VII. Trends for Acquiring Patents for Blockchain Innovation
Overall blockchain patent activity remains robust despite the recent drop in patent application publications and issuance of blockchain patents. Inventors and companies seeking patent protection for blockchain inventions face significant legal challenges. Succeeding against these legal challenges requires diligent strategies. Data from the USPTO suggests important practices for those pursuing patent applications on blockchain technology.
A. Successful Drafting of Blockchain Applications
In the United States, securing patent rights consists of two major processes: the preparation of a patent application, and the review of that patent application by the USPTO. When the USPTO determines that an invention claimed in a patent application covers statutory subject matter, is novel, and is nonobvious, the USPTO grants the patent. The USPTO will reject patent applications that fail to meet these criteria. During review of the patent application at the USPTO, a single USPTO official, an examiner, is assigned to handle the application. The assigned examiner reviews the applications and determines whether the claimed technology lacks novelty based on prior art, or is an obvious variant of the prior art. The USPTO will also reject patent applications if the subject matter of the patent lies outside of the statutory scope of what is patentable.
This scope of patentable subject matter under 35 U.S.C. § 101 has proven to be a critical hurdle for the patentability of software and data technologies like blockchain. There are serious legal considerations for every applicant and inventor seeking patent protection for a blockchain technology.
Blockchain primarily exists as software. Successful preparation and prosecution of a blockchain patent depends on a clear understanding of the legal landscape of software patenting and how to navigate it. The legal landscape for the patentability for software in the United States has undergone a dramatic adjustment since the Supreme Court’s 2014 decision of Alice Corp. v. CLS Bank International. Subsequent opinions from the Federal Circuit have applied Alice and provided further clarity. While federal courts provide primary guidance on strategies for the successful drafting of software patents, an analysis of data and rulings from the Patent Trial and Appeals Board reveals critical prosecution strategies for applicants when navigating the application process at the USPTO.
Successful blockchain patenting begins with drafting the application. A key risk facing blockchain patents is that they could be described at too high a level, using broad generic terms covering a general concept or business or financial application. Broad and generic patent applications may appear promising in that they cover such a wide idea, but this promise is actually a trap. Broad and generic applications are likely to be considered to describe abstract ideas, which are ineligible for patent protection.
To avoid having a patent fall into the trap of being a mere abstract idea, patent applicants need to dive deep into the technology and create a technologically detailed and rich patent application filled with technological parameters including flow charts, block diagrams, computer code, and actual data from created prototypes. A technologically heavy patent application provides greater opportunities to avoid the trap of abstract ideas and clear the hurdle of what qualifies as 35 U.S.C. § 101 patentable subject matter.
Not every invention is patentable. Three categories of subject matter for which one may not obtain patent protection include laws of nature, natural phenomena, and abstract ideas. For example, one can patent inventive applications of the laws of physics, but not the laws of physics themselves. One can patent inventive processes for artificially manufacturing a substance that may occur in nature, but not something found in nature. With respect to abstract ideas, one can patent specific technological implementations of an abstract idea, but not the abstract idea itself. The topic of blockchain may seem to include many abstract ideas. The challenge for innovators and companies is to explain software and blockchain in sufficiently concrete technological terms to secure valuable blockchain patents.
The Alice decision was handed down by the U.S. Supreme Court in 2014. The Supreme Court determined that patent claims for a computer-implemented, electronic escrow service for facilitating financial transactions were not patent eligible, as they were abstract ideas under 35 U.S.C. § 101. Thus, the decision had a powerful negative impact on the patentability of software after it issued in 2014. In 2015, over 60 percent of the software patents challenged under Alice were found to have at least one claim unpatentable. Subsequent Federal Circuit Court decisions placed the Alice decision in perspective and created more certainty about the type of patent disclosure and claim elements needed to avoid the trap of software being ineligible for patenting as an abstract idea. For example, Joseph Saltiel notes that “[i]n 2019, the percentage of successful or partially successful Alice challenges [was] less than 50 percent.” Essentially, software and blockchain patents, to be held valid, need technologically rich specifications with claims focused on specific technological implementations of a software or blockchain concept, and cannot focus on the concept alone. In support of the patentability of software, the USPTO issued guidance on software eligibility under 35 U.S.C. § 101 in 2019 to ensure uniform application of the law to software patent applications.
A further hurdle for the patent is prior technology. To qualify as an issued patent, the invention must be novel under 35 U.S.C. § 102 and not have been published previously, or be an obvious variant of published information under 35 U.S.C. § 103. A great strategy for ensuring that applications avoid rejections for a lack of novelty or non-obviousness is through conducting a rigorous prior art search. With these key strategies, blockchain patent applicants are positioned best for success at the USPTO.
B. Successful Prosecution of Patent Applications
Prosecuting patent applications at the USPTO is a process. When prosecution of a patent reaches an impasse due to examiner rejections, applicants and inventors can pursue an appeals process with the Patent Trial and Appeal Board (PTAB) at the USPTO. The PTAB is a panel of three attorney judges who preside over ex parte patent prosecution appeals from patent applications that have claims twice rejected by an examiner. The PTAB has rendered decisions in 90 ex parte appeals involving blockchain patents to date. The single largest issue on appeal is prior art rejections under 35 U.S.C. § 103 for obviousness, which was raised in 74 appeals. Subject matter eligibility of blockchain claimed inventions under 35 U.S.C. § 101 was raised as the second most often appealed issue in 47 appeals. Issues involving indefiniteness and enablement under 35 U.S.C. § 112 were the third most raised issue in 34 appeals. Prior art issues under 35 U.S.C. § 102, fifteen in total, and priority under 35 U.S.C. § 120, three in total, round out the top five most appealed issues in front of the PTAB.
