SLP249 Bitcoin Patents & Open Crypto Alliance with Stephan Kinsella and Jed Grant

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Stephan Kinsella and Jed Grant join me to chat about Open Crypto Alliance.

We talk:

  • Why IP laws are anti-liberty and anti-progress
  • How progress has been delayed by improper concepts of property rights
  • How Patent laws could hinder the Bitcoin industry
  • The asymmetry of attack vs defense here
  • How to stop overly broad patents
  • How to support OCA

Guest links: 

Prior episodes:

Sponsors:

Stephan Livera links:

Podcast Transcript:

dcasStephan Livera:

Stephan and Jed, welcome to the show.

Jed Grant:

Thank you. Thanks for having us.

Stephan Kinsella:

Thanks Stephan.

Stephan Livera:

Today. We’re going to talk a little bit about intellectual property and what it means in terms of Bitcoin and property rights as well. I think many listeners of the show are libertarians themselves, but not all of them. And so I think it might be good. Well, firstly let’s talk, let’s hear a little bit about each of you just a little bit on your background. Jed, if you want to start?

Jed Grant:

Sure. Yeah, I’m a technologist I’ve been in tech. Well, since the eighties, when I got my hands on an Apple II and started writing code I’ve always been interested in cryptography. Somewhat of a cypherpunk, ended up at NATO running their deployment of TCP IP in the nineties and been an entrepreneur for the last 20, 22 years, more or less and focused on, on security and crypto and technology in that space. So Bitcoin is something that I’ve been following since basically when the white paper came out as a novelty and really liked the tech and want to see it change the world. So that’s sort of my focus. For my professional side. I run a company called KYC 3 and I set out to change the way we do KYC because it’s fundamentally broken. So somewhat similar to what Stephan’s going to say. I’m not a lawyer, but I’m a KYC guy, but I’m anti KYC. So there you have it.

Stephan Livera:

And Stephan, just for listeners who maybe they haven’t heard you before. Can you tell us a little bit about yourself?

Stephan Kinsella:

Sure yeah, I’m a patent attorney in Houston and Texas, I’m from Louisiana originally and I’m a libertarian and I’ve been interested in libertarian theory and intellectual property stuff for a long time now. And got interested in Bitcoin when it came out and started buying it when I lost a bet to Vijay Boyapati, because I thought in 2012 that the government would kill it. So I lost that bet had to buy some Bitcoins to pay them off. So I bought some for me at the same time. So those Bitcoins are now worth 90,000 or now, $120,000 that I gave him.

Stephan Livera:

Yeah, that’s great. Vijay our mutual friend, he’s a regular guest on my show. And for listeners who aren’t familiar, Stephan is a really leading thinker in the libertarian world especially in the areas of intellectual property. And also just generally in terms of private property theory and explaining some of the thought of some of the leading lights of the Austrian libertarian world, such as Hans Hoppe and others. I think maybe we can start there as well, because I think for some people they might not be as familiar with this way of thinking and they might be thinking, well, hang on. I thought these people put in work to create intellectual property. So why shouldn’t that also be respected as a quote unquote private property, right? Why is that not correct?

Stephan Kinsella:

Right. And I guess I thought that too at first, like most people do I mean I come at it from a private property point of view, I favour free markets and private property and individual Liberty capitalism and all that. And I still am and innovation and technology. And you hear about this thing called intellectual property, which includes mainly patent and copyright, which covers inventions and artistic works. And you just assume that, well, this is another type of property rights. It was part of capitalism, but the more I studied the issue and when I started practicing, practicing it in the early nineties as a lawyer. I started looking into it more closely understanding the legal system and then understanding libertarian and economic arguments about it more deeply, came to the conclusion that the systems are completely antithetical to private property and free markets and competition, and it should be abolished.

