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The Shareability Factor: Are Patent Pools Useful for Blockchain Innovation?

While there may be few enterprise blockchain platforms being deployed today, behind the scenes there are a growing number of organizations aiding efforts to more broadly bring the technology to market.

Add to those yet another: the Blockchain Patent Sharing Alliance (BSPA), an international organization founded by blockchain organizations in the United States, Canada and China. The alliance aims to create and manage a patent pool whereby blockchain innovators, patent investors, startups, enterprises and other entities can openly share, cross-license or trade patents.

While a potentially valuable and collaborative way to support innovation, the creation of blockchain patent pools may run into their fair share of legal and operational challenges. And in such a nascent space like blockchain, it’s difficult to tell exactly what effects, if any, IP-focused tools like BPSA will have.

Theodore Mlynar, partner at Hogan Lovells, pointed out that it may be too early for blockchain patent pools given the relatively small number of issued blockchain patents in the current market. He explained, “There are many efforts underway to patent blockchain technology, resulting in the filing of thousands of patent applications for blockchain-related technologies, but not that many have issued.”

However, he added that he believes there is still a benefit in starting such a pool early on. “I would credit BPSA with trying to create a pool before the value of any set of patents becomes apparent, because once there are valuation differences between different sets of patents, it becomes that much more difficult to pool them,” he explained.

Joseph Loy, partner at Kirkland & Ellis, agreed, noting that starting a patent pool early may be useful “to set standards, to steer the technology in a particular direction, and to allow the organization to become a market leader.”

A patent pool’s ability to define future innovation, however, will likely depend on what members join the pool in the first place. “You got to make sure that the ones that are holding the ‘blocking patents’—the seminal patents in the blockchain space—are participating,” said Chinh Pham, who co-leads the emerging technology practice at Greenberg Traurig.

A patent pool’s effectiveness might also wane if it is commercialized to the extent where it becomes accessible to only well-funded participants. Pham noted that if a patent pool starts charging “a premium for the service they are providing” or looks for other ways to “recoup some of the investment that they put into [the pool],” they might be less relied on  in the industry they are trying to serve.

On the other hand, should a patent pool remain relatively inexpensive or free to use and become a formative force in an emerging technology industry, it could also stifle innovation through its domination of the market.

“Certainly, patent rights are government-issued monopoly rights, and those rights can be asserted against others who are not participating in the pool,” Loy said.

But should that happen, such patent pools are likely to run into legal liability. Mlynar explained, “The main concern here is antitrust or competition law issues, because we’re talking about a group of industry participants who may have a significant amount of market power, especially in a new industry that would be able to create burdens and obstacles for new entrants.”

To be sure, while the BSPA is the first established patent pool for blockchain, it is far from the only patent pool in tech industry. “Entities like the Open Invention Network have been engaged in a similar type of activity for Linux-related inventions,” Mlynar said.

He added, “The entity called Askeladden has also been engaged in what they call a ‘patent quality initiative’ for opposing patents that might be problematic in the financial industry. And there are other more technology-focused entities like RPX that have a patent pooling model.”

Though other pools have yet to enter the blockchain space, it may be easy for them to join in. “An established patent pool might be in a better position to move forward with this than a new startup,” Mlynar said, noting that established pools might have an incentive to enter the blockchain industry if they believe they can create and manage a patent pool more effectively than BSPA.

Yet should patent pools launch as a global endeavor like BSPA, they may also run up against more than just antitrust liabilities. Multinational pools “will also need to navigate the laws of multiple countries and deal with the regulatory bodies in each of those countries to make sure they are in compliance,” Mlynar said.

Still, striving to have as far-reaching a patent pool as possible does offer the much-needed benefit of standardizing how an emerging technology like blockchain is used. “What I believe is going to be most beneficial might perhaps be the creation of a standard for blockchain,” Pham said.

He added, “There are several different approaches to blockchain technology right now, and with so many players, especially larger ones from many different businesses jumping into the space, you don’t want a situation where you end up with many different approaches.”

For now, however, it remains to be seen whether the variety of organizations and stakeholders looking to promote blockchain innovation can coalesce around a single standard. But chances are, it’s going to be a complex matter to accomplish, and one that will quite likely be a long time in the making.