Term Paper by Mohammad Kiumarsi

Introduction

Blockchain technology and its derivative innovation—non-fungible tokens (NFTs)—have rapidly emerged as disruptive forces in the digital economy. These technologies promise decentralized recordkeeping, authentication of ownership, and enhanced digital security. Yet, despite their transformative potential, Canadian patent law struggles to accommodate their unique structures, particularly where innovation is community-driven and governance is decentralized. This essay argues that while blockchain-based inventions can already fall within the statutory scope of patentable subject matter, Canadian patent law must adapt its conceptual framework and institutional practices to better incentivize innovation in this domain. This includes: (1) recognizing and protecting decentralized governance mechanisms, (2) revisiting the inventorship and ownership doctrines, and (3) importing elements from trademark and copyright registration and notice systems to promote clarity, interoperability, and user accountability.

I. Blockchain Innovation and the Fit with Patent Law

Under section 2 of the Patent Act, patentable subject matter includes “any new and useful art, process, machine, manufacture or composition of matter, or any improvement thereof” (Patent Act, RSC 1985, c P-4, s 2). At first glance, blockchain innovations—often software-based processes or cryptographic systems—would appear to qualify. Indeed, in Canada (AG) v Amazon.com Inc., the Federal Court of Appeal confirmed that business methods and software are not per se excluded from patentability, provided they have a practical application and are not mere abstract ideas. The Court emphasized a purposive construction of claims, rejecting the Commissioner’s categorical denial of business methods and holding that the “art” branch of section 2 can include new processes producing commercially useful results (Canada (AG) v Amazon.com Inc, 2011 FCA 328).

A. Decentralized Inventorship and Ownership

Canadian patent law requires that inventors be natural persons and that inventorship be traceable to a single mind or collaborative team. In Apotex Inc. v Wellcome Foundation Ltd., the Supreme Court of Canada held that an inventor is “the person or persons who conceived of the invention” (Apotex Inc v Wellcome Foundation Ltd, 2002 SCC 77 at para 96). Yet many blockchain innovations arise from decentralized autonomous organizations (DAOs) or open-source communities, where contributions are distributed and anonymized. In this environment, identifying a singular inventor or assignee becomes legally and factually difficult. Current patent doctrine does not address distributed or collective invention without centralized control.

B. Utility and Enablement in Cryptographic Systems

While utility is a low threshold, blockchain systems may rely on dynamic protocols that evolve over time, complicating the enablement and disclosure requirements under section 27(3) of the Patent Act (Patent Act, RSC 1985, c P-4, s 27(3)). Patent claims that seek to future-proof blockchain processes may become overly abstract or vague, leading to overbroad monopolies—a risk highlighted in critiques of patent thickets and ‘patent trolls’ (Bessen & Meurer, Patent Failure, 2008).

C. The Pace of Technological Evolution

The average time to grant a patent in Canada is approximately 6.5 years from filing, which may exceed the commercial lifecycle of many blockchain innovations (Canadian Intellectual Property Office, MOPOP). In the fast-moving crypto sector, open-source licensing and reputational signaling often substitute for formal IP rights. This undermines the utility of patents as incentive mechanisms and suggests the need for alternative or supplementary IP tools.

II. Importing Features from Copyright and Trademark Law

A. Blockchain Patent Registry and Public Disclosure

Canadian trademark law under the Trademarks Act provides for publicly accessible registration, where applicants describe marks, list goods and services, and declare use or intent to use. Similarly, under section 53 of the Copyright Act, copyright registration, while not required for subsistence, creates a rebuttable presumption of ownership. A blockchain-specific patent registration regime, possibly implemented within the Canadian Intellectual Property Office (CIPO) or as a decentralized ledger, could: (1) promote transparency of claims over decentralized processes, (2) allow innovators to register cryptographic functions, smart contract code, or decentralized governance methods with accompanying metadata, and (3) create notice and avoid conflicting claims, fostering better interoperability across platforms. Such a registry could mirror the Creative Commons model or the World Intellectual Property Organization’s Blockchain Whitepaper proposals for tech-neutral IP registration (WIPO, Blockchain Whitepaper, 2020).

B. Declarative Attribution and Collective Licensing

Following the model of copyright collectives or open-source licensing, patent law could accommodate declarative ownership by consortia or DAOs. Inventors could register blockchain-based systems as jointly managed assets, with terms of use embedded in the smart contract layer. This would recognize the community-led nature of blockchain innovation and avoid the rigidity of single-inventor models.

