This was a CLE presentation that I gave concerning blockchain technology. The talk covered blockchains, cryptocurrency, smart contracts, DAOS, ICOs, patents, open source software, and suggested best practices.
Nelson RosarioIntellectual Property Attorney at Marshall, Gerstein & Borun LLP
1. IP Considerations for Blockchain Technology
Chicago Bar Association – IP Committee
Nelson M. Rosario
September 26, 2017
2. Presentation Roadmap
marshallip.com | 2
1. Introduction to blockchain technology concepts
2. Interesting statistics on blockchain patents
3. IP Issues related to Blockchain
4. Suggested best practices
3. Why should you care?
Source: CoinDesk, “State of Blockchain – Q2 2017”
Patents: 1,843 patents and patent
Trademarks: 109 live trademarks
Copyrights: 58 registered copyrights
on artistic works
Source: UPSTO, and US Copyright Office
marshallip.com | 3
• No agreed upon definition
• A blockchain is a tamper-evident append-only distributed ledger of peer-peer
transactions maintained by a decentralized network of participants
– Blockchains are cryptographically linked blocks of transactions
• Blockchains utilize public-key cryptography, and consensus mechanisms to
establish the veracity of information stored in the blockchains
• Fundamentally, blockchains are about two key concepts: trust and
marshallip.com | 6
7. Who do you Trust? How is Consensus achieved?
• Blockchains are trustless
• How do you prove veracity of data?
• How do you get people to agree on
• Blockchains allow for emergent
marshallip.com | 7
• Blockchains are tamper-evident
• Saying blockchains are immutable is imprecise
• As time goes by, previously entered transactions trend towards being
– Always the possibility of a 50%+1 attack
• The use of Merkle tree’s and cryptography make changes very difficult
marshallip.com | 8
• Blockchains are append-only
• You can’t go back and edit previous transactions
• Information communicated on a blockchain is not reversible
– Once information is sent out there is not getting it back
marshallip.com | 9
• Blockchains utilize a distributed ledger of peer-peer transactions
• Every node in the network may have a copy of the “ledger,” or blockchain
marshallip.com | 10
• Blockchains are decentralized
• Robust blockchains are run by a plurality of nodes where no one party controls
over 50% of the computing power necessary to sustain the network
marshallip.com | 12
• Consensus is achieved over time, accordingly, consensus on the information in
the network emerges as more and more nodes confirm the data
• Main two approaches to incentivize nodes to maintain the network
– Proof of work
• Nodes solve a cryptographic puzzle to prove they expended a certain amount of computational power during the
process of building a block of transactions to be added to the blockchain
• As a reward miners receive a token for the network, usually a cryptocurrency, when their block is accepted and
added to the blockchain
– Proof of stake
• Blocks are added to the blockchain in a deterministic fashion
• The chance that a block built by a node is added to the blockchain depends on the amount of cryptocurrency
“staked” by that node
marshallip.com | 13
16. Blockchain Use Cases
marshallip.com | 16
2. Smart contracts
3. Decentralized Autonomous Organizations (“DAOs”)
4. Initial Coin Offerings (“ICOs”)
Example Real-World Use Cases
1. Land transfers
2. Escrow accounts
3. Voter registration
5. Supply Chain Management
6. Digital Identity
• The first cryptocurrency was Bitcoin
• Bitcoin introduced the first blockchain protocol
• Solved the “double-spend” problem
• Addresses in the network keep track of unspent transaction outputs
marshallip.com | 17
18. Smart Contracts
• Smart contracts were first introduced by Nick Szabo in 1994
• Scripts that automatically execute
• Essentially, they are distributed and decentralized public agreements
• Ethereum was the first public blockchain built specifically for smart contracts
– Two accounts in Ethereum
• One account that holds a balance of ether
• Contract account that has
– An ether balance
– Data, which is the state of the Contract
marshallip.com | 18
19. Decentralized Autonomous Organizations
• Extension of the idea of smart contracts
• Organizations that live solely in code on a blockchain
• Program in all of the functionality of your “organization” using smart contracts
• Most famous example is the “DAO”
• The DAO was hacked as a result of a bug in its smart contract
