Blockchain, Crypto and DeFi Technology Patent Law
The proliferation of blockchain, cryptocurrency and decentralized finance (DeFi) applications in recent years has been accompanied by an increase in patent applications worldwide by blockchain technology developers. And despite some early reluctance by national patent offices to recognize the patentability of these emerging technologies, many national patent laws and patent application regulations have been revised in recent years to recognize their patentability. This has resulted in thousands of patents being granted worldwide for blockchain, crypto and DeFi inventions.
A blockchain was created as a transaction ledger for the bitcoin cryptocurrency. Historically, the patent laws of most countries have considered fintech inventions as patent-ineligible business methods because they lack sufficient technical features and are merely mental processes, mathematical formulas or methods of organizing human activity. However, a blockchain is itself a technological system. It is a distributed ledger consisting of a growing list of electronic records securely linked using cryptography and managed by a peer-to-peer computer network.
As the popularity of blockchain technology has grown and its application has expanded from the fintech sector to other industries, such as healthcare, transportation, big data, cyber security and consumer electronics, patent applications for blockchain-based inventions have skyrocketed worldwide. Recognizing the economic importance of blockchain technology and its inherent technical nature, many national patent offices have also revised their patent laws and examination regulations to ease the eligible subject limit for blockchain inventions.
The following is an examination of national patent laws and regulations related to the examination of blockchain, crypto and DeFi technologies in the most popular patent filing jurisdictions:
United States
The United States has historically been one of the most patent-friendly countries in the world. Not surprisingly, the earliest patents for blockchain inventions were granted in the United States due to the strict interpretation of patent-eligible subject matter defined in 35 USC 101 with respect to software and business methods, where blockchain applications are usually classified, and the confusion caused by several different tests for patent eligibility announced by courts, prosecution of blockchain applications at the US Patent Office became quite challenging.
The Patent Office recognized these issues and published the 2019 Revised Patent Subject Matter Eligibility Guidance (here’s our analysis of the guidance), which provided a structured framework for evaluating software and business methods. The guidance effectively eased the scrutiny with which blockchain-related applications were treated and provided clarity regarding patent eligibility criteria for crypto, DeFi and fintech inventions. Currently, there are nearly 30,000 patent applications and over 10,000 patents in the United States for blockchain-based inventions.
China
Due to the rapid growth of crypto mining farms, e-commerce businesses and fintech startups in China, the number of patent applications for blockchain, crypto and DeFi inventions has exploded in recent years. Some of China’s largest e-commerce and internet companies, such as Alibaba Group and Tencent Holdings, lead the world with thousands of granted blockchain patents.
Recognizing the importance of blockchain and fintech technologies to the economy, the Chinese government asked companies to accelerate the development of blockchain technologies in 2019. Later that year, the National Intellectual Property Administration (NIPA) of China revised its patent examination guidelines to include examples. of blockchain methods – further facilitating the examination process for applicants to blockchain technology. Currently, there are nearly 35,000 applications and around 9,000 patents in China for blockchain, crypto and DeFi inventions.
Europe
The European Union has traditionally been more challenging than the United States and China in the treatment of business-related inventions. The European Patent Office (EPO), according to the guidelines in section G-VII, 5, considers an application patentable if the claims define a technical solution to a technical problem, and make non-obvious technical contributions compared to the prior art. The EPO recognizes that a blockchain is a multi-disciplinary technology and that patent applications can include claim features related to networking, computing and communications – usually considered “technical” – and claim features related to mathematics and business methods – usually considered “non-technical.” Accordingly, to improve the chances of obtaining a patent in Europe, applications for blockchain, crypto or DeFi solutions should minimize their focus on non-technical features and emphasize technical aspects of the invention. To date, approximately 2,000 European applications have been filed for blockchain technologies, and around 500 patents have been granted.
Japan
While business methods in Europe are not particularly favored, the Japanese Patent Office (JPO) is relatively lenient on this type of application. Despite the Japanese patent law following a similar framework to the EPO guidelines in terms of distinguishing technical and non-technical properties, the Japanese remuneration rate for business-related inventions, which umbrellas blockchain-related inventions, is over 50%. This does not mean that a blockchain-related application is automatically patent-eligible in Japan. For example, the data in a blockchain is not patentable. However, a device, method and/or program for implementing a process using blockchain/crypto is generally considered patent-eligible by the JPO. To date, there are approximately 1,700 patents in Japan for blockchain, crypto, and DeFi inventions.
South Korea
Like Japan and China, South Korean patent laws view blockchain-based technology quite favorably. In accordance with Article 29(1), Article 29(1)ii and Article 29(2) of the Korean Patent Law, both blockchain core technology and application technology are patentable. Core technology covers transfers or transactions of data involving the use of blockchain/crypto and application technology covers the use of blockchain networks in the context of finance, security, cryptocurrencies, etc. Because both aspects of blockchain technology are considered patent-eligible, South Korea is generally a favorable country for patent applications for blockchain, crypto and DeFi. It is therefore not surprising that the number of patent applications in South Korea has grown exponentially from several dozen blockchain-related patent applications in 2015 to nearly 1,500 applications in 2019.
Blockchain, crypto, and DeFi technologies offer great opportunities for innovation, as evidenced by thousands of patent applications worldwide for these cutting-edge technologies. The rapidly growing number of patents issued for these technologies in the United States, China, Japan, South Korea and even Europe indicates that the majority of patent filing jurisdictions view the patentability of blockchain-based technologies favorably. However, to maximize the chances of obtaining a patent for these technologies, inventors and their patent attorneys should be aware of different patent requirements and standards of different national patent offices and use correct strategies for patent application drafting and prosecution.