III. Enhanced Patent Criteria for Decentralized Inventions

A. Refining Non-Obviousness

In Apotex Inc. v. Sanofi-Synthelabo Canada Inc., the Supreme Court of Canada outlined the “obvious to try” test, requiring an assessment of whether an invention was self-evident based on prior art and general knowledge (Apotex Inc v Sanofi-Synthelabo Canada Inc, 2008 SCC 61 at para 66). Applying this to blockchain, examiners must differentiate between genuine algorithmic novelty and the repackaging of known ledger or cryptographic functions. This would ensure that patents are not granted for mere implementation of known methods on a blockchain.

B. Adaptive Disclosure Standards

Blockchain patents should be held to high standards of disclosure under section 27(3) of the Patent Act to prevent strategic ambiguity (Patent Act, RSC 1985, c P-4, s 27(3)). The patent specification should explain the algorithm, protocol structure, use-case, and any planned integration into decentralized platforms.

IV. Policy Considerations: Innovation, Access, and Abuse

While blockchain technologies offer transformative potential, they also expose vulnerabilities within the current patent system, particularly concerning non-practicing entities (NPEs), commonly known as ‘patent trolls.’ These entities acquire patents not to produce or commercialize innovations but to enforce patent rights against alleged infringers, often seeking settlements. Although Canada has not experienced the same level of patent trolling as the United States, Canadian companies remain susceptible, especially when operating in jurisdictions with more litigious environments. The Canadian government’s 2018 Intellectual Property Strategy acknowledged the threat of patent trolls, proposing measures such as establishing minimum requirements for patent demand letters to discourage deceptive practices (Government of Canada, Intellectual Property Strategy).

Blockchain developers are particularly vulnerable due to the open-source nature of many projects and the rapid pace of innovation. Patent trolls may exploit ambiguities in patent claims related to blockchain technologies, leading to costly litigation or settlements that can stifle innovation (Bessen & Meurer, Patent Failure, 2008). For instance, the decentralized and collaborative development models common in blockchain projects complicate the attribution of inventorship, making it challenging to defend against infringement claims.

To mitigate these risks, Canada could consider several policy reforms:
1. Enhanced Examination Procedures – Implementing more rigorous examination standards for blockchain-related patents to prevent the issuance of overly broad or vague patents (CIPO, MOPOP).
2. Transparency in Patent Ownership – Requiring disclosure of the ultimate beneficial owners of patents to identify and monitor entities that may engage in trolling activities.
3. Fee Structures to Deter Trolling – Adjusting patent maintenance fees to discourage the hoarding of patents by entities that do not actively commercialize the inventions.
4. Alternative Dispute Resolution Mechanisms – Establishing specialized tribunals or arbitration processes for resolving patent disputes involving blockchain technologies.
5. Education and Support for Innovators – Providing resources and guidance to blockchain developers on navigating the patent system, including best practices for documentation and defensive publishing.

Conclusion

Blockchain-based inventions, including NFTs and decentralized governance mechanisms, challenge the traditional frameworks of Canadian patent law. While these innovations can fall within the statutory scope of patentable subject matter, the decentralized and collaborative nature of their development raises questions about inventorship, ownership, and disclosure requirements. Moreover, the threat of patent trolling poses additional risks to innovators in this space.

To better incentivize innovation and protect against abuse, Canadian patent law must adapt by recognizing decentralized governance structures, revisiting doctrines of inventorship and ownership, and incorporating elements from trademark and copyright systems to enhance clarity and interoperability. Implementing policy reforms to deter patent trolling and support blockchain innovators will further strengthen Canada’s position as a leader in technological innovation.

Bibliography

1. Patent Act, RSC 1985, c P-4.
2. Canada (AG) v Amazon.com Inc, 2011 FCA 328.
3. Apotex Inc v Wellcome Foundation Ltd, 2002 SCC 77.
4. Apotex Inc v Sanofi-Synthelabo Canada Inc, 2008 SCC 61.
5. Canadian Intellectual Property Office, Manual of Patent Office Practice (MOPOP), online: Government of Canada <https://ised-isde.canada.ca/site/canadian-intellectual-property-office/en/manual-patent-office-practice-mopop>.
6. Government of Canada, Intellectual Property Strategy, online: Innovation, Science and Economic Development Canada <https://ised-isde.canada.ca/site/intellectual-property-strategy/en/intellectual-property-strategy>.
7. World Intellectual Property Organization, Blockchain Technologies and IP Ecosystems: A WIPO White Paper, online: <https://www.wipo.int/export/sites/www/cws/en/pdf/blockchain-for-ip-ecosystem-whitepaper.pdf>.
8. James Bessen & Michael J Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk (Princeton: Princeton University Press, 2008).