Stephan Kinsella:

I mean, completely, I think the patent system and the copyright system are completely unjustified and do tons of harm in the world, especially the patent system. Basically it gives people a monopoly from the government, which allows them to prevent people from competing with them. And that’s anti-competitive and against the free market, it violates their property rights. In particular, the patent system allows you to get a license from the government to sell your product that you claim to have come up with on your own for about 17 years, without anyone competing with you on that. So delays innovation because other people don’t bother to innovate with, they can’t sell a product that’s like yours. So it slows down innovation and it lets you rest on your laurels and connect monopoly profits because you’re the only guy you could sell this thing.

Stephan Kinsella:

So the standard arguments for it that you need it to incentivize innovation are all flawed. There’s no empirical research for it. And in fact, that way of thinking about it is confused because the purpose of law is not to have the government come in and twiddle the leavers in the market and optimize things that are broken. Like that’s the market failure idea of the Chicago school, which I don’t believe in. And I don’t think the government is really their goal is to do that and they’re not equipped to do it. And the patent law system won’t do that anyway. All it does is help monopolies grow larger and help cartels and oligopolies form.

Stephan Livera:

Right? And so some might believe that, Oh, this business model, it requires intellectual property for it to be viable. And without that, these businesses would just not work and maybe they would say music or art or maybe writers. And, but fundamentally it comes back to, as you were saying, it’s about private property rights and the need for private property rights to be granted or issued only in things that are scarce. Like rivalrous. And I guess as you’re saying, if you, or if the government grants somebody an intellectual property, right then in some way, shape or form, they are giving some people the right to control what other people do with their own private property, whether that be their own piece of paper, that they are writing down a poem or a whatever, or their own computer. Right. And so that you are giving some people the right to control other people’s computers, but we are just in some sense the guns of the government to enforce that. And that is anti private property rights.

Stephan Kinsella:

Yeah. And there are definitely some business models that won’t work without IP, such as the business model of being a patent attorney. Just like it’s like without a tax system, there wouldn’t be tax attorneys and those types of CPA’s and without a drug war, there wouldn’t be defense attorneys making money, defending people who are facing prison time for doing something that’s a victimless crime. And there are probably some business models in the regular business world that would have a tough time making it without IP law. But by the same token, nothing is for free. So if you make something easier, you’re taking it away from something else. And so other business models are the seen and the unseen, by Bastiat. We see that some companies claim to make profits from their copyrights and their patents, but that’s at the expense of innovations and creativity.

Stephan Kinsella:

That’s suppressed hands of other people by, by virtue of these laws. So from the empirical point of view, people that just have this thing, like you need it. Well, we’re just used to it. We’re used to these laws. So it’s hard to imagine what it’s like, what it will be like to have a fully free market, just like in most countries outside the U.S. Who are used to socialised medicine, they’re used to thinking of medicine as something the government provides and they can’t imagine what it would be like to live in a free market healthcare. But that doesn’t mean that we shouldn’t move in that direction for anyone interested in looking into this further, there’s a ton of resources on my site C4sif.org. And you can find there, let’s say a link to Boldrin and Levine’s book against intellectual monopoly, which just goes in detail over the empirical arguments, given in favor of patent and copyright and shows how each one of them are just flawed and wrong.

Stephan Livera:

That’s excellent and for listeners as I would echo that. So definitely go and read. Stephen can sell his against intellectual property. And also that Michele and Boldrin book where basically there are many examples of how society has been slowed down. The progress of society has been slowed down. Arguably the industrial revolution was delayed by I believe, 18 years. And that’s the example from the first chapter in that book. So there’s a really great example, actually. I’m curious if you guys have any other examples of where progress of society has been halted by these kinds of intellectual property rights or patents in one specific example.

Jed Grant:

Example. Well, Schnorr signatures in Bitcoin have been prevented by IP, right? The patent on that was delayed, the implementation of snore signatures for 17 years. So we’re only now going to get them in Taproot, but they should have been in Bitcoin from day one.

