Corporates want a piece
Recently Ebay, IBM, and JPMorgan looked at issuing patents for bitcoin. One of the most recent companies to enter was the colorado-based giant WestrnUnion. WU received a patent on April 1st which suggested that it would give the company a way to claim a certain aspect of the bitcoin industry – the exchange of the alt coins. This is a huge risk for bitcoin because it means that now monopoly-based businesses are going to enter and take control. Bitcoin is mean to be decentralized and the issuance of patents to such business is a step in the wrong direction.
On April 1st the US Patent Office granted Western union a patent on the exchange of alternative currecies. Here is the tweet of when it happened:
The patent number is 8688563 the funny thing is it was granted on April fools day.
Western Union is not the only company going to the bitcoin market, in recent news IBM is building an e-Currency trading platform. They name it the e-Currency Validator which is similar to Coin Validation
Ebay also seems to be filing a patent application for a bitcoin currency exchanger, an article about it can be found HERE
Ebay is a big partner with PayPal, and it sees bitcoin as a threat to PayPal. It’s main competitors are services like Coinbase and Bitpay. Ebay is a business and like any other business it wants to dominate the market. That is why it is going for the patent in crypto-currency to try and set a check-mate scenario to Coinbase and Bitpay to where they would either have to pay huge royalties to Ebay or stop services completely.
Ebay filed a patent application where it actually mentioned Bitcoin (20130173416) with the United States Patent and Trademark Office. This application was published on the U.s Independence Day of 2013. Further checking shows that the application was filed back in December of 2011.
Ebay wanted to be an early adopter of bitcoin, but that company was BitMit. Quoted from the EcommerceBytes article:
BitMit was the first successful Bitcoin marketplace (well, second if we count Silk Road) and actually launched its service the same month and year of the eBay patent filing. and actually launched its service the same month and year of the eBay patent filing. BitMit closed its doors last November due to a security threat (a reported modest Bitcoin heist and potentially compromised database) about a week after my investigatory piece for Bitcoin Magazine Issue 14 “Bitmit Bitcoin Auction is With Bits but Without a Face” (print exclusive).
Gemalto also took a bite into patentin bitcoin related ideas. Gemalto has a pending patent application for a transaction method between two entities which provides anonymity without a trusted party. This one is the patent which is the most related to virtual currency. It was filed in April of 2008 it is an invention that uses an off-line divisible e-cash scheme that allows a user to withdraw a divisible coin of monetary value that he can spend anonymously and without any links. The full patent description can be found HERE
The patent analyzer and the founder of the CDF suggested that the patent could have implications for alternative uses of the block chain, which is the mechanism that drives bitcoin and all the other crypto-currencies. Quoted from Jessen “They are proposing a cryptocurrency scheme without the need for access to the internet”.
Just like with Ebay’s patent, this patent might not be ever approved or let alone granted. So far Western Union is the one with the ball so we need to keep a close eye on them.
I have to make one point, none of these patents directly mention Bitcoin, however, they mention the way bitcoin operates and are trying to patent the idea itself. Quoted from the Western Union patent:
There are many different types of alternative currencies (herein also “alternative forms of value” or simply “alternative value”), each currency representing what the community holds valuable (e.g. time, labor/skill, goods/services, etc.). Alternative currencies currently in use include: “LindenDollars”—Second Life; Amazon.com’s “Quest Gold”; World of Warcraft’s (WoW) virtual “Gold”; Ithaca Hours (Ithaca, N.Y.); Carbon credits; regional currencies in Germany; “Dotz” (Brazil); Tradebank “Credits” (Construction-centric barter network); “Lassobucks” (Time/Skillset currency); Maha Vitaran—Indian power utility barters with other utilities for power; “Bartercard”—Loaded with goods & services (not cash), used in exchange for other goods & services. Many others are planned or currently in development.
Here we see mentions of alternative currencies such as video game gold and other popular game credits. Even though this patent does not mention crypto-currencies, it still will apply to alt-coins as we know them.
You might argue that this patent is very broad. However, this patent has made it past the application state and has already been granted the patent status by USPTO. Western Union did a great job covering up their patent application and not advertising it to the public. Now the ball is in their hands to try and pursue its intellectual property rights under the granted patent. On the other hand, the patent might have been filed for defensive reasons in order to keep competitors away, instead of an offensive move to try and dominate the bitcoin market.
The Cryptocurrency Defense Foundation
Lucky for the bitcoin community one patent analyst believes that the threat of such actions is an inevitable one, and one that needs proper defense. That is why Reed Jessen founded the Cryptocurrency Defense Foundation or CDF
CDF takes an interesting approach to defending bitcoin from patents. Instead of trying to fight those patents from being approved,
The Cryptocurrency Defense Foundation is a defensive patent aggregator which acquires cryptocurrency related patents and licenses them openly to all those who agree to not enforce their patents against other members of the community.
In essence it takes those patents that have a relation with bitcoin, and controls their usage. The way patent aggregation works is by purchasing patents or patent rights and keeping them out of the hands of entities who would assert them against operating company. This mechanism is called Defensive patent aggregation, or DPA. What we fear Western Union will do is go for offensive patent aggregation, or OPA which is the purchasing of patents in order to use them against companies who are using inventions which are protected by those patents. In our case we fear Western Union will go for Coinbase and try to add its hefty fees to each transaction.