Patents on Bitcoins

One of the questions that comes up often for IP attorneys is  "who owns Bitcoin'? 

In a sense, no one owns Bitcoin.  It is a distributed peer-to-peer unit of exchange. However this answer rarely satifies people who have come to you for your indepth legal opinion.

It should be noted that the concept of a network wide, anonymous, crypto-currency was only really implemented in 2009 by an individual known as Satoshi Nakamoto. Mr. Nakamoto (we have no way of knowing if that individual was/is a he/she/cybernetic construct from the future) published a paper describing the basic elements of the bitcoin system and released the software that underpins the peer-to-peer networking aspect. This software was released open source, without restriction. As such, no one legally has the right to prevent others from modifying or using the software for their own purposes. Thus while the Nakamoto Hivemind owns the software that bitcoin are mined with, it does not own the underlying conceptual framework.

There is some speculation that a Neil King, et al, listed inventors on US 2010-0042841 A1 (now abandoned for failure to respond to an office action) are the true inventors of bitcoins. Even if true, the patent office found several prior art references. Thus, the attempt to patent the concept appears to have been abandoned.  However, there is a thriving trade in bitcoin patent applications. People can, and do, attempt to file patent applications on the use of bitcoins for all manner of transaction. However, these patents do not reach back to the underlying concept of the Bitcoin and its use as a digital currency.

The actual software implementation of bitcoin generation is somewhat complex, but involves scanning for a value that when hashed twice with SHA-256, begins with a number of zero bits (you don't want me to explain this in more detail that that but ... a hash is an algorithm which takes a arbitrary amount of data and generates a fixed length of data. This is useful when attempting to use encode something for privacy. It is easy to hash something, and it is easy to verify that the data matches the hash, but hard to fake the data if you were up to no good. I am not a cryptanalysis guru and this was all distilled from 3 or 4 really good Wikipedia articles).

This is all a long winded way of saying that the process of generating bitcoins is technically complex and rests on the security and usibility of the SHA-256 Hash Function. However, in one of those ironic twists of fate that only happens in America, the NSA, bane of anonymous privacy advocates everywhere, actually owns the patent on the SHA-256 Hash function.

US Patent 6,829,355 to Lilly, and assigned to the NSA, covers the technical details employed in using the SHA-256 function to authenticate data (e.g. bitcoin transactions). All is not lost, the US has granted the world a royalty-free license to the patent.

However, the terms and conditions of this royalty agreement are murky. The royalty-free notice was filed in 2004. However, there is no easily available record of the exact terms of the grant of a royalty free (i.e. is it irrevocable?).

Thus, the long answer to the question of "who owns anonymous peer to peer government agnostic pro-privacy transaction crypto-currency" might, in fact, be the United States Government.  It is their world, we are just trading digital currency in it.

Jordan Garner
jgarner@leasonellis.com
(c)2013

IP in the age of self-replication technologies

During a recent business trip to Asia, I had the opportunity to discuss the Bowman case with many colleagues and clients.

For the unaware; in Bowman, the US Supreme Court held that chemical giant Monsanto's patent rights in its Ready Round-Up seeds could not be exhausted through the first sale doctrine. A farmer, Bowman, tried the circumvent the patent license on a genetically modified soybean plant by purchasing the seeds from a plant grown from Round up seeds AS opposed to Monsanto directly.

The Supreme Court held that each time the plant produced a new seed, or that seed grew into a new plant which in turn produced new seeds, that event was a new infringement of the patent. The reasoning was that the plant "manufactured" new seeds. By harvesting the seeds, you were essentially harvesting the seed technology, in violation of the patent.

Many commentators have pointed out that the Court's reasoning was highly specific, only applicable to the particular facts at issue. However, I am not convinced.

A reasonable argument could be made that any self-replicating technology, be it biological, informational or mechanical is the functional equivalent to a seed.