Stephan Livera:

There you go. And any other examples from your side, Stephan, in terms of progress being delayed?

Stephan Kinsella:

Well, there’s lots of pharmaceutical drugs, for example, that are in limited supply quite often. And some people actually die because they can’t get it because there’s only one manufacturer and they don’t make enough and no one else can come in and compete. Lots of examples like that. I think one of the examples that Boldrin and Levine given and their book is because of all the patents on the airplane, in the U.S. From the Wright brothers and others, the entire airplane industry was ground to a halt. And when world war one started, the whole industry had to move to France and other places to get airplanes. So it retarded the entire aviation industry in the U.S. for a good generation.

Stephan Livera:

Yeah. And I think, I guess while we’re still on this idea of intellectual property being anti Liberty, I think another interesting idea is just that we’re moving into a world where some of these things aren’t really enforceable anyway, in some cases where it’s maybe it’s music, it’s like how famously RIAA and MPAA were going after the file sharing, but they weren’t able to, ultimately they weren’t able to stop it. And so they had to adapt and so in some ways the business model for some, some businesses became more about how we’re living in this world of massive abundance, or there’s so much music and so much writing out there. Now it’s more about how do you get out of obscurity? Wouldn’t you say?

Stephan Kinsella:

And I mean, of course music has transformed as piracy and copying and streaming of music has risen to the fore with the internet old business models of selling CD’s collapsed, not just because of piracy, but because people don’t really want to own music anymore. They just want to stream it, so yeah, a lot of musicians now make money by touring and selling merchandise and things like that. So copyright and patent are both unnatural interventions into the free market, but luckily technology is emerging to help us get around those laws. So I think the internet, which is a huge copying machine, along with encryption and torrenting and things like that has basically made copyright almost unenforceable. So piracy is rampant, which is a good thing. I would, I think patents, I think that something like that may happen in the future when 3d printing matures and I mean a long time down the road where you can print your own car, or iPhone with a 3d printer, when you can start doing sophisticated and expensive and advanced machines and things like that with printer in your basement, then the patent holders won’t be able to stop that either.

Stephan Kinsella:

So the laws will never perish because the special interests are too entrenched and stop it and always try to ratchet the laws up and make them worse. But luckily technology is allowing us a way to evade those two regimes and in other ways, too, right.

Stephan Livera:

And that’s a really good point.

Jed Grant:

There’s a project that I believe is being done at MIT. I need to find the reference back, but a couple of guys wrote an algorithm to generate every possible melody on the normal musical scale and to put that in the public domain, so that musicians couldn’t sue each other over a simple melody.

Stephan Livera:

Yeah. That’s really interesting. So how does the whole idea of things being in the public domain versus being quote unquote owned by certain people who have, who have the right for it? Because as I understand, the other thing you hear is that some of these big companies like Disney or whatever will go out and keep trying to extend the time period so that their work does not go out into the open public domain. Could you just explain that dynamic for us?

Stephan Kinsella:

Yes. So the original in the U.S. Which has the first modern set of copyright and patent laws inspired by the British or the English system. So the patent system kind of emerged from the practice in England and in Europe of Kings granting monopolies to their cronies. And it was refined in England with the statute of monopolies in 1623, copyright emerged from the attempt of the government to censor, what could be printed through the station, his company, and then the statute of ban in 1709. Then the U.S. Adopted something similar to that in a more modern version in 1789 with the country, the original terms were about 14 years. And the idea was some artisan needs protection from his own apprentices for about two apprentice terms, which is seven years time. So pick 14 years randomly and arbitrarily over time because of lobbying by owners of copyright that were about to expire and enter the public domain the copyright term kept getting extended over and over and over again. The classic example is Disney trying to keep Mickey Mouse from falling into the public domain. So 20 years keep getting added on here and there to the point to where from 14 years, extendible once for 14 years to 28 years maximum, the copyright term is now the life of the author plus 70 years, which is well over a century in most cases. So 130, 140 years, in a lot of cases. So it’s just basically infinite at this point,

Stephan Livera:

In many cases, it, depending on who you look at and what arguments you’re reading, sometimes you’ll see people who try to argue that, Oh, it should be moderated back or in some way it should be, they’re not in favor of fully abolishing government intellectual property. Rather they try to moderate it back a little bit and they sort of treat it. Like it’s something that where you have to try to balance the interest and so on. Why should we go the whole way? Why should we abolish government intellectual property rights? It hypothetically if we were able to do so, why should we do that?

