Blockchain Technology – Patent Eligible Subject Matter or Just a Business Model?

Written by: Fritz Wetzel, Ph.D.

This article first appeared in the April 4, 2018 edition of the Legal Intelligencer.

Bitcoin, Ethereum, and Litecoin have become household terms.  Bitcoin’s unprecedented run to $20,000 (and back down again), along with similarly impressive gains by other cryptocurrency, has created a horde of so called crypto-millionaires.  But how many people—including those investing large sums of money in this volatile medium—really understand Bitcoin and its underlying blockchain technology?  And how is this “technology”—where new “coins” debut monthly—dealt with from a patent perspective?  This article aims to provide a brief background relating to blockchain technology, with a view towards how it is treated under European patent law.

Briefly, blockchain is a software based technology that allows the transfer of data in certain divided blocks which are all encrypted. The blocks need to be confirmed from different participants in a network and will be stored decentralized. Hence, it is or should not be possible to manipulate the transferred and stored data because if only one block is manipulated, the system would immediately recognize this manipulation and can prevent any claim or request on this data. Not only can this technology be used to transfer funds between market participants, it can also perform the transfer of any kind of data such as music files, literature, smart license contracts and even sensitive confidential data from governments.

Under European laws, patents may only issue for technological inventions.  Even though the architecture described above  is commonly referred to as “blockchain technology”, a savvy European patent attorney will question whether there is indeed some technology involved or whether blockchain is a business model or even just software that would be excluded from patentability in most jurisdictions worldwide.

A review of the European patent registers reveals about 100 patent applications containing the term “blockchain” in its title.   Very few of these applications are granted.  A recent interview with an Official of the European Patent Office (EPO) revealed that the EPO will closely scrutinize any patent application pertaining to blockchain technology.  According to the EPO, most blockchain-based patent applications are categorized as business models or pure computer software—i.e., non-patent eligible subject matter. But – the Official also stated that some applications could qualify as computer-implemented inventions which would then be patent eligible.

Therefore, it is critical to understand how blockchain technology can be captured in a patent application that has a potential to be granted.  How must blockchain technology be claimed to qualify as a computer-implemented invention?

There are four basic requirements for patentability according to Art. 52(1) EPC:

  • there must be an “invention”, belonging to any field of technology;
  • the invention must be “susceptible of industrial application”;
  • the invention must be “new” and
  • the invention must involve an “inventive step”

Further, according to Art. 83 EPC the invention must be of “technical character” to the extent that it must relate to a technical field, must be concerned with a technical problem, and must have technical features in terms of which the matter for which protection is sought can be defined in the claim.

According to the EPO, a computer-implemented invention is one which involves the use of a computer, computer network or other programmable apparatus, where one or more features are realized wholly or partly by means of a computer program.

In claims comprising technical and non-technical features which very often will be the case for computer implemented inventions, each feature has to be evaluated to see if it contributes to the technical character of the claimed subject-matter, since this is relevant for assessing inventive step.

Inventions involving programs for computers can be protected in different forms of a “computer-implemented invention”, an expression intended to cover claims which involve computers, computer networks or other programmable apparatus whereby prima facie one or more of the at least one featurefeatures of the claimed invention are is realized by means of a program or programs. Such

Features of the computer program itself as well as the presence of a device defined in the claim may potentially lend technical character to the claimed subject-matter. In particular in embedded systems, a data processing operation implemented by means of a computer program can equally be implemented by means of special circuits.

A computer program claimed by itself is not excluded from patentability if it is capable of bringing about, when running on or loaded into a computer, a further technical effect going beyond the “normal” physical interactions between the program (software) and the computer (hardware) on which it is run. The normal physical effects of the execution of a program, e.g. electrical currents, are not in themselves sufficient to lend a computer program technical character, and a further technical effect is needed. The further technical effect may be known in the prior art.

Likewise, although it may be said that all computer programming involves technical considerations since it is concerned with defining a method which can be carried out by a machine, that in itself is not enough to demonstrate that the program which results from the programming has technical character; the programmer must have had technical considerations beyond “merely” finding a computer algorithm to carry out some procedure.

Further “technical character” of a computer program may be found e.g. in the control of an industrial process or in the internal functioning of the computer itself or its interfaces under the influence of the program and could, for example, affect the efficiency or security of a process, the management of computer resources required or the rate of data transfer in a communication link. A computer program implementing a mathematical method that itself makes a technical contribution would also be considered to be capable of bringing about a further technical effect when it is run on a computer.

Patent claims in the field of computer implemented inventions or blockchain technology often have technical and non‑technical features.  Such claims are in general legitimate. The non-technical features may even form a major part of the claimed subject-matter. However, in the light of Art. 52(1), (2) and (3) EPC, the presence of an inventive step under Art. 56 EPC requires a non-obvious technical solution to a technical problem.

For assessment of inventive step of such a mixed-type invention, all those features which contribute to the technical character of the invention are taken into account. These also include the features which, when taken in isolation, are non-technical, but do, in the context of the invention, contribute to producing a technical effect serving a technical purpose, thereby contributing to the technical character of the invention. However, features which do not contribute to the technical character of the invention cannot support the presence of an inventive step. Such a situation may arise, for instance, if a feature contributes only to the solution of a non-technical problem, e.g. a problem in a field excluded from patentability.

The problem-solution approach is applied to mixed-type inventions in such a way as to ensure that inventive step is not acknowledged on the basis of features not contributing to the technical character of the invention, while all those features which do contribute are properly identified and taken into account in the assessment. To this end, where the claim refers to an aim to be achieved in a non-technical field, this aim may legitimately appear in the formulation of the objective technical problem as part of the framework of the technical problem that is to be solved, in particular as a constraint that has to be met.

It is likely that blockchain patent applications will continue to proliferate, but it remains to be seen whether these applications can overcome the hurdles of the EPO´s requirements for patentability. Blockchain patent applications may be considered pure software patents. Software patents that take an old idea and “apply it on a computer” or “apply it through the Internet” will be patent ineligible. Accordingly, a patent application that takes existing blockchain technology and comes up with a new use may be not patent eligible. By contrast, an application that improves the technological functioning or processes of a computer itself—such as improving efficiency or security—may be eligible.

Blockchain technology and cryptocurrencies have generated a new playing field for patent experts. However, the rules have not changed.