Bitcoin's most controversial mining firm, Bitmain, is under threat of having a key chip patent revoked.
Forcing a review of the patent is an ex-employee of the China-based mining giant: former director of design Yang Zuoxing, who has now founded a rival mining firm called Bitewei.
According to documents reviewed and confirmed by CoinDesk, the State Intellectual Property Office of China (SIPO) is proceeding with a review that could determine if Bitmain can protect its current market dominance under the shield of the patent claim.
Based on SIPO's data, Bitmain filed a patent application for "Serial power supply circuit, virtual digital coin mining machine and computer server" in July 2015, which was authorized on March 30, 2016.
According to the document, the technology provides higher efficiency for cryptocurrency mining chips, reducing electricity consumption and cost. The feature is said to significantly extend the life of miners, potentially resulting in far higher returns from mining activities.
With its patent-backed products, Bitmain is now a dominant force in bitcoin mining. Apart from supplying chips to individual miners and mining pools, Bitmain also runs the mining pool Antpool, which accounts for 20.3 percent of the global bitcoin hash power.
Yet, based on the patent law in China, any organization or individual that disagrees with a certain patent authorization can file an application to revoke it, if they provide evidence for their claim. In his review application, Yang claimed that the serial power supply circuit has long been in use and is widely and publicly documented.
While the authority does not specify a timeline when a decision will be made, Yang expects to hear from SIPO in about three months.
He told CoinDesk:
Yet, Yang did not bring up the procedure voluntarily, he indicated. Instead, it is a countermove made in response to a lawsuit filed by Bitmain against him, claiming patent infringement.
A graduate of Tsinghua University with a doctorate in Engineering Physics, Yang's career has focused on chip design, with over a decade working for several hardware companies in China, and authoring over 20 patents authorized by SIPO.
From 2015 to 2016, he served as Bitmain's director of design, during which time the Bitmain patent was filed and authorized. While his name was not among the group of patent inventors, Yang said that he designed the AntMiner S7 and S9, the two popular bitcoin mining chips manufactured and supplied by Bitmain.
After his departure from the firm, Yang started his own company Bitewei, based in Shenzhen, which manufactures the Whatsminer and also uses the serial power supply circuit to lower electricity consumption.
Bitmain subsequently sued Bitewei for infringing its patent right. According to Yang, Bitmain initially asked for ¥26 billion ($3.8 billion), but later changed the claim to ¥2.6 million ($380,000) as per the court's requirement.
When contacted by CoinDesk, Bitmain did not respond to inquiries for comments on the lawsuit or the application for revoking its patent.
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