Blockchain technology has been one of the most hyped innovations of the past decade. At its core, it enables a secure, immutable, and decentralized shared ledger—promising greater transparency and trust in business by reducing reliance on centralized intermediaries. While still in its early stages, blockchain has already demonstrated transformative potential across industries.
The first major application was Bitcoin, a cryptocurrency payment system built on blockchain. Bitcoin functions as a digital unit of account, but the real breakthrough came with the introduction of smart contracts—self-executing code stored on the blockchain that automatically enforces agreements when predefined conditions are met. This innovation opened the door to a new wave of decentralized financial instruments and applications.
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This evolution gave rise to Initial Coin Offerings (ICOs)—a fundraising mechanism where startups issue digital tokens to raise capital. These tokens often serve functional roles within future platforms or ecosystems. Between 2016 and 2018, ICOs revolutionized startup financing, with over $18 billion flowing into blockchain ventures in 2018 alone. Many of these projects raised substantial capital, some securing anywhere from $10 million to over $4 billion.
But what does this have to do with patents?
The Rise of Blockchain Patents
As blockchain adoption surged, so did the number of patent filings. What makes this technological wave unique is the unprecedented level of funding available to startups—many of which emerged with millions in capital before even launching a product.
Equally significant is the ideological foundation of many blockchain projects. A large portion are built on principles of decentralization and open-source development. Their codebases are publicly accessible, often released under permissive licenses like Apache 2.0. Philosophically, many developers and project leaders reject traditional intellectual property frameworks, including patents.
This creates a complex and risky landscape.
The Vulnerability of Open-Source Innovation
Many cutting-edge blockchain startups rely solely on open-source licensing for protection, without pursuing patents or other legal safeguards. Despite being well-funded—some with war chests exceeding $25 million on average—they leave their innovations exposed.
These companies are developing transformative technologies in full public view, inviting collaboration but also creating opportunities for exploitation. With hundreds of well-capitalized startups operating in this space, the risk of intellectual property predation is real—and growing.
The Emergence of Patent Aggregators
At the same time, a small but growing number of well-funded entities are aggressively filing blockchain-related patents. Some operate like future Patent Assertion Entities (PAEs)—often referred to as "patent trolls." These organizations acquire broad patents not to build products, but to assert them against others.
This practice, sometimes called patent hoarding, involves claiming intellectual property rights over fundamental aspects of blockchain technology. Once granted, these patents can be used to demand licensing fees or initiate litigation against companies—even those unaware they’re infringing.
Never before has there been such a concentration of wealthy, unprotected startups operating in a space ripe for legal challenges. This combination could fuel a surge in patent disputes, turning blockchain innovation into a legal battlefield.
Corporate Players Enter the Fray
Large corporations are also increasing their blockchain patent portfolios, though their strategies differ from speculative PAEs. Established companies like Visa and UPS file patents related to their core operations—such as blockchain-based payment processing or logistics tracking.
Their goal isn't necessarily to stifle competition, but to protect existing revenue streams and maintain control over key infrastructure. When disruptive blockchain solutions threaten these models, corporations may deploy their patent portfolios defensively—or offensively.
This mirrors historical patterns where incumbents use intellectual property to slow down innovation that challenges their dominance.
A Perfect Storm for Legal Conflict
When we combine these elements—well-funded startups with minimal IP protection, aggressive patent aggregators seeking profit, and large corporations defending their turf—we see the makings of a full-scale blockchain patent war.
The stakes are high:
- Startups may find themselves targeted not for market competition, but for their cash reserves.
- PAEs could profit not from building technology, but from litigation and settlements.
- True innovation might be stifled as legal costs rise and development slows.
Erich Spangenberg, CEO of IPwe, openly acknowledged this reality: “…it’s a strange road, a bunch of misfit trolls, geniuses and nerds ending up here—but we crush it to make big money.”
Whether or not one believes in the value of patents, it’s clear that some actors are pursuing blockchain IP purely for financial gain.
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Core Keywords
- Blockchain patent wars
- Patent assertion entities
- Open-source innovation
- Smart contracts
- Initial Coin Offerings (ICOs)
- Decentralized technology
- Intellectual property risks
- Blockchain startups
Frequently Asked Questions
Q: Why don’t blockchain startups file more patents?
A: Many blockchain projects embrace open-source principles and view patents as contrary to decentralization. Additionally, some lack awareness of IP risks or prioritize product development over legal protection.
Q: What is a Patent Assertion Entity (PAE)?
A: A PAE is a company that acquires patents not to manufacture products, but to enforce them against alleged infringers—often through litigation or licensing demands.
Q: Can open-source software be patented?
A: While open-source code itself can be freely used, new implementations or methods may still be patentable. This creates tension between open development and proprietary rights.
Q: Are corporate blockchain patents harmful to innovation?
A: Not always. Some patents drive R&D investment. However, overly broad or aggressively enforced patents can hinder progress by creating legal uncertainty for smaller players.
Q: How can startups protect themselves?
A: Startups should conduct patent landscaping, consider defensive publishing, join patent-sharing communities (like the Open Invention Network), or selectively file their own patents.
Q: Is the blockchain patent race inevitable?
A: As long as valuable commercial applications exist, IP competition will follow. The key is balancing protection with openness to foster sustainable innovation.
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Conclusion
The blockchain patent war isn’t science fiction—it’s already unfolding. With vast sums of capital at stake and powerful incentives for both creation and exploitation, the next few years will likely see increased legal friction in the ecosystem.
For innovators, the lesson is clear: idealism must be paired with strategy. Open-source development fosters collaboration, but without thoughtful IP planning, it can also invite predation. As the line between technological progress and legal warfare blurs, navigating this landscape will require both vision and vigilance.