US and China Battle for Blockchain Dominance
When Chinese President Xi Jinping announced strong support for blockchain technology last month, pundits suggested that China would soon overtake the United States in dominating blockchain innovations. Our patent research at the Blockchain Center of Excellence at the University of Arkansas finds that China is already winning the Intellectual Property arms race against the U.S.
We examined blockchain-related patents that were granted from January 2014 to October 2019 by China’s patent office, the National Intellectual Property Administration, or CNIPA, and the U.S. Patent and Trademark Office, or USPTO. During this period, the CNIPA awarded 2,218 blockchain patents compared to 227 by the USPTO.
The difference in numbers between U.S. and Chinese patents is slightly misleading, as the CNIPA awarded nearly 40 blockchain-related patents to U.S.-based global companies such as Goldman Sachs, IBM, Intel, JP Morgan, Mastercard, Microsoft and Visa. In contrast, the USPTO has not awarded blockchain-related patents to any Chinese-based organizations. This pattern holds more widely, according to a study published by the Federal Reserve Bank of Saint Louis, which found that only 4.17% of 1.2 million Chinese patent applications were filed overseas in 2016, whereas 43% of 521,802 U.S. patent applications were filed overseas. Perhaps U.S. organizations worry more about protecting their IP overseas than Chinese organizations do, or perhaps this trend reflects a distrust in the patentability of the Chinese applications made overseas, as only 6.31% of the overseas patent applications filed by Chinese firms are granted.
Furthermore, the Chinese patent office expedited the patent process more quickly than the U.S., taking just six months on average from patent filing to acceptance compared to 20 months in the U.S. Several explanations for this are possible: China may have more resources devoted to patent processing, or China’s patent process might not be as rigorous as it is in the U.S. Meredith Lowry, a patent attorney for Wright Lindsey Jennings, shared in a private interview:
“Blockchain patent applications in the US patent process face additional hurdles to show the invention is patentable subject matter and more than the use of an algorithm. The bar for patentable subject isn’t as high in other countries like China.”
We also analyzed the data to determine the top categories of innovations protected by the blockchain-related patents, and the top patent owners in each country.
The IP being protected
The CNIPA and USPTO require patent applicants to use the International Patent Classification for categorizing their patent filings. Each patent typically includes multiple IPC codes. In both countries, the three most frequently occurring IPC codes for blockchain-related patents were G06, H04 and G07:
G06 (Computing; Calculating; Counting) — covers innovations associated with the mathematics of computing, image data processing and data generation.
H04 (Electric Communication Technique) — covers a broad range of electronic communications including transmissions, broadcasts, and secret communications over wired or wireless networks.
G07 (Checking-devices) — covers innovations associated with registering the receipt of cash or tokens, the handling of coins or valuables, metering tolls and fares, generating random numbers for lotteries, systems for voting, and more.
Top CNIPA and USPTO patent owners
We extracted the top patent owners of granted blockchain-related technology patents by the CNIPA and USPTO. In the table below, we focus on just the top three in each country. China United Network Communications Group Co., or China Unicom; Alibaba; and NChain Holdings are the top patent owners granted by the CNIPA, while IBM, Accenture and Mastercard are the top patent owners granted by the USPTO and also hold patents from the CNIPA.
Sample patents include:
- China Unicom — A Chinese, government-owned, telecommunications provider. It has the most patents granted by the CNIPA, with 54 thus far. One of its patents defines a method for tracking food quality on a blockchain application (Patent 108537558A).
- Alibaba — founded by Jack Ma in 1999 and now the world’s largest online retailer. It has the second-highest number of CNIPA patents awarded, at 51. Alibaba, for example, has a patent for a music originality analysis method and device based on a blockchain (Patent 108595709A).
- Nchain Holdings — has the third-highest number of patents awarded by the CNIPA, at 37. Nchain is a company based in the United Kingdom seeking to make cryptocurrencies more globally usable. One patent describes an operating system for IoT devices controlled by a blockchain. Each IoT device has an IP address and a cryptographic public-private key pair. Software controls the device through instructions that require access to the private key (Patent 109089427A).
- IBM — an American multinational information technology company. It owns the most patents granted by the USPTO. Among its 34 patents, one provides a way to maintain and verify the status of accounts in multiplayer games (Patent 10348487).
- Accenture — a global professional services firm that is headquartered in Dublin, Ireland. It has 23 patents from the USPTO. Accenture, for example, patented its invention for an interoperability node that connects different blockchains using zero-knowledge proofs (Patent 10298395).
- Mastercard — a global financial services company headquartered in New York City. Mastercard holds nine patents with the USPTO, one of which is a smart parking meter verification method using a blockchain (Patent 10198949).
This November, China signaled that it may strengthen its IP laws. The rate of blockchain-related patent protection in the country is accelerating, with the sheer number of China’s blockchain-related patents outpacing the rate of the U.S., but contributing to these numbers are U.S. companies filing patents in multiple locations to increase their IP protection globally. Therefore, while China may appear to be accelerating beyond the U.S. in patent approvals on the surface, multiple leading global companies operate in both countries and protect their intellectual property as such.
The bottom line
Blockchain-related patents are just one indicator of a country’s blockchain dominance. Favorable regulations, the number of vacancies, the prevalence and level of financial support provided to blockchain-startups, active participation in global policy-making bodies, and the number of blockchain solutions in production are other metrics being explored by the Blockchain Center of Excellence at the University of Arkansas.
The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Mary Lacity is a Walton professor of information systems and the director of the Blockchain Center of Excellence at the University of Arkansas.
Zach Steelman is an associate professor of information systems at the University of Arkansas.
Jacob Yates is a graduate student in the information systems department at the University of Arkansas.
Jia Wei is a Ph.D. student in the information systems department at the University of Arkansas.
The Blockchain Center of Excellence (BCoE) is housed in the Information Systems Department of the Sam M. Walton College of Business at the University of Arkansas. The BCoE was officially launched by U.S. State Governor of Arkansas, the Honorable Asa Hutchinson, on Aug. 1, 2018. The center’s vision is to make the Sam M. Walton College of Business a premier academic leader in blockchain application research and education.