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Who’s Leading the Way in Cryptocurrency-Related Inventions

Dec 21 2020

As of December 8, 2020, the price of a single bitcoin is approximately US $18,891. In January 2016, the unit price of a bitcoin hovered around US $380 at one point. The rise of the bitcoin, along with other types of cryptocurrency, has led to one of the fastest growing trends in patent applications worldwide.  

Blockchain is a distributed ledger technology that enables units of a cryptocurrency (including bitcoin) to be generated, circulated, and used for payment in various types of transactions across the internet. Acting as a virtual, encrypted, and decentralized ledger of all transactions on a peer-to-peer network, blockchain can facilitate transactions without the need for a central clearing agent or authority. 

According to incoPat and IPRdaily, China's Alibaba/Ant Financial Group has filed, worldwide, more than 1,500 patent applications in 2019 on the subject matter of blockchain technology (including cryptocurrency-related technology), which is far ahead of any western company (e.g. IBM only filed 240).1 In the first half of 2020 (i.e., Jan. 1, 2020 to June 30, 2020), Alibaba/Ant Financial Group has filed 1,457 patent applications on the subject matter of blockchain technology, while IBM filed 251.2 It is also interesting to note that in 2019, China has become the top filer of international patent applications at WIPO, with 58,990 applications filed.3

Blockchain technology is considered to be a sub-category of "financial technology" (or “FinTech” for short). While different countries may have different laws or rules regarding FinTech patent applications, an invention described in a blockchain patent application needs to have, among other requirements, a technical nature or technical effect. Abstract ideas, financial principles, or pure business methods tend not to pass muster, so to speak, at various patent offices such as the Patent Offices in Canada, United States, China and Europe. 

For example, a successful blockchain patent application can show that specific technology is implemented to make a blockchain platform (or part of the platform) more secure, more reliable or more efficient. For instance, US Patent No. 10,305,694 (Mastercard International Inc.), describes a blockchain system for propagating configuration data, where a new block in the blockchain includes encrypted data generated based on a lock or release time associated with a data item in the configuration data.

For another example, US Patent No. 10055715 (Square Inc.) describes a payment service for providing financial transactions between a customer and merchant where the customer can pay in a cryptocurrency and the merchant can be paid in a fiat currency, leveraging the blockchain system. A point-of-sale system determines a monetary value owed to the merchant and an exchange rate based on the monetary value between the cryptocurrency and the fiat currency, and a payment service executes two separate transactions to enable the payment by the customer using the chosen cryptocurrency.

VISA International has filed a US Patent Application with Application No. 16/678,947, currently pending before the USPTO, describing a system to replace fiat currency (e.g. cash) with cryptocurrency. The current set of claims are rather broad, and are unlikely to be granted in their present form. However, it is interesting to note that the application states "the payment ecosystem may become entirely (e.g. 100%) digital. According to various embodiments, cash may be removed from the markets in a frictionless manner and the payment ecosystem may be improved. Users may hold digital currency with the same denomination as the local physical currency (e.g., $100 for User A in America; 200 pesos for User B in Mexico, and so forth) in order to perform transactions in a secure, fast and reliable way." While a majority of the population do not trade bitcoins, a practical benefit of the technology described in the patent application may be to provide seamless currency exchange services as a person physically crosses a border, or engages in international shopping online.

As blockchain and cryptocurrency technologies mature and improve, they may have profound impact on people's daily lives in the near future. The race for patent protection for blockchain technology has already begun and China appears to lead the global race. Patent protection is rather important for any new, emerging area of technology as it provides the patent owner a right to exclude others from exploiting the patented invention without a proper license, and in this case, it may be wise to file patent applications worldwide for new blockchain or cryptocurrency related inventions.

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Note: while not many people know China's Alibaba or Ant Financial Group, their mobile payment technology, AliPay, became the world's largest mobile payment solution in 2013. Alipay has been used by more than 800 million users worldwide as an all-encompassing payment technology to pay for goods and services, purchase health or life insurance, order takeout, apply for a car loan, or track COVID-19 incidents.

This article is for information purposes only and does not constitute legal or professional advice.

Author: Rita Gao


1See https://www.finextra.com/newsarticle/35692/chinese-giants-lead-blockchain-patent-applications.
2See https://mp.weixin.qq.com/s/WIS41kSKpkzfsT2arVvIbQ (Chinese).
3See https://www.wipo.int/pressroom/en/articles/2020/article_0005.html

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Tags: Bitcoin, Blockchain, Cryptocurrency, Financial Technology, Patents, Rita Gao