Are the Bitcoin Patent Wars About to Begin?

A major Bitcoin company is trying to patent some popular services.
September 23, 2015, 8:33pm
Screengrab: YouTube

Coinbase, a popular platform for people to buy and sell bitcoins, is trying to patent some of Bitcoin's core services—ones which many companies already provide. Predictably, everyone is losing their shit.

Coinbase has filed nine patents over the last 18 months in the US, which include things like a "tip button," and a "Bitcoin exchange."

The problem is, many other companies have offered these services for years. ChangeTip, for example, has been letting people tip each other in Bitcoin since 2013. Coinbase's tip button was introduced in 2014 before being shut down this year, citing ChangeTip's success. The first Bitcoin exchange—the now-defunct Mt. Gox—was founded in 2010. Coinbase entered the scene in 2012.

"It will not be a matter of if, but when, we get patent trolls coming after us for hundreds of millions of dollars"

Coinbase is hardly the first company to try and file patents for Bitcoin, an open source protocol with many libertarian-leaning users. Regardless, filing to patent something as industry-essential as an exchange is brazen. According to CEO Brian Armstrong, however, the US patent system forced the company's hand.

"As Coinbase grows it will not be a matter of if, but when, we get patent trolls coming after us for hundreds of millions of dollars," Armstrong wrote me in an email. "One of the best ways to defend against this is to build your own portfolio of patents, and this is exactly what we are doing."

Armstrong said in a Reddit thread that he wished patents would be "abolished"—patenting BItcoin services is purely self-defense in a patent-happy world, he maintains. Coinbase, along with other tech companies like Disqus and Airbnb, has signed a pledge to not use patents aggressively against companies with fewer than 25 employees. Google and Twitter have both signed similar agreements with other companies.

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This agreement is no doubt well-intentioned, it is also the action of a company in good times; just this month Coinbase expanded its business into Canada. Things could change if the unforeseen happens and Coinbase folds.

"What we've sometimes seen is that if a company fails, their patents may be sold off in order to get money for creditors," Vera Ranieri, a patent law staff lawyer for the Electronic Frontier Foundation, wrote me in an email. "Oftentimes the patents are sold to non-practicing entities that intend to use the patents to sue for infringement."

Thus, a patent that started out as an earnest attempt to protect a business's interests while not simultaneously ruining their competitors with patent lawsuits could end up later being used by shady patent trolls.

It's still unclear whether or not Coinbase's patent applications will stand, although Ranieri noted that the US Patent Office has a habit of granting patents somewhat liberally. Armstrong declined to comment on whether he believes Coinbase's patent filings are substantially different from those services offered by other companies.

If the patents go through, Bitcoiners will just have to trust that Coinbase sticks to its word.