Smart Contract Patent Update

A quick update on the growing smart contract patent landscape. I’ve written before about the number of patents mentioning smart contracts here, here, and here. The number of filings continue to grow at a rapid pace.

As of May 30, 2018, we know of 267 patent filings in the USA that mention “smart contracts.” These filings include issued patents, and published patent applications. There are surely more we do not know about. The chart below shows a breakdown of filings by the year they were filed.


Smart Contract Patents

It’s about that time again to check in and see how many patent filings mention smart contracts. The first time I wrote about this was in June ’16 here, and then again in March of this year here. Smart contracts are very much a part of the current zeitgeist (sidebar, if you ever want to feel like an idiot read Hegel), and all the rage in the B2B world.

The first time this search was run there were seven hits. The second time the search was run there were fifty-six hits. This time? One hundred and thirty six filings mention smart contracts. This is less than seven months since I last ran the search when the number was fifty-six. Of those filings, eight are issued patents and 128 are published patent applications.

The first chart below shows the growth in filings by publication year. The second chart below shows the number of filings by the year they were filed.


Each year there are more and more patent filings that we know about that are related to smart contracts. What the second chart shows us is the growth in the number of filings. Those numbers are not final, as there are undoubtedly still more filings that are not yet public. Based on the trend shown by these numbers its not unrealistic to assume that twice as many patent applications have been filed in 2017 that mention smart contracts than were filed in 2016. That would be around 150 patent applications filed in 2017 making use of smart contracts.

More broadly speaking, the growth in the number of filings that mention smart contracts is in line with what we would expect from the maturing blockchain industry. I wrote about this emerging blockchain patent landscapein March of this year. Companies, large and small, are moving to protect their innovation in this space. Bigger numbers are on the horizon.

Blockchain Patents

Say you’ve got a great idea to use “blockchain for [insert literally any problem domain]”. First off, congratulations! That sounds cool. Now you think to yourself, “I should patent that!” Maybe.

Before you go through the long and costly process of seeking patent protection there are some questions you should ask yourself, or your attorney should ask you.

Do you really need a blockchain?

This is the most important question, and one that requires serious introspection. Are you pursuing a blockchain technology solution because you are trying to capitalize on a hot new trend? Do you just need a new data storage solution? Have you really hammered out the pros and cons of using blockchain technology? Do you want to build your own blockchain, or use a public blockchain or some private blockchain service?

Your answer to these questions will of course depend on your goals, constraints, and the data you are dealing with. If you are convinced that you do want to pursue a blockchain technology solution to your problem you should have answers to at least the following questions.

What data do you hope to store using blockchain technology?

It doesn’t make sense to throw any old data in a blockchain. I mean, you certainly can, but that would be wasteful. Typically, you want to put “significant” data in a blockchain. For example, data that might be usefully stored on a blockchain may be mission critical data that you don’t want to lose, however, then the question becomes is access to said data time-sensitive? If the answer is yes then a blockchain solution may not be a good fit.

Have you considered any privacy restrictions on the data you are dealing with? For example, is the data personally identifiable information, such as healthcare data? If it’s healthcare data, have you properly walked through permission controls that need to be put into place? “We’re just storing a hash of the data!” you say, and yes that’s great, but are you really comfortable with that? Similarly, how will the data be entered into the system? Is the data going in solely under human direction? Is there some type of machine-machine communication going on?

Good candidate datasets for storage in a blockchain solution are “shared datasets that are shared amongst parties that do not fully trust each other.” That is, parties that may be incentivized to change data to the detriment of other parties involved in the network. Remember, blockchains are tamper-evident and so can cut down on funny business by participants that don’t have a majority of the computing power necessary to overrun the blockchain the data is stored in.

How are transactions handled?

Transaction verification should be trivial, but if you are not dealing with public blockchains (e.g. Ethereum, Bitcoin) then you may need/want additional verification steps. If so, what are the additional steps taken as part of the verification process? Even if your idea involves the use of public blockchains you may want to include additional transaction verification steps that occur prior to interfacing with the public blockchain.

Similarly, how is consensus handled in your blockchain solution? Inventing a new consensus algorithm is probably not a good idea. It’s better to use an existing consensus mechanism. This calculus changes if your blockchain solution does not make use of tokens that are native to your new fangled blockchain network. If you are not using tokens (e.g. bitcoin, ether) as part of your solution, why are you trying to use blockchain technology again?

