The hype surrounding cryptocurrencies has been growing over the past few years. Not only have they risen in terms of scope, but companies and countries have started to become more accepting of it. And with this impressive growth, various fintech companies are moving towards patenting their technologies. But since cryptocurrencies are such a new market, it does beg the question, is it even possible to patent technologies like Bitcoin?
The answer to this question is not simple, nor is it direct. And one of the reasons is that cryptocurrencies fall under the “Eligibility Trap.”
What Is The Eligibility Trap?
One of the major challenges that lawyers face when patenting crypto-based technology is its eligibility. Although this is certainly a technology that can fit under the label of patents if only it did not deal in crypto. Cryptocurrencies are a judicial exception in patenting law, which means that it is not eligible.
More specifically, they fall under the USPTO’s definition of abstract ideas. They define it as a method that possibly organizes human activity. Therefore, in order to qualify for the patent, a claim will have to include additional limitations. These limitations can take on two unique forms. It can either add much more to the judicial exception, or they will have to bring the abstract idea into more practical applications.
This is the major challenge that all fintech firms face when trying to patent their technology. However, two firms have managed to break out of this mold and patent their respective technologies. These firms include PayPal Holdings, Inc. and Square Inc.
Both companies have introduced their Bitcoin trading services, where users can both buy and sell Bitcoin. Furthermore, both companies were also able to overcome the hurdles placed by USPTO.
What Square Inc. Offers Its Customers
As mentioned above, Square Inc. is one of two major companies that have been able to get a patent for their cryptocurrency technology. They are the second biggest payment application that deals with peer-to-peer transactions. They have been supporting crypto transactions since 2017 and have created a service that would satisfy most of the issues retail companies have about cryptocurrencies.
More specifically, they act as middlemen to retail outlets and customers. Customers will be able to pay in crypto, and the retail outlet will be receiving their money in fiat currency. And their patent number 10,055,715 protects their technology from other businesses. Since they have taken an abstract idea and brought it into a more practical application, their claim qualifies for a patent.
The examiner for the patent saw that the technology is capable of providing real-time transactions to both customers and retail companies. Their service allows customers to avail the benefits of using non-fiat currencies while eliminating barriers to companies.
PayPal’s Technology Patents
PayPal is obviously the biggest peer-to-peer payment service provider. In 2020, they allowed users to trade Bitcoin, but they could not make any transactions yet. So they could only sell, hold, and buy cryptocurrencies. But in 2021, they started allowing users to pay at check out during various transactions. Moreover, they also hold two patents for risk assessment and dispute resolution within the crypto space.
Patent number 10,789,589 resolves disputes for customers using a secondary blockchain system. Since it was close to impossible for people to dispute crypto transactions, this was a step in the right direction. Their claim for a patent became legitimate as they are now able to offer benefits to both customers and retail companies.
A Possible Monopoly
With their new patent, Square Inc. has essentially become the only “crypto bank” in the entire space. Now, different companies will have to maneuver their way around this patent if they want to compete with Square in the market. Of course, it will be interesting to see what happens when PayPal enters the mix with its checkout features. Will PayPal potentially be infringing on their patents, or will they file their own claims for a patent?
It has become quite clear that cryptocurrencies like Bitcoin do not fall into a specific patent. In fact, they are possibly the only exception to a patent claim. However, under the right circumstances, it is possible for a fintech company to claim a patent.
Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in Rocklin, California.