Stephan Kinsella:

Well, I mean, to me, it’s like saying if poison is bad, why not just take a little bit, I mean it’s just in principle, it’s a bad thing. It doesn’t do any good. It violates property rights. Some people say don’t throw the baby out with the bath water, but my retort is always, unless it’s Rosemary’s baby it’s the spawn of satan, so I it’s a mistake. It didn’t have as much of a negative effect before the internet, I believe for the modern technology age, because it was sort of a background thing. It probably impeded innovation to some degree, but with the internet copyright censors speech a lot, I mean, it’s used as an excuse to limit freedom on the internet. You have YouTube takedowns happen all the time for censorial purposes and with the speed of innovation now, and with digital technology, the patent system is posing a greater and greater threat to innovation as well. So it’s an even bigger threat than it used to be, I believe.

Stephan Livera:

All right. So let’s bring it to the Bitcoin world and OCA. So perhaps Jed, do you want to just give us a bit of an overview? What is OCA?

Jed Grant:

Sure. Open Crypto Alliance is a nonprofit effort of a few of us have started in the last two months. The objective is to keep the technology behind Bitcoin and blockchain in general, open and free as much as possible, and to prevent patents from being granted on the technology, especially patents that are pirating. So they’re taking existing open source technology and applying for patents on it. People are doing,

Jed Grant:

this trying to patent ideas that are not original, not their own, this type of thing. So there are a number of efforts to prevent patent abuse and patents from hindering innovation in the space. There’s COPA, which actually as of today, I believe we’re in touch with, and there’s a LOT network, which is licensed on transfer. Those are both organizations that help patent holders, not to sue each other or to be sued. But our approach is a bit different. We don’t want to hold any patents. We’re not trying to create a patent pool or anything like that. Our objective is to raise funds and use those funds to simply fight against patents that are in the filing process in order to keep that technology in the public domain as much as possible.

Stephan Livera:

Right. And so that’s probably the key difference there where so now listeners, from my prior episode with Steve Lee from square crypto, we spoke about COPA. And so as I understand you guys, Jed and Stephan it’s sort of like COPA is a way of pooling some resources and putting them into a, if you will, a defensive pool, such that the members don’t go after each other, or that if members have contributed any of their IP into COPA, then it’s kind of accepted that you’re not going to be attacked for using that. It’s a defensive thing. Whereas what OCA is doing different is more like essentially trying to stop the creation of these kinds of maliciously people who are trying to apply for these patents. And essentially there’s kind of this gears turning of bureaucracy and the costs associated with defending yourself can be quite high. And so that’s why you’re trying to, in some sense, nip it in the bud before it, before the cost gets high.

Jed Grant:

Absolutely. that is a core element. I mean, the cost to stop a patent from being granted is significantly lower than the damage that patent could cause once granted and the people that are going to use these patents to attack businesses are going to try to attack multiple businesses with them. They’re going to wait until businesses are somewhat successful, and they’re going to try to milk that business for a long time. So if we can, with a small one-time effort stop some of these patents. And it’s also a timing effort in that respect because in the last two years we’ve had over 10,000 patents per year filed on blockchain and crypto technology. Up to that point, there were a few hundred per year. I think there were over a thousand in 2018, but 2019 is when it really went Kaboom. And a lot of these patents are now just winding through the system. And so now is the time to stand up and go through these and hopefully stop the most egregious ones so that we can prevent them from doing damage in the future.

