Top Blockchain Developer Makes Patent Non-Aggression Pledge

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By Joseph Marks

July 19 — Blockstream Corp., a top developer of technology that enables the cryptocurrency Bitcoin, pledged July 19 it will never go to court over a patent unless it’s playing defense.

The company does not hold any issued U.S. patents yet, but has filed a small number of provisional and standard patent applications related to Bitcoin’s signature blockchain technology, General Counsel James Murdock told Bloomberg BNA. The pledge bars the company, its engineers or anyone who later owns one of its software patent from suing anyone for infringement who didn’t sue first.

Blockstream's founders played a major role in Bitcoin development and the nearly three-year-old company is backed by $76 million in venture capital, including investments from founders and executives at Google Inc. and LinkedIn Corp.

Blockstream hopes other blockchain companies will make similar pledges, Murdock said. The larger goal is to ensure the technology remains a free space to innovate, he said, where developers don’t have to pay licensing fees to patent holders or fear litigation.

“We’re trying to lead by example and demonstrate to other companies in this space that you can be venture backed and develop an [intellectual property] portfolio but also commit to the public good,” Murdock said.

A Signal Moment for Blockchain Non Aggression

This is not the first non-aggression pledge in the blockchain community, but it goes further than previous pledges.

The blockchain company BitGo Inc. adopted the Innovators Patent Agreement in May 2015, a pledge initially developed by Twitter Inc. that states a company will not litigate patents offensively without the consent of the initial developer. Another company, Coinbase Inc., pledged that it would not use its patents to sue other blockchain companies in a November 2015 blog post. The company said it was exploring several options to make that pledge binding.

Blockstream, by contrast, signed onto the Defensive Patent License 1.1, which bars all parties in a patent’s ownership chain from offensive litigation. The company also updated an internal agreement with its engineers to state all intellectual property developed at the company will only be litigated defensively.

Blockchain is effectively a method for linking a chain of computers together, each of which independently verifies an encrypted transaction. That series of checks gives Bitcoin traders confidence that any fluctuations in the value of their digital currency is the result of market forces not nefarious hackers.

Blockchain initially developed patent free because Bitcoin’s shadowy creator, who went by the pseudonym Satoshi Nakamoto, didn’t seek any patents and future developers used open source tools, publicly sharing each new innovation so other developers could learn from it and test it for glitches.

Most Bitcoin developers also adhere to an open source ideology, which eschews software patents and believes software innovation moves more quickly when developers cooperate rather than compete, Murdock said.

More recently, however, tech and financial firms have begun applying for blockchain-related patents as the technology has proved to have uses outside Bitcoin, such as for digital wallets that carry conventional currencies.

Bank of America Corp. has applied for 15 blockchain patents and expects to apply for 20 more, the company told CNBC in January. Craig Wright, an Australian who claims to be the real Satoshi Nakamoto, has applied for more than 50 Bitcoin-related patents in Britain, Reuters reported in June.

Two Meetings, Different Ideas

Blockstream’s pledge is a major step forward in blockchain patent non-aggression, but only a first step, Patrick Murck, an attorney and fellow at Harvard University’s Berkman Klein Center for Internet & Society, told Bloomberg BNA.

Murck helped organize two conferences in the past year focused on keeping blockchain free of proprietary intellectual property. The first meeting was at Harvard in November, 2015. The second was at Stanford University in March.

The meetings were attended by blockchain startups, developers and venture capitalists, Murck said. The consortium R3CEV LLC, which represents financial firms that work in blockchain, including Bank of America, also attended, he said.

The meetings were organized by the Berkman Klein Center and the Massachusetts Institute of Technology Media Lab’s Digital Currency Initiative, he said.

Murck hopes blockchain firms will ultimately form something similar to the Open Invention Network, a patent non-aggression community that pools patents related to the open source operating system Linux. Murdock, who attended the Harvard meeting, expressed a similar hope, though both noted such a community is likely still a ways off.

“It’s just a matter, I think, of priorities for companies,” Murdock said. “Not everyone can focus on this issue at the same time.”

OIN has roughly 2,000 members that get free access to the network’s Linux patent pool in exchange for agreeing not to launch any offensive litigation related to the operating system. The network also has eight board members, including Google Inc. and, more recently, Toyota Corp., that purchase Linux patents to add to the pool and help defend Linux developers accused of infringement (135 PTD, 7/14/16).

Linux is used in a wide range of devices, including Android applications and connected vehicles.

Developing an OIN-like community may be stymied as much by developers’ hostility to software patents as by companies’ desire to keep blockchain innovations proprietary, Murck and Murdock said.

Patents Vs. Publicity

During the Harvard meeting, Blockstream advocated for a broader defensive strategy across the industry, Murdock said, while other attendants advocated for defensive publication of innovations. That basically means publicizing a new innovation so there’s proof anyone else who tries to patent it isn’t working with an original idea.

“To accomplish the main goal, which is to not have patents send a chill over innovation in the space, it was my take that a defensive publication strategy is just one component of an overall strategy,” Murdock said. “It’s important, but you can’t fully rely on it.”

Murck hopes more blockchain companies will sign onto a defensive patent pool as the technology becomes more mature, similar to the way companies that work in Linux joined OIN. He’s hopeful Bank of America and other financial firms will join the pool because they arguably have more to lose than small firms do if blockchain patents become fertile ground for aggressive litigation.

Patent owners that are more interested in seeking licensing fees from their patents than developing technology based on them – derisively called patent trolls – tend to target established organizations with deep pockets rather than early stage startups, he noted.

“We’re at an interesting moment in time with this industry,” Murck said. “We can actually preserve innovation and do it smartly and do it quickly because everyone is on the same page now. A few years down the road that may not be the case.”

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