Blockchain companies can’t afford to stay on the patent sidelines

Twitter is defending with its patents, Square has set up a consortium – including Coinbase – to pool crypto patents, and Alibaba is well on its way to overtaking IBM in the blockchain patent wars.

A lot of startups don’t take the necessary steps to protect their innovations and that’s a big mistake. In the blockchain in particular, an open source philosophy embedded in the room means that many entrepreneurs avoid the competitive territorial landscape of patent applications. In fact, many startups believe that patents for decentralized autonomous technologies cannot be enforced. That is not true. By keeping their distance, they are doing themselves and the community a disservice.

If founders and entrepreneurs stay on the verge of patent, they will lose the benefits of their innovations and inventions to the tech giants who will have no regrets squeezing them out and devouring even more markets.

Blockchain companies should also be careful if their ideas are stolen. Steve Jobs, the late Apple CEO, once said:

“We have always been shameless when it comes to stealing great ideas.”

The Wall Street Journal wrote in 2017 that the new Facebook motto seemed to be, “Don’t be too proud to copy.” So far, however, there is evidence that too few blockchain startups are paying enough attention to the potential threats.

In our study of the state of patents, we found that blockchain patents are skyrocketing. More blockchain patents were published in the first half of 2020 than in all of 2019, when three times as many blockchain patents were published as in 2018. Alibaba and IBM are the two largest patent publishers, with the Chinese giant on the right track overtake American rivals. Mastercard recently announced, on a call for profit, that it had amassed blockchain patents for payments that enabled it to capitalize on central banks’ appetites for digital currencies.

While the largest companies struggle to position new markets, blockchain companies rarely apply for patents.

Strategic decisions

One of the most important strategic decisions a company can make is to get a patent. Patenting an invention has an impact on the company’s value. Not only does it protect it from counterfeiters but it also blocks others from a particular market.

The patent filing issue can be controversial in a room full of passion for collaboration and decentralization. But attitudes aren’t monolithic, and I’ve seen more recognition in recent years for the fact that blockchain companies can’t ignore patent wars.

Sure, there will always be people who have an attitude towards anything to do with patents, and that is respectful. The problem is that this paves the way for multinationals to dominate the technology.

On the other side of the spectrum, there are pragmatic business leaders who have decided that the world of innovation will always involve patents. They may be a minority for now, but they are determined to apply for patents and protect their ideas – and potential gains.

Third, there is a cohort that strikes the middle. They advocate the open source philosophy but accept practical practices. Given the balance of interests in the industry, this is the best way forward. Blockchain companies have to play defense.

The defensive model here was exemplified by Red Hat, which is admired by open source proponents. Red Hat has established itself in a central position at the heart of invention by protecting Linux innovations from patent attacks. Following this model means companies can obtain patents and then pool them to hold off larger companies while maintaining flexibility in the use of their patents.

Twitter was also a leader in defensive patents, creating the innovator’s patent treaty with the express goal that “patents should only be used as a shield, not a weapon”. Jack Dorsey, CEO of Twitter, also runs the payments company Square, which has created a consortium of blockchain companies to pool patents and build a consolidated defense in case the big tech companies try to innovate. Coinbase was one of the first major blockchain companies to join the Cryptocurrency Open Patent Alliance.

This demonstration of collective strength is a step in the right direction. When blockchain companies take advantage of patents, they can develop growth strategies for companies endowed with the knowledge and confidence that no one can steal their inventions.

Patents can help make blockchain companies economically viable. This is good for businesses, for the blockchain industry, and for a world that will enjoy the fruits of innovation.

The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

D’vorah Graeser is a US patent agent and CEO of KISSPatent, which uses artificial intelligence models to help companies manage the patent application process and conduct business intelligence.