Is blockchain patentable?
The simplicity of the question underestimates the complexity of the answer.
When the decision of Advanced New Technologies [2021] APO 29 was handed down in July this year, as is often the case with cutting-edge technologies, the case was widely reported. In order to draw the attention of would-be readers, articles appeared with titles like “Is blockchain patentable?”, or otherwise pronounced the decision as clearing up this issue.
Blockchain can be defined as “a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network”: IBM, “What is Blockchain?”. But blockchain technology is not a single, indivisible whole. As observed by Gurneet Singh in “Are Internet-Implemented Applications of Block-Chain Technology Patent-Eligible in the United States?” (2018) 17(2) Chicago-Kent Journal of Intellectual Property 356 at 358-9:
There can be several aspects of internet-implemented applications of block-chain technology that an innovator can protect, including:
1. applications that use the block-chain technology over the internet, such as applications for financial data such as cryptocurrencies, public records, identification, private records, attestation, tangible and intangible assets, remittance, securities transactions, loyalty points, electronic coupon, smart contracts, escrow transactions, and third-party arbitration;
2. improvements in the architecture of one or more of the following individual technologies that collectively form the blockchain technology implemented over the internet, such as: asymmetric encryption, hash functions, Merkle trees, key-value database, peer-to-peer (P2P) communication protocol, and proof of work;
3. improvements in methods executed by the aforementioned individual technologies, such as: (a) a method of sharing transactions and blocks as executed using the P2P communication protocol, (b) a process of validating transactions and achieving distributed consensus, which use the block-chain concepts of proof of work, proof of stake, and decentralized consensus, (c) a method of efficiently packaging transactions into blocks, using the concept of Merkle trees, (d) a method of performing hashing of at least one of blocks and transactions, and a method of obfuscating public keys, (e) a method of searching previous transactions to prevent double-spends, which uses the concept of key-value database, and (f) a method of signing transactions, which can use the technologies of digital signatures based on public and private keys, asymmetric encryption, and elliptic curve cryptography; and
4. computing systems or devices, computer program products, and articles of manufacture that are used by the end customer to execute the internet-implemented applications that implement the block-chain technology. (footnotes omitted)
The Advanced New Technologies innovation itself relates to solving a particular technical problem arising in blockchain transaction requests, namely “how to solve the technical problem of how to design a method for verifying a transaction request, such that there is no risk for privacy breach of a blockchain node participating the the transaction”: at [21], citing par5 of the specification.
The difficulty with generalisations in relation to manner of manufacture, is that they are prone to mislead. It is true, as the Full Court stated in Commissioner of Patents v RPL Central Pty Ld [2015] FCAFC 177 at [98], “[i]t is not a question of stating precise guidelines but of deciding, in each case, whether the claimed invention, as a matter of substance not form, is properly the subject of a patent.” Whether any particular innovation which uses, or relates to blockchain technologies, is patentable or not will therefore depend on a detailed consideration of the manner of manufacture test in s18 Patents Act 1990 (Cth).
The claimed invention was objected to by the Examiner by reference to the “distinction between mere implementation in a computer and implementation of an abstract idea in a computer that creates an improvement in the computer”, citing Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 at [103], cited with approval in Commissioner of Patents v Rokt Pty Ltd [2020] FCAFC 86 at [83].
The Hearing Officer ultimately characterised the alleged invention as follows (at [53):
The substance of the invention therefore lies in a method of processing a transaction request within a blockchain wherein the transaction data is irreversibly converted into a non-recognisable form (data abstract) and using this data abstract to first get approval for the transaction only from transaction nodes and then use this approved data abstract to then get consensus validation from all of the consensus nodes. By processing the transaction request in this manner, only the data abstract finally gets to be stored in the blockchain and not the transaction data. It is clear from the specification that the basic computer infrastructure that underpins the claimed invention is very much the standard blockchain infrastructure comprising a network of computers that are programmed to communicate and transact with each other.
On this characterisation, it was found that “this new method of processing a transaction request within what is otherwise a standard blockchain infrastructure includes elements that may be considered technical … and elements that may be considered as an abstract scheme”: at [54] (emphasis added).
Where the Examiner and the Hearing Officer ultimately differed, was as to whether the disclosed invention involved a technical solution to a technical problem. The Hearing Officer found (at 63):
while not all of the steps of the claimed method can be considered to be technical steps, the critical steps of converting the transaction data into an indecipherable data abstract and then generating a transaction abstract based on digitally signed approvals from the transaction nodes involves the application of information technology techniques.
However, the Hearing Officer was not convinced as to the inventiveness of the claimed invention in light of the prior art, and referred the matter back to the Examiner for further consideration.
Whilst the casual reader might gain some satisfaction that Advanced New Technologies indicates that blockchain-related innovations may be patent-eligible, the decision really serves to highlight the need for expert advice in relation to the requirements for patentability in Australia.
In patent law, there are no shortcuts.