For example, computer viruses have the peculiar nature of replicating themselves. Is a software agent which is able to package a copy of itself into a compressed format for transport (i.e. a seed) any different from a biological entity which is able to produce a small portable package containing its build and execution code base (DNA)?

In both instances, the technology has all the features of a seed; storage, portability and self-replication. A single computer virus is capable of replicating itself infinite times. So are seeds.

This opens the door to all manner of self replicating technologies.  For example, imagine a patentable custom-made virus or bacteria designed to infect a person with the goal of generating a specific medicine to treat a chronic illness. Once in the body the organism replicates and continues to provide live saving medicine. Excellent. However, what if the patient decides he doesn't want the treatment? It is possible that even after a course of antibiotics, or anti-viral, the organisms could continue to live on in the subject.

Is that patient now infringing? If not, why not? How is a patient who schemes to contract this patentable virus from a friend, not the same as Bowman?

Autonomous technology is a fascinating field which holds significant promise to reshape the very basic tenants of society, economics and health.  However, it is too easy to try to fit essentially identical technologies into different classes based on how we intuit them. Seeds are different from computer viruses, which are different from designer organisms. The principals underlying all these technologies are highly correlated. We would all be better off if we formulated a framework now, then doing it piecemeal later.

Twitter:JordangarnerEsq

Girls be illin?: Don't waste your start-up capital on non-essential legal fights

Story: Goldieblox, a toy company marketing engineering toys to girls, used the Beastie Boys famous / infamous song "Girls" in a parody music video to promote their start-up project. The music video went viral on youtube, spawning mostly ardent praise and affection.

The Cerberus Legal dogs of Universal Music sent Goldieblox a pleasant letter (by Cerberus legal dog standards) asking them to take down the video. The letter claimed that the parody video was outside the scope of the fair use exception to copyright use, and constituted an impermissible use of the underlying work.

The legal counsel for GoldieBlox filed a declaratory judgment action seeking a finding on non-infringement under the parody provision of fair use.  This could be a educational case about how a "letter" is never really a letter, but an invitation to bring a DJ action.

A lot of digital ink has been split regarding the merits of the parties positions. If you are in favor of the permissible parody argument, then the Electronic Frontier Foundation (eff) has a great rundown of the law and their interpretation.

The point being missed here is one of resource allocation. It is argued that any press is good press. If that is true, then this entire episode is a net benefit to Goldieblox and their start-up ambitions.

However, from a business point of view, getting into a law suit with a major entertainment company is a huge hassle. Aside from your own legal costs, which could have been better spent on non-legal blog based marketing, you run the potential risk that you might lose and owe someone, or some mega corporation, lots of money. That outcome is unlikely here (even if GoldieBlox loses, they will likely have minimal damages), but that is besides the point.

A cursory level of diligence would have shown that not only do the Beastie Boys not like "Girls" (they refuse to play it anymore), they are actually quite litigious. As such, perhaps their IP, regardless of your use, was not the best media to use.

For the legal costs involved in filing and arguing a Declaratory judgement action, you could have hired a band or a composer to generate a all new song. The point here isn't that the Beastie Boys are right to argue about fair use, it is that a start up generally should avoid potentially bruising legal fights.  IP counsel should always be mindful of not only the legal arguments, but the overall business position.

Start-up resources should never we wasted on non-essential legal fights. If you need access to a particular piece of technology or code in order for your idea to function, then roll the dice, take the risk. If you want to make a music video parody of a famous song, think about the necessity to the bottom line.

Jordan Garner

No Patents on Perpetual Motion Machines

In this house we obey the laws of thermodynamics!!!

It is always good to revisit the basic, core concepts to reconfirm that you have a firm grasp of the complex. This is true across endeavors. Great cooks sometimes need to remember how to boil an egg. Likewise, software designers sometimes create simple apps using the bare bones code base.