Stephan Kinsella:

Yeah. And maybe I was going to say, maybe I can explain a little bit about how the patent system kind of works in this regard and distinguished patent trolls and these other things and our model from what the other groups are trying to do. Like, as you said Jed, they’re trying to arrange it so that the members of these, of these groups, don’t Sue each other, right. And maybe a mass patents that each other can borrow and use for defensive purposes. One problem with that is that once you’re in that pool, you have less of an incentive to acquire patents in the first place because you’re not going to use offensively. So the number of patents produced, which you could use later for defensive reasons would be diminished, but also one reason companies acquire patents, even if they don’t want to use them aggressively or to shake down, other people is they acquired them as defensive weapons to use as a threat to keep their competitors from suing them.

Stephan Kinsella:

So if my competitor sues me for patent infringement and they know I have a lot of patents on the same space, I could counter sue them and they might not sue me in the first place. They might go after some smaller companies, some startup, one problem with this is that a lot of patents are held not by competitors who are practicing or making products covered by their patents and maybe by their competitors patents, but they’re called patent trolls. And these are people that are called non-practicing entities. So they just buy up patents from someone else, or they just file patent applications. Without ever making a product that’s covered by their patents or by anyone’s patents. So if they sue you, they want a cut of your action and you can’t counter sue them because they’re not doing anything that you can sue them for.

Stephan Kinsella:

So you’re sort of defenseless against patent trolls. So the biggest defense against those types of threats is to try to invalidate their patents from the get-go to basically show that their patents are toothless or to have them thrown out or not even granted in the first place. And so the way the process works is you file a patent application and it has to be examined by a patent office. And it usually takes a year or two or three during that process at a certain point in time It becomes public and other people can submit prior art and try to tell the examiner or the patent office, Hey, consider this prior art before you grant this patent. You probably shouldn’t grant the patent because this patent application is obvious in view of what was already known, or it was already being used, right? So it’s not a new innovation, or once it’s granted, there’s a limited time window, you can still oppose it. So it’s important to get these guys early on in the process to try to take them out of the armory of the potential patent troll and patent pirate threats to the Bitcoin Ecosystem.

Stephan Livera:

I see. And so, in some sense, we could say, it’s like by showing prior art, you’re able to help stop the creation of these overly broad patents that can be used by these more malicious patent troll or non-practicing entities, right?

Jed Grant:

That’s exactly what I mean.

Stephan Kinsella:

To get a patent. You’re supposed to have four things it’s to have utility or usefulness. So you’re not supposed to be able to get a patent on something that can’t work like a perpetual motion machine or something that’s totally destruct. Like if you came up with a bomb that would destroy the earth, you probably couldn’t get a patent on that because that’s not useful, that’s destructive, but usually utility is easy to show. And the fact that it functions is taken for granted, you don’t have to prove that because you don’t have to come up with a working model, but it’s assumed the other one is you have to be the inventor of it. That is you have to be the one that came up with the idea. You couldn’t have copied it from someone else. And then the other two criteria are non-obviousness and novelty.

Stephan Kinsella:

Novelty means that its new, no one’s done the exact same thing. And non-obviousness means that it might be new, but if it’s obvious in view of what other people were doing, where everyone’s selling yellow cars and you come up with a red car, it’s obvious just to change the color. So you couldn’t get a patent on a red car that change wouldn’t be non-obvious enough. Or in Europe, it’s called the inventive step. So basically if you can, prior art, previous working devices that are publicly known or publications like articles or journals or scientific papers or patents themselves, which are published, these serve as a record that someone else already knew about this idea, and it was publicly known and your invention is obvious in view of that, it shouldn’t be granted. So if you show the patent office prior art, that, and you come up with an argument why this new patent application is obvious in view of that prior art then the patent office can be persuaded not to grant it or to invalidate one that was already granted.

