Crypto can benefit from patents without losing its open source ethos 

The coexistence of open source and patents in the crypto space actually encourages a healthy ecosystem for innovation

OPINION
article-image

Artwork by Crystal Le

share

ENS’ feud last year with Unstoppable Domains has brought to light the prevailing skepticism many open source developers harbor toward the patent system. 

While concerns over the potential misuse of patents are valid, the decision by organizations in the crypto space to abstain from the patent system altogether might inadvertently limit the advantages available for safeguarding their innovations.

Unstoppable Domains (UD) was awarded a patent on “Resolving Blockchain Domains” at the end of 2023. This irritated the lead developer of its largest competitor, ENS. In an open letter, ENS’s Nick Johnson argued that UD’s patent is “based entirely on innovations that ENS developed and contains no novel innovations of its own.” He criticized UD for pursuing patents,  even after they stated support for open innovation. While Johnson recognized that UD then did pledge its patent to the Web3 Domain Alliance, he expressed skepticism about the pledge being legally binding.

Read more: ENS partners with GoDaddy to enable users to link wallets to domains

However, companies do pursue patents for many reasons other than to initiate lawsuits against potential infringers or to stifle innovation. Patents serve as powerful signals to investors, which recognize a company’s development of groundbreaking products or processes.  They can also be used to recognize inventors for their efforts. 

Patents can also be used defensively.  If a company is sued by a competitor for patent infringement, the company may use their existing patents that the competitor appears to infringe in a countersuit. This can be an effective negotiating strategy to reach a favorable settlement.  

It is important to note that a company can make its software open-source under an open source license while still patenting the software. Typically, anyone who complies with the terms of the open source license is protected from a patent lawsuit. This gives patent holders another avenue to go after those who do not abide by the terms of the open source license. Therefore, crypto companies can still remain open source while filing for patents without using them to inhibit innovation. 

Read more from our opinion section: We need to stop forcing use cases on blockchains

For example, a company may want to protect themselves against a competitor who modifies open source code and seeks to protect it themselves. In this scenario, the competitor may try to sue the company who initially developed the code. If the company does not have a patent or other avenues of protection, it may be vulnerable to these unfair tactics.

Additionally, organizations that develop open source code may encourage others to freely use and improve the code. However, with a patent, these organizations can protect themselves against competitors who make similar products but do not use their code.  

For example, Litecoin was a fork of the Bitcoin code. If Satoshi Nakamoto had patented a decentralized network for recording transactions using a blockchain, they likely would not have been able to go after Litecoin due to the open source license included in the Bitcoin code base. However, if another entity developed a similar system without using the Bitcoin code, Nakamoto may have been able to prevent them from competing in this space.  

Allowing others to use and modify the original code while preventing competitors from profiting off their own version of the same concept does not go against the ethos of the crypto community. Instead, a combination of open source licenses and patent protection encourages open innovation and allows developers to build off each other’s software. This approach discourages the proliferation of numerous versions of similar products, promoting a more cohesive and collaborative community.

In light of these considerations, companies in the crypto space should feel empowered to explore patent protection without fear of alienation. If a company decides to patent its open source software, it should make it very clear that anyone who properly uses the software also has a license to the patent — it may be pursuing patent protection simply to raise funds and formally recognize inventors’ creations. And, if someone runs afoul of the license terms or independently creates a similar product without using the company’s code, it now has a way to protect its business.

In conclusion, the coexistence of open source and patents in the crypto space encourages a healthy ecosystem of innovation. Companies can strategically leverage both, fostering a community where developers can build upon each other’s work without compromising on protection and recognition. 

The ENS and Unstoppable Domains argument likely won’t be the last time that someone in crypto is critical of a competitor’s patents. Nonetheless, the crypto community would benefit by being open to multiple strategies for encouraging, pursuing and protecting innovation.

DISCLAIMER: The information contained in this article is for informational purposes only and is not legal advice or a substitute for obtaining legal advice from an attorney. Views expressed are those of the author and are not to be attributed to Marshall, Gerstein & Borun LLP or any of its former, present, or future clients.



Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Cover Vertex.jpg

Research

The proliferation of new perp DEXs has led to fragmented liquidity across various DEXs and chains. Vertex, known for its vertically-integrated DEX that includes spot, perpetual, and integrated money markets, is now tackling cross-chain liquidity fragmentation through horizontal integration with the launch of new Edge instances. Vertex's integrated offerings and cross-margined account structure amplify the benefits of new instances: native cross-chain spot trading, optimized cross-chain basis trading, consistent interest rates, reduced bridging friction, and more.

article-image

Partnering with EtherFi and Angle, the fully on-chain perp DEX features bespoke collateral

article-image

Sponsored

Gavin Wood introduced the next evolutionary step for the Polkadot network: the Join-Accumulate Machine, or JAM

article-image

The side events were the places to be at Consensus 2024, according to attendees

article-image

Also, who’s come out swinging in the spot ether ETF fee war — and who could undercut them

article-image

I know it is not in their nature, but US regulators could learn a lot by researching the digital asset frameworks that overseas regulators have already gotten right

article-image

Also, the ETF hype train can count out at least one member