Patentability of Blockchain Inventions in India

Introduction

Blockchain technology, a decentralized and secure ledger, has revolutionized industries like finance, supply chain, and digital assets. Its innovative applications raise important questions about its patentability within India’s legal framework for computer-related inventions (CRIs). This article explores the legal provisions, key judicial precedents, and the evolving stance of the Indian Patent Office on blockchain patentability.

What is Blockchain?

Blockchain is a decentralized, immutable ledger used to track assets and record transactions across a network. It functions as a distributed and secure database, shared among network participants, enabling transparent sharing of information. The power to update a blockchain is distributed across the nodes, or participants, of the network. Blockchain ensures that digital assets remain permanent, irreversible, and transparent through decentralization. As a result, it is tamper-proof, meaning that recorded data cannot be changed, deleted, or destroyed. Blockchain technology has been used to create cryptocurrencies like Bitcoin, as well as in decentralized finance (DeFi) applications, non-fungible tokens (NFTs), and smart contracts.

The Mechanics of Blockchain

In blockchain, each transaction is recorded as a “block” of data, which is then added in a sequential chain to other blocks storing transaction records, enabling continuous monitoring of any changes. The blocks cannot be altered and exact time and sequence of transactions can be confirmed. A new block cannot be inserted between the existing blocks. Each transaction is encrypted with a unique and irreversible hash, ensuring data security. The encrypted blocks are permanently linked to one another, forming an unbreakable chain. Transactions are recorded in a chronological, indefinite sequence, creating an immutable audit trail that provides full transparency into the blockchain’s history. Before new data is added, the majority of network nodes must verify its validity using consensus mechanisms. Once consensus is reached, a new block is created and appended to the chain, and the updated ledger is synchronized across all nodes in the network.

Basic Criteria for Patentability of Blockchain Innovations

In India, for any invention to be patentable, it must meet three key criteria: novelty, inventive step, and industrial applicability. These criteria are outlined in Section 2(1)(j) of the Patents Act, 1970, which defines “invention” and sets the basic requirements for patentability. 

Section 3 of the Act, on the other hand, sets a threshold for patent eligibility. In Cipla Ltd. v. F. Hoffmann-La Roche Ltd. & Anr., the Division Bench of the Delhi High Court held that Section 2(1)(j) provides a theoretical definition of an invention, while Section 3 illustrates what is not considered an invention. In essence, for subject matter that falls outside the scope of Section 3, a qualitative analysis is required to determine whether it meets the conditions of Section 2(1)(j). However, for subject matter that falls within the scope of Section 3, an analysis under Section 2(1)(j) is unnecessary, as it will be rejected at the threshold.

The most relevant clause of Section 3 that applies to blockchain technology is clause (k), which stipulates that computer programs per se, algorithms, business methods, and mathematical methods are not patentable.

In India, the jurisprudence regarding the patentability of computer-related inventions (CRIs) has significantly evolved over the last decade. Earlier, all inventions involving software were considered to fall under the ambit of Section 3(k), and the requirement for novel hardware was considered a sine qua non for the patentability of CRIs. The Patent Office has issued guidelines time and again to ensure uniformity in the examination of CRIs. The latest guidelines emphasize the importance of evaluating the substance of the claims by considering them in their entirety. If any claim—whether it pertains to a method/process, apparatus/system/device, computer program product, or computer-readable medium—falls within the excluded categories, it will not be eligible for patent protection. However, if the claim, when considered in its entirety, does not fall under any of the excluded categories, the patent should not be rejected.

In essence, the current stance of the Indian Patent Office regarding the patentability of CRIs, including blockchain-related inventions, is that the invention should be technical in nature. It should provide a technical solution to the technical problem existing in the state of the art and should be technically advanced over what was known earlier. The invention should not be a purely abstract idea and should be implemented with hardware.

Interpretation of Section 3(k) by Courts in India

The patentability of blockchain can be further understood through landmark precedents that have provided clarity on the interpretation of Section 3(k).

