The Convincing Implications of Using a Blockchain to Record and Confirm Patent Assignments | McDonnell Boehnen Hulbert & Berghoff LLP

In particular, the notion of smart contracts – pieces of computer-generated code that can be built into a blockchain to control the transfer and use of digital assets – has opened the door to a world of innovation. NFTs are the most well-known use of smart contracts, but other uses include banking, investing, real estate, gaming and many more.

Unlike the worldwide network around 1993, blockchain is a new frontier, whose applications are huge. It is difficult to see where the technology is going or how it will be used in the future. The most likely result is that there will be a large number of spectacular errors, but also a few successes that can potentially be integrated into 80-90% of the software in the future.

Patent assignments at the US Patent and Trademark Office (USPTO) are stored in a publicly available database operated by the USPTO. These assignments register the interests of various entities in a patent or patent application through a title chain.

The original ownership of a patent share usually lies with the inventors. The inventors usually transfer the rights of the patent share to another entity (e.g.., an employer). Liabilities against these interests can be recorded, as well as additional transfers to other entities through sales, mergers and acquisitions, legal proceedings and so on.

Could the USPTO implement its mission database as a privately controlled blockchain? In short, the answer is “yes” – and doing so could potentially enable a number of interesting uses.

In fact, the USPTO’s mission database is a natural candidate for admission to a blockchain. It is mostly a read-only database of transactions where records are rarely deleted (see MPEP § 323). As new missions are registered, they can be added to new blocks. These blocks can be extracted (verified) by USPTO computer systems to ensure that they are correct. Advantageously, standard smart contracts can be used to automate job verification instantly and efficiently for most transactions. This will be a significant improvement over the current manual verification process which may take weeks or months in some situations.

For example, before an allotment transaction is placed in a block on the blockchain, the USPTO can verify that the transferor has the right to allot the patent asset. Since the blockchain will register each asset’s title chain, the current ownership of the asset is known. Thus, for example, if the blockchain specifies that the asset was originally owned by Unit A, transferred to Unit B, then transferred to Unit C, and has no subsequent transfers, Unit C is the current owner. Therefore, only unit C has the authority to transfer the asset to another unit, such as unit D. If another unit E attempts to transfer or impose any kind of liability on the asset, this transaction will fail in the mining process and will not be placed on blockchain. As a consequence, the current possibility of filing erroneous or fraudulent patent assignments effectively disappears.

Of course, this means that all entities with an interest in a patent share must have an account or identity with the USPTO’s mission blockchain, and keep their credentials secured against conventional hacking attempts (e.g.., phishing). Many patent holders already have such accounts in place with the USPTO. Keeping an account secure is already a requirement for any person or entity that uses online banking, e-commerce and so on. The risk is well understood and widely accepted at this time, and the use of blockchain does not make the system less secure.

If a patent holder’s credentials are stolen and fraudulent transactions are placed on the blockchain, this can be resolved in court, as it would be today. To facilitate the correction of such transactions, the USPTO may have the sole authority to place an “override” transaction on the blockchain that invalidates a specific previous transaction, and therefore returns ownership of an asset to its rightful owner.

It may not be possible or desirable for all inventors to have their own USPTO assignment blockchain accounts, so an initial assignment agreement from the inventors to a recipient can be verified by including form language in a programmable interpretable document. As long as the names of the inventors match the names of the submitted application and are accompanied by their verifiable digital signatures on the assignment itself, it will be assumed with a smart contract code that this assignment is valid. Again, disputes about such validity can be challenged in the courts, as they are today.

Furthermore, mechanisms for adding inventors to an asset or removing inventors from an asset will need to be supported.

Another aspect of the proposed mining that will be advantageous is that it will have a low computational load compared to, for example, Bitcoin mining, since there would be no need to solve proof-of-work tasks. There would also be no need to reward the miners with coins or tokens from the blockchain (to be clear, this blockchain does not need to implement any coins, tokens or currency – it can be a pure ledger of transactions). USPTO’s current systems are likely to be able to handle the calculation costs of mining. Alternatively, other US authorities (or interested third parties) may offer servers to process transactions and store their own copies of the blockchain assignment (of course, the blockchain consensus protocol must be arranged so that the USPTO has ultimate control over the decision whether a transaction is valid).

A USPTO mission blockchain will have a number of interesting potential features that can be exploited using smart contract.

As an example, certified copies of a patent object can be embossed on request as an NFT. For a small fee, a unique PDF or image file can be generated and digitally signed by the USPTO to verify its authenticity. This can even be used to replace patent plaques that are usually given to inventors by their employers with NFT-based prices instead.

Smart contracts can also be used to put different types of terms and obligations on a patent asset. For example, companies may encourage their inventors to disclose more inventions by imposing an obligation on all future owners of an asset to pay the inventors a certain percentage of future licensing, sales, settlements or judgments involving that asset (e.g.., the inventors receive 10% of the total value of such transactions). This will allow inventors of commercially valuable patents to enjoy the economic benefits of their inventions in a way that is more equitable than, for example, a nominal one-time payment upon filing or grant.

Since patents can only be claimed when all owners agree to do so, such contracts will have to clearly separate ownership of a patent asset from an obligation for the owner to compensate a previous owner for the asset’s future income.

Another potential use of smart contracts would be for the ownership of an issued patent to return to its previous owner if the current owner does not pay maintenance fees on time. Then the previous owner would have a short deadline where he could either pay the maintenance fees or let the patent expire. Or the first owners of the patent can specify in a smart contract that the patent will be dedicated to the public within, for example, 10 years after issuance, regardless of who owns the patent at that time.

A virtually unlimited number of additional uses for a blockchain-based assignment database may be possible. As was the case for the web in the early 1990s, there is a “wild west” aspect to blockchain in the early 2020s. But most experts agree that the underlying technology is good and highly adaptable. It remains to be seen if, when and how these advances will affect patent business.