The same is true for patent law.  Recently on the internet, there was a discussion about a supposed "perpetual motion" machine developed by a German tinkerer. A brief article concerning the inventor is here.  One of the points being bandied about in the discussion of a supposedly limitless energy system was that "because it is not a perpetual motion machine, it can be patented".  This is a misinterpretation of U.S. Patent Law.

U.S. Patent law allows for the patenting of "everything under the sun, made by man".  This restriction means that naturally occurring items, as well as purely theoretical constructs are not patenable. For example E=MC2 is not a patentable formula, since it describes a fundamental property of physics. A practicable application of this equation, say a nuclear reactor, would be patentable.  However, recent US case law has held that any preemption of a natural law  that is, a patent that claims all the applications of E=MC2, is also not patentable.

The point here is that natural laws are not defined by Congress, or the Courts. Furthermore, natural laws and laws of nature are only rough approximations of how we believe the world to work.  These laws might be subject to boundary conditions and localized modifications given the right arrangement of energy inputs and conditions. As such, it is possible that the "laws of nature" that you can't patent today, will be different from the laws of nature you can't patent 100 years from now.

This is all to say that you could get a patent on a perpetual motion machine. Merely calling it a perpetual motion machine is not the problem in getting a patent. There is no rule that says per se perpetual-motion, Faster Than Light and teleportation devices are not patentable.

The difficulty is in demonstrating to the patent office that it works. This is called the enablement requirement. If you show up to the patent office with a patent application that describes the mechanism of action as a perpetual motion machine, then you are going to need some extraordinary evidence to back that claim up. If you show the world a device that apparently accepts no input but continued to do work, then you will get a patent, so long as others can reproduce your results. What you can't do, is claim on paper to have a device that goes against our current understanding of science and expect to be granted a patent.

 In fact that Patent Office does not even require you to advance a theory as to why the device works in the first place in order to get a patent. A patent is simply a contract between an inventor and some territorial organization (e.g. The United States of America or France). This agreement states, explicitly, that as the inventor of  a improvement in a technical field, you are granted a limited monopoly to make, use and sell that improvement. In exchange for this monopoly, granted and enforced by the government, you must disclose the invention to the public (i.e. the world) in sufficient detail such that any one skilled in that technology can make and use the invention without resorting to undue experimentation.

 If you have a perpetual motion machine, and you can satisfy this requirement, then you will get a patent on it. The underling laws of physics that you are bending breaking or modifying are of no consequence.

Swiss-style Basic Income and IP

To the ill-informed, "Basic Income" is a social security system in which the government regularly gives each citizen a sum of money — with no conditions. No questions asked, no obligations. 

There is a referendum in Switzerland, which if passed would give each adult resident the equivalent of 2750.00 dollars a month. You can read the proponents thoughts here.  In short, the theory is, without the necessity to obtain income necessary to live, people could make more resumed choices about their careers. They could made different choices about how they spend their time. As a result, you might have a more efficient economy. 

Obviously, there are people, including economists, who think this is a terrible idea. The argument against Basic Income is that the whole system will collapse in a morass of lack of motivation to actually work. People will move their expenses down to the level of the Basic Income and then forego employment. Opting instead, it is argued, to just sit around all day. 

I take no position on which one of these outcomes is likely (or the likeliness of this idea gaining traction in the US). Wikipedia has a good run-down on the pros and cons.  However, I do take a position on the economic outcome of people sitting around. I tend to lean on the side of "that's great". 

Why? Because people freed from the restraints of taking ANY job to make ends meet, will naturally gravitate towards their hobbies. When people focus a lot on their hobbies, they tend to turn those hobbies into occupations. We see that with the craft "everything" movement. A zest for baking becomes a bake shop, a thirst for brewing your own beer becomes a craft brewery. A love of reading has become self-published media empires (Ed. a bit close to home....).

Freeing everyone from the constraints of occupation would lead to some people just sitting around. It would also lead to an explosion of new businesses financed by the Basic Income. 

