Blockchain technology has evolved far beyond its origins in cryptocurrency, emerging as a transformative force across finance, supply chain management, healthcare, intellectual property, and more. As global enterprises race to harness its potential, the need for robust intellectual property (IP) protection—particularly through patents—has become increasingly critical. This article explores the legal and strategic dimensions of blockchain patent regulation, focusing on patent eligibility standards, infringement challenges, and policy recommendations tailored to the technology’s unique architecture.
With over 22,000 blockchain-related patents granted in China alone by 2022—accounting for nearly 60% of global filings—the stakes are high. Yet, the decentralized nature of blockchain introduces complex legal questions, especially around divided infringement, where multiple parties collectively perform steps covered by a single patent. Without clear regulatory frameworks, innovation risks being stifled by litigation uncertainty or monopolistic control.
This analysis draws on comparative legal frameworks from the U.S., UK, Canada, and China to propose a forward-looking approach: refining patent standards, addressing multi-party liability, and fostering public-private collaboration to ensure balanced technological advancement.
Understanding Blockchain Technology and Its Patent Potential
Blockchain is not a single technology but a composite system built on three core components: peer-to-peer (P2P) networking, chain-based data structures, and consensus mechanisms. These enable decentralized, secure, and transparent record-keeping—features that have attracted investments from banks, insurers, logistics firms, and even government agencies.
From tracking food safety to managing digital identities and automating contracts via smart contracts, blockchain applications are expanding rapidly. The global blockchain market was valued at $5.85 billion in 2021 and is projected to exceed $1.2 trillion by 2030. As adoption grows, so does the incentive to protect innovations through patents.
👉 Discover how leading innovators are securing their blockchain IP strategies today.
However, unlike traditional inventions, blockchain operates without central control. This decentralization challenges conventional IP models designed for linear, centralized innovation processes. While copyright law fails to protect functional algorithms or system designs, patent law offers a more suitable framework by incentivizing disclosure in exchange for time-limited exclusivity.
Patents encourage investment in R&D by granting temporary monopolies, allowing developers to commercialize breakthroughs. They also promote standardization and interoperability—key for widespread adoption—by clarifying technical boundaries and reducing duplication.
Yet unchecked patenting can lead to “patent thickets” or exploitation by non-practicing entities (“patent trolls”), which acquire patents solely to sue others. A balanced regulatory approach must therefore protect genuine innovators while preventing abuse.
Global Standards for Blockchain Patent Eligibility
For a blockchain invention to be patentable, it must meet core criteria: novelty, inventive step (non-obviousness), and industrial applicability. However, jurisdictions differ significantly in how they interpret these requirements—especially regarding software and abstract ideas.
United States: The Alice/Mayo Two-Step Test
The U.S. applies a rigorous two-step test established in Alice Corp. v. CLS Bank and Mayo v. Prometheus. First, examiners determine whether the claimed invention is directed to an abstract idea—such as a mathematical algorithm or method of organizing human activity. Since foundational blockchain concepts like distributed ledgers or proof-of-work are considered prior art, pure implementations of these cannot be patented.
Second, the application must include an “inventive concept” that transforms the abstract idea into a patent-eligible application. Merely implementing a blockchain algorithm on generic hardware is insufficient. Instead, applicants must demonstrate integration with specific technical improvements—such as enhanced network security or optimized data validation—that go beyond routine computing tasks.
As a result, U.S. patent grants for blockchain remain selective, favoring innovations with clear industrial applications in finance, cybersecurity, or logistics.
United Kingdom and Canada: Focus on Technical Effect
In the UK, computer programs "as such" are excluded from patentability under the 1977 Patents Act. However, if software produces a technical effect beyond normal operation—like improving system reliability or reducing latency—it may qualify. The Symbian v. Comptroller case affirmed this principle.
Similarly, Canadian law excludes abstract ideas but allows patents for inventions with tangible effects. In Amazon.com v. Attorney General, the court ruled that a system producing measurable technical outcomes—such as faster transaction processing—can be patented.
Both countries require blockchain inventions to demonstrate concrete utility and novelty. Given the open-source nature of many blockchain protocols, meeting novelty thresholds is increasingly difficult unless the innovation involves significant customization or integration.
China: Balancing Innovation and Practical Application
China follows the standard triad of novelty, creativity, and practicality under its Patent Law. However, it explicitly excludes "rules for mental activities" and standalone computer programs from protection.
To qualify, a blockchain invention must:
- Solve a technical problem,
- Involve technical means (e.g., cryptographic hashing or node synchronization),
- Produce measurable technical results (e.g., improved throughput or reduced energy consumption).