One of the most important judgments that affected the patentability of CRIs was delivered in 2015 in the matter of Telefonaktiebolaget LM Ericsson (Publ) v. Intex Technologies (India) Ltd., wherein the Delhi High Court ruled that an invention is patentable if it involves a technical contribution or technical effect and is not merely a computer program per se.

In the landmark judgment of Ferid Allani v. Union of India & Ors., the Hon’ble Delhi High Court noted that technologies such as blockchain cannot be deemed non-patentable merely because they are based on computer programs and algorithms. The Court observed: “In today’s digital world, when most inventions are based on computer programs, it would be retrograde to argue that all such inventions would not be patentable. Innovation in the field of artificial intelligence, blockchain technologies and other digital products would be based on computer programs, however the same would not become non- patentable inventions – simply for that reason. It is rare to see a product which is not based on a computer program. Whether they are cars and other automobiles, microwave ovens, washing machines, refrigerators, they all have some sort of computer programs in-built in them. Thus, the effect that such programs produce including in digital and electronic products is crucial in determining the test of patentability.”

In Microsoft Technology Licensing LLC v. The Assistant Controller of Patents and Designs, the Hon’ble Delhi High Court further clarified that an invention should not be deemed a computer program per se merely because it involves algorithms and computer-executable instructions; rather, it should be assessed based on the technical advancements it offers and its practical application in solving real-world problems.

The ‘technical effect’ was defined in the case of AB Initio Technology LLC v. Assistant Controller of Patents and Designs, where, the Hon’ble court emphasized that a ‘technical effect’ cannot be just about nuts and bolts, or hardware tweaks and transformations. A well-designed innovative input in the form of a process, system, or method which enhances the computational ability of the processor would undoubtedly result in a ‘technical effect’ and which goes beyond the usual ‘user interface’.

These landmark judicial pronouncements have clarified that, for the patentability of innovative technologies like blockchain, the key requirement is the presence of a technical effect. The fact that these innovations are rooted in computer programs, algorithms, and mathematical methods does not preclude them from being patentable, as long as they provide a technical solution to a problem existing in the art and are technically advanced.

The patentability analysis of the business method aspect of blockchain can be best understood through the case of Priya Randolph & Anr. v. Deputy Controller of Patents and Designs. In this case, the Hon’ble Madras High Court noted that the CRI Guidelines, which provide guidance but should not be construed as authoritative interpretations of Section 3(k), indicate that a claim would be considered a business method if, in substance, it pertains to a business method. The Court held, “in the present case, the claims are directed at concealing the physical address of the purchaser of goods in e-commerce transactions by deploying software, hardware, and firmware. While the conduct of e-commerce in this manner may be part of a business method for an enterprise if the claimed invention were to be put to use, the claim does not pertain to a business method but rather to an invention involving hardware, software, and firmware for data privacy and protection.” Therefore, the court concluded that the claimed invention cannot be classified as a business method. This case highlights that inventions like blockchain technology, which address a technical problem and provide a solution thereto, even in a business context, may not be classified as business methods and can be patentable.

Conclusion

The patentability of CRIs has come a long way in India, owing to landmark judicial precedents that have lent clarity to the Patent Office. The Indian Patent system now requires presence of technical effect and technical advancement instead of novel hardware. Indian courts have repeatedly emphasized that innovations in fields like blockchain, which are rooted in computer programs, are not excluded from patentability as long as they demonstrate a technical solution and technical advancement. The courts have often instructed the Patent Office to fairly evaluate inventions based on their technical merit, rather than dismissing them solely due to their association with software.

Having said the above, there is still a need for guidelines to navigate the complex issues surrounding the patentability of modern technologies based on software, such as artificial intelligence and blockchain innovations.

References

[1] Centre of Excellence in Blockchain Technology, Ministry of Electronics and Information Technology, Government of India, https://blockchain.gov.in/Home/BlockChain?blockchain=blockchain

[2] IBM, “Blockchain”, https://www.ibm.com/topics/blockchain

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