Some of these new businesses would create new works of intellectual property. New artistic, musical, literary works; new software platforms; new devices and new methods could all spring from Basic Income. These works could be licensed world-wide; generating taxable revenue to feed back into the Basic Income system. 

Many Venture Capital organizations have an "Entrepreneur in Chief" position - a person paid to basically think stuff up. We are constantly being told that America needs more "innovation" and "entrepreneurship" and that IP is a step in the wrong direction. Basic Income matched with IP might allow the America to realize the dream of being a "Start-up" Nation where everyone is paid to "think stuff up."

Product Design IP in the age of 3D Printers

Dieter Rams designed Coffee Maker

Intellectual property protection for industrial design and industrial designers has always been a fraught process. The nature IP does not lend itself easily to the tasks Industrial Designers might put to them. However, new technology might begin to change how Industrial Designers see Intellectual Property protection.

IP Limits

Conventionally, industrial design is protected through a design patent.  Design patents allows the designer to get protection on their purely ornamental design for 14 years from filing.  Unfortunately, this means that if the product has a functional component (enhanced ergonomics etc.) then the designer relinquishes that functionality, or they are forced to obtain the more expensive and time consuming utility patent. A utility patent covers the function of a device , process, compound or article of manufacturer. For example, a designer could hold a patent on the manufacture of a particular item. While this might successfully deter large scale copying, it does not prevent wide spread dissemination of the construction methods and processes.

Copyright protects artistic and literary works for 70 years, plus the life of the author. Text and audio-visual works are the primary focus of copyright. Once you move beyond the artistic realm into the functional, Courts have held that copyrights no longer apply.  However, the age of 3D printing might be about to change the rules of the game.

Charles Eames Design Patent 

3D Printing

For the uninitiated, a 3D printer is a device that builds an object, usually out of some resin, layers at a time. It is the electronic opposite of a very fine mandolin slicer. MakerBot, and companies like them are pioneering a way to have an "internet of things." The eventual goal would be a repository of templates for the production of all manner of goods, ready to be downloaded and printed, the way one might download a song and burn it to a CD [ed. do kids ever do that any more ?].

 The software used in 3D printers vary from device to device. However, they all use some form of stereolithography file to instruct the device on how to lay down layers of material. Once all the layers have been deposited, you should have a reasonable copy of object described by the file.

It should be apparent that 3D printing allows for the production of many useful things, it also allows for the re-production of industrial design elements without authorization from the original creators. Where 3D printing has created a problem, it might also offer a solution.

IP Incorporation into Designs



Since the procedures for manufacturing the item begins with a digital file. It is possible to encapsulate the design within the boundaries of Copyright law. If the software file, the instruction set for making a particular design is complete (that is, it does not require additional tooling, or minimal machining) then the software encapsulates the design.

It might still hold true that the tangible representation of the software (i.e. a chair or lamp) is not covered by copyright, the software code that executes the 3D printer is a valid piece of IP.  Therefore, the nexus of IP infringement of the design would occur when the digital file is copied (i.e. on a file share network). Thus, developing code for the 3D designs will become as important as the conceptual prototypes. Court are well positioned to hear arguments on the illicit trade and sale of pirated software. This presents an opportunity for Industrial designers and software coders to collaborate on clever implementations of the software to render the designs with minimal post processing. The closer the code is to representing the object, the stronger the case for infringement. Once the code base of a portfolio has been engineered, a simple licensing program [not in bitcoins!!!] (think Itunes) could offer people the world over the chance to download an use a particular firm's designs.

Alternatively, or additionally, a designer could include a structural trademark element. For instance, the design of a chair could,  incorporate a logo. In this instance, merely printing the object does not create a cause of action. However, once an unscrupulous manufacturer attempts to sell the copied design, they are engaged in trademark infringement.

There are likely more elegant solutions than these two for the potential problems posed by 3D printing. However, these solutions show that IP in 3D printing can be maintained and creators can be protected.

Jordan Garner