Stephan Livera:

I see. And in terms of defending against these kinds of patent troll organizations. Is there some kind of asymmetry here where basically they only have to slip through one time in terms of a patent? Because then they can just go after some Bitcoin business and basically hold them by the balls, basically, because they’ve got this one pattern that they’re going to try to nail you on and try to extract some rents out of you for it, right?

Stephan Kinsella:

Yeah. For two reasons. And for three, in the case of patent trolls. So one reason is its extremely expensive to defend against such a suit. Okay. So if you’re sued by someone is going to take hundreds of thousands of dollars or maybe even more to defend it. And in the case of patent trolls, they have nothing to lose by suing you because you can’t sue them back. And then the other reason is once a patent is granted, it has, what’s called a presumption of validity. And the idea is that the patent offices of these countries are staffed with technical so-called experts and they know this field. And if they say it’s novel and non-obvious than it really must be. So the patent is presumed to be valid, which means the burden is on the defendant now to invalidate the patents. So even if the patents shouldn’t have been granted and it really is obvious, and you could prove it with millions of dollars of defense attorneys, proving it at a trial, you still have to overcome the burden of proof, which gives another advantage to the patent holder. Once it’s granted and it’s past the window where you could challenge it. So that is that is why it’s stacked against the defendants who are like sitting ducks and they could be victimised by the patent holders and the patent trolls.

Jed Grant:

And that’s a major motivating factor for us. If you look at the cost benefit, I mean, it’ll be somewhere between 10 and $30,000 probably to nip some of these patents in the bud before they’re granted. Whereas if they are granted, one action could be, as Stephan just said, hundreds of thousands of dollars for the victim. So the cost benefit is a no brainer at this point to fight these patents. And back on what you first said, Stephan on how we’re operating. I mean, crowdsourcing prior art is something that we’d like to do within the community. And that brings me to an important point. I mean, if you look at what’s happening in the blockchain space and Bitcoin and crypto space, right now, people are patenting stuff that would be like trying to file patents on TCP IP in the nineties. This is because there’s no organization behind Bitcoin. There’s no company behind Bitcoin, there’s nobody to defend it except us. And, and there was DARPA with TCP IP making sure that all of this stuff was in the public domain, all these new protocols, and that’s not happening here. So it’s up to us to stop this right now and to make sure that the technology stays as public as it is.

Stephan Kinsella:

You just say, one thing too, just as a disclaimer, I’m not everyone in our group is a radical anarcho-capitalist IP abolitionist like I am. But all of us are against the patent abuse, right? The threat of bad patents that shouldn’t have been granted and abused by patent trolls and patent pirates that are going to be shakedown artists. So our narrow focus in this group is to I guess, we want to use crowdsourcing people in the community who know this technology to help identify patents that are harmful and emerging, and also to identify all the prior art gradually build up a database of prior art that pertains to these different technology areas that we then can use donations and funding from these companies pretty modest, right? Jed said the cost is pretty modest, but to hire patent attorneys and the key countries to challenge the patents that are really ripe for challenging to start establishing some precedents and once a company has a bunch of patents, a lot of them are fluff. So you pick the juiciest ones that are the biggest threats and the ones you can easily easily get stricken down. And that starts building up a case against their whole portfolio.

Stephan Livera:

I see. Yeah. And so in terms of prior art, what is normally required to prove that could it, I mean in the Bitcoin world, it could be on some prior, earlier technology that maybe, or some concepts that was disclosed on a mailing list or a forum post, or are those, are those examples of prior art?

Stephan Kinsella:

Anything that’s a publication, right. That you can find that is accessible to the general public. So in the old days, it used to be journals and articles and brochures, even for products and the products themselves and the publicly revealed details and also patent applications that are published and patents that are published. So anything published can service prior art.

Stephan Livera:

And is the focus here mainly in the U.S. Or are you looking internationally as well?

