Cryptocurrency: Fostering Innovation, or Alienating It?

By Devorah Peretz (Rutgers Law Student) If you haven’t been living under a rock in the past year, you have definitely heard about Bitcoin; possibly more than you care to. Innovative technologies enable Bitcoins to be “mined”, when complex math problems are solved and added to Blockchain, a public ledger. Bitcoin, and other cryptocurrencies, were created with the goal of open-sourced software, enabling and encouraging “permissionless innovation”. The idea is that this new form of a global currency should motivate creation without the obstacle of intellectual property rights. On the other hand, bitcoin and other cryptocurrencies are constantly filing numerous international patents, which under the Patent Cooperation Treaty, allows them to enforce their patent in up to 152 countries. This treaty, gives the patent holder exclusive property rights over their invention. How then, can these two seemingly contradictory objectives coexist? It seems fairly obvious that by filing for patents on their intellectual property, and by attaining absolute control, they by default are closing open access to their ideas. By limiting access to their singular holders, patents on cryptocurrency mining technology naturally eliminate the availability of fair competition; a necessary component to the success of Bitcoin and like technologies. The CEO of Coinbase, a cryptocurrency platform, Brian Armstrong, claims that while their true intentions are indeed for open- sourced, and shared technology, they must file for patents in defense of patent trolls. In order to keep their mining technology open to all, they must protect it from some. Assuming patents is the only way to achieve this protection, the question in this ever-advancing technological world is if there is a way to harmonize the conflicting ideas of protecting one’s ideas from being abused, and simultaneously promoting freedom of technology? Coinbase has attempted to solve this conflict by signing a Patent Pledge, whereby they publicly guarantee that they will not enforce their patents against any innovation by start-up companies. This way, they can see to it that their patents are purely defensive, preventing abuse of their technology, while simultaneously allowing others to utilize it for the good. This concept is in line with preventing a “tragedy of the commons”. In property law, we recognize that although people have the sole right to their property, there is a public interest concern in utilizing all property fully, and preventing waste. Blockstream, another platform, adopted the Patent Pledge and additionally joined a Defensive Patent License. The DPL essentially creates a mutual agreement between all participants to an environment of shared patents. The BDPL has been created as an attempt to improve the DPL and address its’ limitations, by offering advances such as penalizing licensees who break their agreements or by giving access to third parties. However, since these approaches were not developed specifically to meet the demands of the Bitcoin world, they are limited in their effectiveness. Unfortunately, there are loopholes in every system, and because these solutions are not legally binding, participating companies are exposed to weaknesses that abusers take advantage of. Presently, the world of cryptocurrency is virtually governmentally unregulated. This makes it challenging to propose a definite solution to the perpetual problems patents create. However, the future may bring more clarity. As Bitcoin becomes more widely accepted by large companies such as Overstock, it looks probable that governments will attempt to regulate certain aspects of the currency. If this becomes the case, this could be a more certain way to compromise the two ideals, and positively promote both. The government could require certain compliance with patent standards, as far as how accessible they must be to the shared public, and on the other end of the spectrum, they could enforce certain violations. One country in particular has already been rumored to potentially pass a Bitcoin mining ban. China, the largest producer of Bitcoin in the world, has recognized that although “cryptocurrencies were meant to be stateless”, governments still have a role in preventing potential criminal activity. Following this line of thinking, with the exception of a complete ban, governments can further the objectives of this ownerless currency, by ensuring everyone play fair.