Patent trolls coming for the blockchain

The open-source model has also had its stumbles.

A recent review of the open-source blockchain efforts by Deloitte and the software collaboration platform GitHub found that a majority of the open-source experiments have failed. More than 26,000 open-source blockchain projects were created on GitHub in 2016, according to research by Deloitte, but just 8 percent of these projects remain active

Several large banks, including J.P. Morgan and Goldman Sachs, had been involved in a big open-source blockchain project, R3, but it saw those banks and others drop out last year.

In the tech-sector failure has always been an important part of innovation, or as Spanos said of the Deloitte/GitHub findings, “So what? … Edison had 1,000 lightbulb projects that failed.”

IBM developed a new blockchain-based payment platform to speed up cross-border payments earlier this year. A number of international banks collaborated on the project, including BBVA, Bank Danamon and National Australia Bank. Hong Kong and Singapore’s central banks agreed to work together on a cross-border trade finance network based on blockchain technology.

In building blockchain systems, including one partnership with food giants Nestlé, Unilever and Walmart for a blockchain-based food safety tracking system, IBM has used Hyperledger Fabric, an open-source blockchain framework overseen by the Linux Foundation. For its banking system, IBM partnered with nonprofit blockchain organization Stellar.

The big banks would be a likely target for a patent troll as the blockchain use increases — the banks have been targets in the past, Bessen said, citing suits against banks for check imaging technology.

“The bet is that over the next five years, how we transact and commercially interact is going to change, particularly where intermediaries are involved. Banks and financial institutions are obvious candidates — but there are many more,” Spangenberg wrote in his blog post. He continued: “By 2017, the crazy ideas started to slow down and the better ones took over. I began assembling the team of programmers, data scientists, communications specialists and patent wonks we would need to implement and create a new business model that intelligently captures the power of blockchain in the patent space.”

With all the development in the digital currency space, it’s still early days, and there is no way to know how a patent war will play out. Spanos said only early patent holders are the ones that are probably protected, “as opposed to somebody who might have filed something last weekend.” He added, “Challengers can try to arrive with a ton of money and the best lawyers, but they’ll be wasting their time.”

“Patent trolls are unfortunately a cost of innovating today,” said Lemley.

Patent trolls are most successful when they can target companies that are cash rich and put up a long and drawn-out fight over it. “The whole game is to make litigation costly before you even get into it,” Bessen said.

He added, “If they can find out who to target, it could be more like a speculative bet.”

That has a very “bitcoin” ring to it, but Spanos is sure that no matter where a patent war in the blockchain leads, there is one group assured of cashing in: “Patent lawyers are the ones who get paid from all this strife,” he said.

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