marshallip.com | 19
20. Initial Coin Offerings
• Initial Coin Offerings, or ICOs, are overwhelmingly conducted on the Ethereum
• Type of crowd funding, looks like an IPO without all the required disclosure
• Can be deemed a security by the SEC
• $1.3 billion has been raised through ICOs in the form of cryptocurrency
contributed to projects
marshallip.com | 20
22. Blockchain Patents Summary
• Around a 200% year over year growth in the number of filings we know about
• Results are based on searching anywhere in a patent document for “bitcoin,”
“blockchain,” “distributed ledgers,” “Ethereum,” or “smart contracts”
• 1842 total filings
• 1592 published patent applications
• 250 issued patents
28. Blockchain Patents
• Overwhelming majority of filings are from the 700 family of classes
• Deal with financial innovations
• Makes sense since the initial use cases are financial
• Small group of filings in class 463 that relate to gaming machines, e.g. slot
• Major corporations appear in the filings: Facebook, Apple, IBM, Qualcomm,
PayPal, Bank of America, JP Morgan Chase, Visa, MasterCard, GE, Morgan
• Expect to see filings related to: insurance, shipping, logistics, autonomous
vehicles, internet of things, and supply chains
marshallip.com | 28
29. IP Issues Related to Blockchain
Patent protection, open source software, and trade secrets
30. Legal Issues Generally
• Very little legal guidance to date
• Most case law has been related to criminal law
• No patent infringement lawsuits related to blockchain patents have been filed
31. Patent Issues
• Same patent issues that face all software-related inventions
• The basic functioning of a blockchain is well-known in the community and
would be considered in the public domain
• 35 USC §101: Aren’t these all just abstract ideas?
• Yes, and
• Technical solutions to technical problems
• “Real-world hook”
• Where is the innovation focused? If it is simply “using a blockchain where we
used to use a database,” that is probably not patentable
marshallip.com | 31
32. Open Source Software
• No different than legal issues that come up with other open source software
• Many blockchain projects are licensed as Open Source Software
• For example, Bitcoin is licensed under the MIT License
• Similarly, Ethereum is licensed under a variety of licenses: MIT, GNU GPL,
or LGPL, depending on the parts being used
• Developers in this space are very keen on open source projects
• Need to be mindful of any obligations created by using preexisting code from
a blockchain project
marshallip.com | 32
35. Suggested Best Practices
• What is the data that you hope to store in a blockchain?
• Is it mission critical?
• Is access to it time-sensitive?
• Are there privacy restrictions on the data?
• How will the data be entered into the system?
• Is the data going in solely under human direction?
• Is there a type of machine-machine communication?
marshallip.com | 35
36. Suggested Best Practices
• How are transactions on the network verified?
• Are there additional steps taken as part of the verification process?
• How is consensus handled?
• Is an existing consensus mechanism used?
• Is some new consensus mechanism proposed?
– If so, is it properly tested?
marshallip.com | 36
37. Suggested Best Practices
• How is the blockchain system interfacing into the existing system?
• Is the blockchain system set to replace an existing system?
• Is the blockchain system set to interact with legacy systems?
• How is the blockchain system going to interact with internal systems v.
• Is the blockchain system involved in B2B interactions? B2C?
marshallip.com | 37
38. Suggested Best Practices
• Who all is allowed to participate in the proposed blockchain system?
• Is the invention built on top of an existing public blockchain (e.g. Bitcoin or
– If so, have you considered any privacy requirements and how they might be met?
• Is this a completely open system where anyone can join?
• Are there any checks performed on participation?
• Is there a validation process?
• Are entities automatically entered as participants?
marshallip.com | 38
39. Suggested Resources
• “Mastering Bitcoin” – by Andreas
• “Bitcoin and Cryptocurrency
Technologies” – by Narayanan et al.
• The Bitcoin Whitepaper
• The Ethereum Whitepaper
• CoinDesk – News site covering all
• CoinCenter – Leading non-profit
research and advocacy center
focused on the public policy issues
facing cryptocurrency and
marshallip.com | 39