Ira Schaefer and Ted Mlynar are partners in the intellectual property practice at Hogan Lovells in New York City. They advise on patent and other intellectual property issues relating to blockchain and cryptocurrency technologies.

In this opinion piece, Schaefer and Mlynar look at the possibilities for someone hoping to patent a blockchain invention in the face of complex and arcane legal processes.

With so much blockchain technology publicly disclosed already, many are wondering, “How can we get a patent on a blockchain system now?”

In a previous article, we explored whether Satoshi Nakamoto could have patented bitcoin and whether such a patent would have survived an eligibility challenge.

But regardless of whether a viable bitcoin patent exists, both Nakamoto’s 2008 article describing the bitcoin system and the bitcoin network in operation since 2009 qualify as “prior art” against any new attempt to patent a blockchain system.

There are a few legal and practical hurdles facing the aspiring blockchain patentee.

Alice in Wonderland

The Supreme Court’s ‘Alice’ decision addresses the statutory categories of potentially patent-eligible subject matter articulated in 35 USC §101:

“[A]ny new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” – Alice Corporation vs CLS Bank International (2014).

Being quite the patent buzzkill, Alice notes that there are long-standing exceptions to those broad categories. “Abstract ideas,” in particular, are not patentable. And, according to Alice, in the patent Wonderland, there are exceptions to the exceptions.

We shall explain.

First, when is an idea so “abstract” that it is an unpatentable “abstract idea”? The Supreme Court is not entirely clear in Alice, but it was sure that “fundamental economic practices” are abstract ideas. The court specifically determined that a claimed method for mitigating “settlement risk” was an abstract idea.

Second, the Supreme Court adapted the two-step analysis it had devised for life sciences patents in Mayo Collaboration Services vs Prometheus Laboratories (2012) to apply to financial technology patents.

The first step in ‘Mayo’ was to analyze the patent claim as a whole to see if an abstract idea (the exception to patent eligibility) is claimed. If so, then the second step in Mayo was to see if that patent claim recites additional elements to implement the abstract idea that are “significantly more” than the abstract idea itself (the exception to the exception).

If so, then the patent claims are directed to patent-eligible subject matter. If not, then the patent claims are directed to a patent-ineligible abstract idea.

Determining what qualifies as “significantly more” may seem a bit subjective. The courts have warned that adding well-known activities, routine and conventional activities, or insignificant extra-solution activities do not qualify. Linking a claimed method to a particular field of use is also not adding “significantly more.” Such circular definitions, however, are not particularly helpful guidance.

What has been considered “significantly more?” An improvement in another technology or technical field, an improvement to a computer itself, adding a limitation that is not routine or conventional, linking the use to a particular technological environment (other than a computer network), and applying the method to a particular machine (other than a general purpose computer) have generally been found to be “significantly more” sufficient for patent eligibility.

In applying Mayo to technology inventions, Alice created quite a stir at the US Patent and Trademark Office (USPTO). USPTO examiners were required to figure out which inventions were the exceptions and which inventions were the exceptions-to-the-exceptions. Those lines proved to be not so easy to draw.

The decision also immediately impacted all patent litigation cases, because Alice has a retroactive effect.

For example, even though Nakamoto could have filed his patent application in 2007 and had it examined under pre-Alice law, any challenge to the validity of that patent today would be reviewed under Alice. The Federal Circuit, the court of appeals for patent cases, has issued several decisions to help the district courts understand and apply Alice.

Just ask Alice

How does Alice impact blockchain inventions? In short, they start behind the eight ball.

Applying Alice to FinTech inventions, the Federal Circuit has held that methods for risk hedging, for creating a contractual relationship, of using advertising as currency, and of processing information in a clearinghouse, are all “abstract ideas”.

In none of those cases did the patent claims recite something sufficiently “significantly more” to qualify as an exception-to-the-exception.

In view of those decisions, there was an understandable concern that the Federal Circuit would classify any method for carrying out a…

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