cryptocurrency, bitcoin, finance

“The Growing impact of Cryptocurrency and its effect on the Indian Patent Regime”

“Cryptocurrency is absolutely here to stay. If you can’t see that at this point, it’s time to learn more about it.”
― Joel McLeod

Introduction

In India, there have been few patent applications regarding cryptocurrency for blockchain-based technologies by Barclays and Asadel Technologies. Though the legal position in USA and India appear to be similar, there is one hurdle which Indian patent applications for cryptocurrency will face. The 2017 CRI Guidelines specifically state that ‘database’ is a ‘computer programme per se’ and hence it is excluded from patentability under Section 3(k). Blockchains are databases for storing transactions. Thus, blockchain-based services will still be patentable in India since these Guidelines are not legally binding and merely provide guidance to patent examiners. Also, since parallels can be drawn between software patents and blockchain patents, the patent application for a blockchain-based service should be granted as long as the claims are not directed at the blockchain technology itself and if it provides a ‘technical contribution’ or ‘a technical solution to a technological problem’.

The cryptocurrency trade comprises of various laws, starting from jurisdiction, contract to investment, Data Innovation, and criminal law. Subsequently, the lack of a central authority has obscured the jurisdiction leaving majority of the nations with an unclear position on the legality of cryptocurrency, although a few of them have attempted to regulate it. Additionally, the existence of cryptographic money and its unstable nature that is vulnerable to hacking, discourages government to allow its regulation. In India, due absence of an enactment in this regard, it is being handled aggressively by the Indian government by freezing accounts of cryptocurrency trades in order to secure the rights of the investors. The RBI being the administrative body of money markets in India, has also gone ahead and issued a notification in this respect, cautioning the investors that the risks associated to it has to be solely borne by them and that there are no remedies accessible till date. Be that as it may, the bare minimum which is needed in this regard is, effective regulation before legalizing cryptocurrency and the only way to bring such regulation is through appropriate examination and proper analysis of cryptocurrency which can be done by introducing KYC(Know Your Customer) and other laws in order to control the stream of cryptocurrency.

Present State of Cryptocurrency in India

Recognition of Cryptocurrency has always been discouraged by the Government of India because it is perceived that the only use of it is to fund terrorism and carry on unlawful activities. Additionally, the RBI had issued notice asking the buyers not to use cryptocurrency since the government does not recognize it or provide any consumer protection in this respect. However, it must be noted that in 2017, the Supreme Court of India expressed its intention to regularize cryptocurrency, which is contrary to the notice issued by RBI. In the case of, Dwaipayan Bhowmick Vs Union of India & Others, a PIL was filed under Article 142 of the Constitution of India, seeking before the court to issue directions clarifying the nature of cryptocurrency and set up an extraordinary committee to outline suitable regulation to deal with cryptocurrency in India since the lack of a legitimate system had left the market unregulated, which could saddle all forms of criminal activities. The PIL stated that, regularizing the cryptocurrency within the lawful framework would be a diversion as it would limit users from utilizing it in unlawful activities. Cryptocurrency being a worldwide phenomenon cannot be halted or banned since it is all on the web and therefore, the best thing in this regard is to set up a mechanism to keep a check on it.

Legal implications of Patenting Cryptocurrency in India

Registration of patent in India is allowed only if the invention or process consists of; originality, non-obviousness, and utility; whereby a patent provides exclusive right and control to the inventor. With the popularization of use of cryptocurrency and other block chain/public ledger system-based applications, block chain technology is drawing a great deal of recognition which can be understood by seeing the escalation in the costs of cryptocurrency. With increasing recognition, there is a vertical increase in filing of patent applications claiming innovation based on block chain technology. Such inventors of block chain technology are however senile about patentability of inventions based on block chain technology. As a general rule, inventions covered in patent application are required to fulfill the test of novelty, non-obviousness and industrial applicability, whereby there is no question regarding industrial applicability of block chain technology in areas like cryptocurrency, resource administration, logistics, peer-to-peer lending platforms, insurance, Internet of Things, etc. Besides novelty and non-obviousness, the other key issues included in patentability of block chain technology which is executed as software platform is whether invention will be considered as patentable subject matter under Section 3(k) of Indian Patent Act which forbids patentability of computer program such as business strategies, algorithm, etc.

The creation and verification of Cryptocurrencies includes a process called mining which is executed by utilizing certain hardware and software combination to unravel complex calculations and to confirm transactions. In spite of the fact that it comprises of commercial utility and could be a modern process, which completely revolutionized the concept currency works, it is not an exclusive process as it is available to the public (open-source software), therefore no rights can be granted to any proprietor as there is none. The Patents Act, 1970, however, states that, an algorithm or business strategy or a computer programme, does not qualify as an innovation. Thus, it can be established that Bitcoins or cryptocurrencys’ cannot be patented or licensed by any manner whatsoever.

However, granting of Copyright protection to a computer program is possible according to the Indian Copyright Act, 1957. Such provision has been covered under, “literary works” whereby computer program is defined as, “set of instructions expressed in words, codes, schemes or in any other form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result.” The software which alleviates the generation and trading of Bitcoins is an open-source software, which implies that the code can be accessed by public and can be altered according to one’s requirement. The modification in the code outfits diverse results such as generation of new codes and components which can be copyrighted, but it will be exceptionally troublesome to understand the contrasts and also determine as to who the original creator is.

In India, Section 3(k) of the Patents Act lists that ‘computer programmes, per se’ are patent-ineligible subject matter. Previously, there has been a lot of debate about the interpretation of the term ‘per se’. In 2015, the Delhi High Court in Telefonaktiebolaget Lm Ericsson v. Intex Technologies, stated that “any invention which has a technical contribution or has a technical effect and is not merely a computer program per se” is patentable. In order to reach this decision, the Court relied on the ratio of the Alice case where, the invention must contribute something more than an ‘abstract idea’ and the European Court’s 1986 Vicom decision which states that an invention must result in a technical effect or contribution and declared these tests similar to each other. However, the 2016 CRI Guidelines created confusion when it stated ‘novel hardware’ was one of the requirements for patentability of computer-related inventions. The debate was then settled by the revised CRI Guidelines of 2017 where the ‘novel hardware’ requirement was removed, and it was stated that the ‘substance’ of such claims have to be examined. Recent patent grants to computer related inventions by the Indian Patent Office indicate that such inventions are patentable under Section 3(k) if they provide technical solution to a technical problem by providing a practical application or an improved technical effect of the underlying software.

Conclusion

Whether or not block chain-based inventions are eligible is up for debate. One side of the Indian Law allows computer related inventions and on the other side prevents obtaining patents to certain such inventions. Patent lawyers have noted that open-source technologies like bitcoin are not easy to patent, and even if patents are approved, they are not always easy to defend. On a broad-spectrum, it can be said that there is a dire need to streamline current laws and guidelines in a way which may permit these systems generated inventions to be granted patents. Per contra, with several hindrances and confusions still existing over patentability and other aspects, deeper assessment of the issues is required.
With the upcoming changes for the Industrial development in India, and with the various government initiatives supporting the same, we may hope that this thin line between the computer related inventions and technically advanced computer related invention may mark the dawn of block chain technology protection in the Indian patent Regime.

Author:

Jagannath Chatterjee
Amity Law School
Amity University Kolkata

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