectual property and do careful diligence to ensure that your interests are not threatened
by a potential patent battle.
