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Do Patent Filings from eBay and Western Union Pose a Threat to Bitcoin?

(@pete_rizzo_) | Published on May 19, 2014 at 12:59 BST

In recent months, there has been no shortage of potentially alarming headlines detailing how mainstream financial and tech giants such as eBay, IBM and JPMorgan may be looking to enter or impact the bitcoin space with strategic patent filings.

The most recent company to enter these ranks was Colorado-based remittance giant Western Union, which received a patent on 1st April that reports have suggested would give the company a claim to a key aspect of the bitcoin industry – the exchange of alternative currencies.

Despite the sensational headlines, however, it has remained unclear as to what potential effect, if any, such a patent would have on the ability of bitcoin businesses to provide similar services or offerings.

The question remained, how worried should bitcoiners be about these high-profile patent filings?

Community concern

One patent analyst and bitcoin enthusiast believes the threat of such actions is not only real, but that it’s one that the bitcoin industry needs to actively defend against.

To this end, Reed Jessen, founder of the Cryptocurrency Defense Foundation (CDF), is seeking to protect the bitcoin space from such intrusion through the strategic filing of patents.

“Our goal will be to protect the fledgling cryptocurrencies of the world from the repressive pressures of the patent system and allow them to compete based on the merits of their use, not on government-granted monopolies,” said Jessen in the CDF’s launch statement.

The service would be offered royalty-free to companies that agree not to assert their patents against others in the industry.

More broadly, the CDF would seek to build a patent portfolio to promote and defend the community’s interests and business ambitions, especially given that its research suggests 65 patents related to cryptography have been filed by companies such as QUALCOMM and Visa.

With this in mind, CoinDesk asked Jessen to analyze three recent digital currency related patents – filed by eBay, Gemalto and Western Union – to illustrate their potential impact on the bitcoin space.

Though he notes his assessments represent his opinion and not any legal judgement or advice, Jessen provides a look at how the claims – both those pending and those approved – could impact digital currency businesses.

Western Union

In Jessen’s view, the Western Union patent does give the company exclusive rights to an exchange that allows users to trade digital currency for fiat currency, though the actual system to which Western Union is entitled these rights is far more narrow.

For example, the system protected by Western Union’s patent would provide users with a list of people looking to sell fiat for digital currency and allow these individuals to select the person with whom they would like to trade.

Western Union’s patent also notably calls for an “assessor” that would analyze the offer and score them based on their value. The assessor would then award both individuals proposed trade scores, and both parties would decide whether to execute the trade based on such information.

Jessen concluded that due to these specifications, any effect on the bitcoin space as a result of the patent is likely to be limited, explaining:

“This patent only grants Western Union the right to stop someone from using the ‘assessor’ functionality for 20 years, not the right to exclude people from using exchanges to trade money. If your exchange does not have an ‘assessor’, it does not apply to you.”

Western Union provided comment on its filing to CoinDesk, though the statement did not provide clarity as to its goal for the patent:

“Western Union generally does not comment on specific intellectual property assets. That said, we have, and will continue to explore opportunities that build on our experience and expertise in the various facets of the money transfer market.”

eBay

Unlike Western Union’s filing, which was recently granted, eBay’s patent for a “System and method for managing transactions in a digital marketplace” is currently pending approval. However, it has grabbed headlines due to eBay’s past statements about its active interest in the digital currency space.

This patent, filed in December 2011, describes a system that determines whether a customer is buying unique digital goods and makes adjustments to avoid this overlap.

According to Jessen, the process would work like this:

“If you are attempting to buy the album ‘Abbey Road’ by the Beatles on iTunes (or some other music service), but have previously purchased ‘Maxwell’s Silver Hammer’, this program will identify that you already own the song and instead sell you ‘Abbey Road’ minus ‘Maxwell’s Silver Hammer’ at a reduced costs.”

Bitcoin, however, could still be affected by the system, he said:

“This patent relates to cryptocurrencies only tangentially in that [it describes] doing this process with a privately issued currency like airline miles or bitcoin.”

Gemalto

Of the three patents, the implications of software developer Gemalto‘s pending patent application for a “Transaction method between two entities providing anonymity revocation for tree-based schemes without trusted party” may be perhaps the most related to digital currency.

Filed in April 2008, Jessen described the patent application as “very closely related to the concept of the block chain”. He noted it uses public key encryption, but adds additional anonymity features.

Overall, Jessen suggests the patent could have implications for alternate uses of the block chain, saying:

“They are proposing a cryptocurrency scheme without the need for access to the Internet.”

As with eBay’s filing, however, the patent has not been approve and may never be granted.

Business idea illustration via Shutterstock

CDFeBayGemaltoLawPatentWestern Union

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