Does this interface with legacy systems?

How do you envision your blockchain solution fitting into your existing business model? The blockchain solution will either interface with legacy systems or seek to replace legacy systems. Both paths have their own pitfalls, and their own patent considerations.

Along these lines, is your blockchain solution going to be solely internal to your business, client facing, or a combination of both? You need to consider exactly how your use of blockchain technology interacts with these internal systems and external systems.

Who is allowed to participate?

A blockchain network is made up of all sorts of different participants. Have you figured out who can participate in your blockchain network and how? Do you use an existing blockchain network, such as Bitcoin or Ethereum? If so, have you considered privacy requirements for your data, and how they might be met on those networks?

If you are designing your own blockchain network, are there checks performed prior to participation in the network? What would those checks look like? Accordingly, do you have a validation process in place to validate information used as part of any checks on participation? This is less of an issue if you are spinning up some sort of permissioned blockchain where there is a certain level of trust afforded each participant.


Blockchain technology is not a panacea for every problem you face. In fact, blockchain technology is really best suited to situations where you have participants on a network that don’t fully trust each other, want to update valuable data, and don’t fully trust the network. If that is not your situation, you need to think about at least the questions posed above, but probably many more.

Smart Contracts Patent Filings on the Rise

I previously wrote about smart contracts showing up in patent filings over at Medium. I wanted to do an update to that post to see how many more filings have shown up.

In the previous post on July 21, 2016, there were seven published patent applications that mention smart contracts. Rerunning the search on March 19, 2017, shows that there are now fifty-six published patent applications that mention smart contracts.  This growth in filings is consistent with the rise in the number of patent filings that mention bitcoin, blockchain, and distributed ledgers. Patent filings show maturity in a new technology space, an issue I’ve discussed before, and smart contracts are proving to be no different. The chart below shows the growth on the horizon.

The number of patent filings that mention smart contracts published in 2015 jumps dramatically in 2016. Considering that the Ethereum project went live in late 2015, it is not surprising that we don’t see many filings in 2015. Now that Ethereum has proved itself, and use cases for smart contracts are being tested, there will likely be many more filings that mention smart contracts. Three months in to 2017 we are on track to surpass 2016, and probably see around 80 patent filings that mention smart contracts.

Gaps in the International Patent System

Recently, I was having lunch with a friend who practices IP law in Buenos Aires, Argentina. He mentioned, to my surprise, that Argentina was not a member of the Patent Cooperation Treaty (PCT). This stunned me, because Argentina is a large sophisticated country, and I assumed they would be a part of the PCT, because nearly every country in the world is a part of the PCT.

The International Patent System

A large part of the “international patent system” has to do with the PCT. The PCT makes it easier for people and entities to seek coverage for their inventions in multiple countries at the same time. As of December 8, 2016, there are 151 PCT Contracting States. So, how many countries are not a part of the PCT?

For purposes of this post I am using the list of United Nations member states. According to that list, the United Nations has 193 Member States, which means there are forty-two non-PCT states. Some of these countries make sense, Democratic People’s Republic of Congo, some make no sense, Argentina. Who are these non-contracting states, and what are their economies like?

The Non-Contracting States

As of January 12, 2017, there are forty-two countries which have not signed on to the PCT. These countries range from the small to the surprisingly large. Many of the countries do not have a ton of economic activity, and conversely a few have considerable economic activity.

Using data from the World Bank, the chart above plots all forty-two of the Non-PCT countries in the world by population in millions along the x-axis, and gross domestic product (GDP) in billions along the y-axis. I’ve called out some interesting outliers on this chart. Argentina, my friend’s home country, has the largest economy with a GDP of 581 billion to the country’s population of 43.4 million. Conversely, Pakistan is the most populous nation of the group at 271 million, but only has a GDP of 188.9 billion.

Only five of the countries have a GDP over 100 billion (Argentina, Bangladesh, Iraq, Pakistan, and Venezuela), and only five of the countries have a population over 50 million (Bangladesh, Congo, Ethiopia, Myanmar, and Pakistan). The full list of countries is presented below.

What the Future Holds

Of the countries listed, Argentina seems like the most likely candidate to join the PCT. In fact, my friend told me Argentina plans to join the PCT soon. The rest of the countries, I am not so sure. Negotiating an international treaty is cost intensive in both time and money. Frankly, many of these countries have much more important issues to contend with than patent rights.