Chinese examiners scrutinize whether claims relate to genuine technological advances rather than business methods disguised as tech solutions. With domestic giants like Alibaba and Tencent leading global patent filings, China’s evolving standards will shape international norms.
Tackling Divided Infringement in Decentralized Systems
One of the most pressing legal challenges in blockchain patent enforcement is divided (or split) infringement—where no single entity performs all steps of a patented method, yet collective actions infringe the claim.
For example, a blockchain-based authentication process might involve:
- A user submitting credentials,
- A miner validating the transaction,
- A node updating the ledger.
Each party performs one step; none acts alone. Under traditional patent doctrine—especially the all-elements rule—this fragmentation makes direct infringement hard to prove.
U.S. Jurisprudence: Control and Benefit Standards
U.S. courts have addressed this through cases like Akamai v. Limelight, where the Federal Circuit held that liability arises when one party "exercises control or exerts a sufficient influence" over others’ actions. Later decisions in Centillion Data v. Qwest added that benefit from each step is essential—not just overall system use.
These principles suggest that entities orchestrating blockchain networks—such as platform developers or consortium leaders—could be liable if they guide node behavior and profit from the entire process.
China’s Evolving Approach: Lessons from Xidian Jietong v. Sony
In China’s landmark Xidian Jietong v. Sony case (2017), courts grappled with multi-party method patents in wireless security. The first instance found indirect infringement based on device provision encouraging user actions. However, the appellate court overturned this, citing lack of “direction or control” over end users.
This highlights a gap: Chinese law lacks explicit provisions for divided infringement. While recent rulings show willingness to expand direct liability—as seen in Tenda v. Dapeng—a clearer legislative framework is needed.
To address this, China should adopt a unified direct infringement model, where coordinated multi-party execution of a patented method constitutes infringement if:
- There is functional interdependence among actors,
- One entity directs or controls key operations,
- All parties derive benefit from completing the full process.
Such an approach aligns with blockchain’s collaborative nature while protecting innovators.
👉 See how cutting-edge platforms are navigating complex IP landscapes in real time.
Strategic Recommendations for China’s Blockchain Patent Future
To maintain leadership in blockchain innovation, China must refine its IP ecosystem through targeted reforms:
1. Refine Patent Examination Guidelines
Establish clear boundaries between unpatentable foundational concepts (e.g., consensus algorithms) and protectable applications (e.g., energy-efficient mining protocols). Develop a dedicated blockchain patent classification system aligned with international standards (IPC/CPC) to enhance searchability and reduce duplication.
2. Combat Patent Abuse
Introduce patent tagging systems to increase transparency and deter speculative filings. Encourage defensive publishing and open licensing models to prevent monopolization of basic infrastructure.
3. Strengthen Legal Frameworks
Amend patent regulations or issue judicial interpretations to formally recognize single-entity liability in divided infringement scenarios. Adopt the “control and benefit” test to identify responsible parties in decentralized environments.
4. Foster Public-Private Collaboration
Create innovation hubs linking government labs, universities, and private firms to co-develop core technologies like DAG architectures and quantum-resistant cryptography.
Frequently Asked Questions (FAQ)
Q: Can blockchain algorithms be patented?
A: Pure algorithms cannot be patented as they fall under abstract ideas or mathematical methods. However, their practical implementation in solving technical problems—such as optimizing data verification speed or enhancing network security—may qualify for patent protection if they meet novelty and inventive step requirements.
Q: What is divided infringement in blockchain?
A: Divided infringement occurs when multiple participants in a decentralized network collectively perform all steps of a patented method, but no single party completes every step. This complicates liability determination under traditional patent law.
Q: How can companies avoid blockchain patent infringement?
A: Firms should conduct thorough freedom-to-operate searches before launching products. They can also adopt open-source alternatives with permissive licenses or seek cross-licensing agreements with major patent holders.
Q: Is open-source blockchain development incompatible with patents?
A: Not necessarily. Developers can release code under licenses that allow use while retaining patent rights (e.g., Apache 2.0). Some organizations join defensive patent pools to share patents without litigation risk.
Q: Who is liable when a decentralized app infringes a patent?
A: Liability may fall on entities exerting de facto control over the network—such as core developers or foundation bodies—if they guide user actions and benefit from infringing activities.
Q: How does China compare globally in blockchain patents?
A: China leads globally with over 60% of all blockchain patents granted by 2022. Companies like Alibaba and Tencent dominate filings, particularly in enterprise solutions and financial services applications.
👉 Stay ahead of the curve—explore next-generation tools shaping the future of digital innovation.