Where is blockchain heading?

Business cliché or not, Gretzky brings up a key point in business (and tech) — we should be anticipating where the next innovations will appear, rather than looking to the past. Especially with a new disruptive technology such as blockchain, which threatens to remake many of our business interactions. “Disintermediation” means that blockchain could put many financial and transactional professionals out of a job.

In the case of blockchain, we’ve reached a metaphorical fork in the road. We’ve seen its application to cryptocurrency (who among us hasn’t read about bitcoin in the past year?). No one can deny the power of a distributed ledger for verifying financial transactions — perhaps it could have given consumers and investors a better idea as to what the true valuations of banks should have been.

For startups working in cryptocurrency, we’ve noticed an growing but alarming pattern: these startups are deliberately avoiding protecting themselves with patents. They are so attached to the idea of avoiding interactions with government, that they are engaging in million dollar plus ICOs without any intellectual property protection. If everyone in the blockchain space didn’t protect their intellectual property, then we wouldn’t be alarmed. However, there are also a growing number of BigCos and blockchain startups that are collecting patents — which could lead us into a blockchain patent war. These small, but powerful startups could lead the blockchain community into a full-fledged patent war.

There’s a strong and growing community of blockchain startups sitting on an average of $25 million to develop open-source innovations — and a growing community of startups (plus big companies) that have even more money — and are collecting patents in blockchain. So, what does this mean for blockchain startups? If you’re a blockchain startup without intellectual property protection, and you go up against a well-funded (albeit silent) competitor with patents, you could find yourself blocked out of the market. As we mentioned above, part of being a successful entrepreneur is anticipating where the market is headed — and in the case of blockchain, you should anticipate that you feasibly could be denied market access without intellectual property (IP) protection.

Moreover, even if you believe in a decentralized system without a central institution regulating your activity, the reality of the law may surprise you. If you’re located in the US, you are a target of US courts — and thereby subject to US law — even if your startup is focused around blockchain. Therefore, you could find yourself standing in a courtroom, defending your startup, even if you are not philosophically aligned with national court systems. Unless you’re willing to live life from hotel room to hotel room (like one blockchain entrepreneur who is actively trying to avoid the authorities), you’re still subject to US law.

Too many blockchain startups are complacent about IP because they feel that blockchain itself will protect them. But as we’ve seen, if your company is located in the US, then it is still under US jurisdiction. You don’t want to be only reacting to a problem once it appears. Patent portfolios take time to build; if you wait until your startup (or another startup) is attacked, it will be too late to do anything about it. Proactive blockchain entrepreneurs who take action to protect their ideas now with patents will thrive while reactive blockchain entrepreneurs will find themselves sidelined. Reactive entrepreneurs are the ones who are taken aback when the patent “trolls” start attacking — and are forced into an all-hands on deck approach to salvage their business. On the other hand, proactive entrepreneurs are the ones who had anticipated and created an action plan in case they were disrupted — by building their own portfolio.

You want to avoid the perfect storm: startups that are gaining traction, but without protection — and other blockchain startups in the wings, waiting to use their patents to block out their competitors. Whether you agree or disagree with the very concept of intellectual property protection, if you’re passionate about blockchain, it’s important to remember that as a community, we all fail when patent trolls block our ideas. Therefore, the best possible solution is to protect your innovation with intellectual property. It’s not just for your startup — but for the good of the blockchain community.

At KISSPatent, we help entrepreneurs and innovators to monetize their ideas. We put the power of patent protection for your unique idea in your hands. We help startups increase their valuation, keep from getting blocked, and protect their ideas and their communities. Contact us to get started here.

Visit our Learning Hub to learn more about how intellectual properties can contribute to your startup’s success.

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Dvorah Graeser

Dvorah Graeser

CEO of KISSPatent, providing strategic patent protection for tech startups www.kisspatent.com