Patentability of Blockchain: SDNY Raises Subject Matter Eligibility Issues

By Emily D’Agostino 

A blockchain is a public, digitized ledger used to store data.[1] Blockchain technologies are used in a variety of settings such as to track asset ownership and document transactions.[2] Blockchain systems are often incorporated within broader processes or comprise one component of an invention or technology.[3] Unlike traditional databases, blockchain systems are decentralized, which makes data storage more secure and easily verifiable.[4] Accordingly, technologies utilizing blockchain have become increasingly valuable. However, innovators seeking patent protection for their blockchain technologies have faced challenges, particularly under the §101 subject matter requirement.[5]

The Patent Act, defines a patentable invention as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”[6] The Supreme Court has interpreted this provision to exclude abstract ideas.[7] In Alice Corporation Pty. Ltd. v. CLS Bank International, the Supreme Court developed an inquiry now known as the “Alice “ test, which is used to determine whether a claimed invention constitutes an abstract idea.[8] The Alice test ultimately looks to determine whether a claimed invention that covers an abstract idea demonstrates sufficient ingenuity, surpassing mere application of the abstract idea.[9]

A recent holding in the Southern District of New York applied the Alice test to dismiss a claim of infringement of a patent claiming a blockchain technology that utilized 3D spectral analysis to digitally map gemstones and store that information using blockchain technology.[10] The Court emphasized that the plaintiff’s patent “is not improving the functionality of storing and processing data on a blockchain.”[11] The Court also acknowledged that “a blockchain is merely a ledger maintained and verified through a peer-to-peer network, and Plaintiff does not describe how the patent improves blockchains.”[12]

The ruling is currently on appeal, but, if upheld, even novel applications of blockchain technology may be unpatentable where those applications do not change or improve the blockchain process itself.[13]

[1] https://www.forbes.com/advisor/investing/cryptocurrency/what-is-blockchain/
[2] Id.
[3] Id.
[4] Id.
[5] https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2017-18/march-april/patentability-blockchain-technology-future-innovation/
[6] 35 U.S.C § 101.
[7] Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).
[8] Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014).
[9] Id.
[10] Rady v. Boston Consulting Group, LLC, No. 1:20-CV-02285 (ALC), 2022 WL 976877, at *1-2 (S.D.N.Y. Mar. 31, 2022).

 
[11] Id. at *3.
[12] Id.
[13] Id.