Blockchain Technologies Are Being Patented in Canada

We had previously written about the emergence of and issues of patenting blockchain technology in Canada.

Over the course of the past year there has been an increase in the number of Blockchain patents filed in Canada.

Notably, in 2018 at least two Blockchain patent applications have received a grant in Canada, including Canadian Patent No. 2 981 511 to Nasdaq, Inc., US (the “Nasdaq Patent”) and Canadian Patent No 2 943 230 to nChain Holdings Limited, AG (the “nChain Patent”).

In general terms, the original Satoshi paper describes a system wherein a ledger is distributed to across a network, and ownership of Bitcoin is solely based on accepted entries in the ledger. Entries to the ledger are added based on the network collectively agreeing to add a transaction to the ledger. The Satoshi paper goes on to describe that transactions are added to the aforementioned ledger through a process wherein the person making a payment (“payor”) transfers a Bitcoin to the next owner (“payee”) in part by digitally “signing” the transaction which gave the payor ownership of the Bitcoin. For example, in order for Bob to send Sally a bitcoin, Bob would digitally sign the transaction record which shows Bob getting the aforementioned bitcoin from Dave. In this fashion there is a chain of ownership of a particular Bitcoin. The original Satoshi paper does not require any information corresponding to the payee’s obligations.

In contrast, the Nasdaq Patent describes a system of matching orders between two separate parties which requires asset information about both payee and payor. The Nasdaq Patent describes an exchange that uses a matching process in conjunction with block chain transactions. A first client generates a transaction request, which the exchange system stores in an “order book”. The exchange system queries a market Blockchain ledger to determine whether the first client has sufficient assets to complete the transaction request. The system subsequently identifies a match between two transaction requests in the order book (“For example, a new received order “A” that is of size 10 may be matched against two contra-side orders that are each of size 5.”) Once a match is identified, the exchange system requires the two counterparties to each submit a Blockchain transaction to the aforementioned Blockchain system with by digitally “signing” certain transaction specific information. The exchange monitors the Blockchain system, and the effect of having the Blockchain transaction incorporated into the maintained Blockchain system is that the assets forming the transaction requests are transferred.

In contrast to the Blockchain system outlined by the Satoshi Paper, and the Nasdaq Patent, the nChain Patent describes a Blockchain like application which involves a tiered network where the system reviews and validates “transaction receipts” submitted by the payor.

In the nChain Patent claims a client node (or payor) sends a request for a transaction, and attaches a reference to a previous transaction receipt(s), much like the original Satoshi teachings. A validation computing device then requests the same transaction receipt from at least two other sources in the distributed network. Validation includes determining whether the previous transaction receipt(s), sent with the transaction request, matches copies of the previous transaction receipt(s) stored on the at least two other sources in the network using digital signing properties. Once a transaction request is validated by the protocol (i.e. the prior transaction receipts are consistent), the corresponding new transaction receipt (based on the transaction request) is sent to some, but not all of the distributed network. Only certain parts of the ledger are subsequently distributed to the entire network, and each tier of nodes in the network can contain a unique combination of transaction receipts.

Therefore, the nChain Patent is claiming a Blockchain system wherein the full distributed ledger is stored in a subset of nodes by design, and in order to validate transactions other nodes are forced to request “transaction receipts” from the (presumably more trusted/secure) subset of nodes.

The Canadian Intellectual Property Office (CIPO) had found that the nChain Patent’s claims of a distributed network with a plurality of computers that is reliant upon “transaction receipts” to validate transactions is patentable. CIPO has also found that the Nasdaq Patent’s claims which involve counterparty matching are patentable.

In terms of guidance for Blockchain patents in the future, the above granted patents provide guidance that certain Blockchain related functions can be patentable. CIPO has demonstrated willingness to allow patents for Blockchain innovations.

This article is for information purposes only and does not constitute legal or professional advice.

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