Jed Grant:

Definitely internationally. I’m based in Europe and about half the group is European. We have both the us and European patent attorneys in the group.

Stephan Livera:

That’s great.

Stephan Kinsella:

Yeah. We have be good if we had some examples at hand and I’ll try, I’ll try to find one while we’re talking, but we’ve already identified some patents to start looking at. And what you would do is you would look at the claim of the patent. So the way that a client, a patent is written, it has a title as a summary has a detailed description with drawings, which describes all the background and what you need to know to do it yourself later when the patent expires. But the hard part of the patent is the claims. This is a numbered series of sentences, starting from number one to number 20 or whatever. And it’ll say something like a method or an apparatus for doing the following, comprising the following elements, and it’ll list them A, B and C. And that is what is the property right?

Stephan Kinsella:

Being claimed by the patent. So if element one is, you know, a cryptocurrency system, having a blockchain, number one, having element B and having some kind of Schnorr signature feature, something like that, then what you would try to do is like, if someone tried to patent Schnorr signatures, now they wouldn’t be able to, because that was already patented in the patent has just expired or something like that. So you could produce that as prior art. So you would tell, are the people interested in this to help us look, help us find papers, help us find well-known practices, help us find the examples that are similar to the elements that are being claimed in these dangerous patents here and provide these articles. And we would collect them and they could be submitted to the patent offices so that the examiner would have to review them and compare them to what’s being claimed in these patents.

Stephan Livera:

So in terms of identifying,

Jed Grant:

Priority, includes code open source code. And I, I’m pretty convinced that the patent offices are not conducting a, an exhaustive review of existing open source code before granting.

Stephan Livera:

So there’s all these areas that maybe they’re not looking and they should be. Also, Stephan, you mentioned earlier about dangerous applications, if you will. So what are some of the ways that you’re able to identify which kinds of patent applications are more dangerous in that?

Stephan Kinsella:

Well, maybe Jed has some thoughts on this too, but the ones that, the ones that would go to the heart of what existing Crypto Companies need to do, right. To improve the blockchain or the code or the architecture or business, even business models around it. Jed, do you have any particular thoughts on that?

Jed Grant:

No, it’s pretty much the space. I mean it’s yeah. If anyone could get leverage on a core component or for example, new hash algorithms that’ll need to be developed that are quantum resistant, this kind of thing. It’s also feasible that the patents could render it impossible to protect the blockchain because the new cryptography is all patented.

Stephan Livera:

Yeah. So that’s certainly interesting and things that people have to think about. And I think another point that might be good to cover is this idea that companies might be okay for now, but the factor or the risk comes in once they get bigger, because now they’ve got something to go after for, from the patent trolls point of view.

Jed Grant:

Exactly. That’s it. And I started thinking about this problem actually several years ago, and it became painfully obvious to me when we had this ICO boom in 2017. I mean, here, you had a bunch of startups that were publishing white papers of what they intended to do. And they were raising, 30, $40 million. It was like, I’m really surprised, I guess the patents just weren’t granted yet that none of them were trolled at that point because they were big fat, juicy targets and they published exactly what they intended to do. So what I had expected to see more patent trolling then, but I think it’s just that there were only a few hundred patents granted at that point on blockchain related technologies.

Stephan Livera:

So when a patent troll goes after you, what’s the normal process there, what does it look like when the patent troll is going after a normal Bitcoin or entrepreneur?

Stephan Kinsella:

Say for normal competitors? When someone has a patent and they go after you, what they, unless they’re ready to Sue you right off the bat. What they usually want to do is they want to be able to pick their jurisdiction. They don’t wanna make a threat. If they make a threat, then you could sue first with a declaratory judgment action and choose the forum. So they try to word it nicely. They’ll send you a letter saying, hi, we see you’re in this space. We thought you might like to be aware of these patents, that we have rights to. If you’re interested in discussing and negotiate a license, please let us know. So they’re not threatening to sue you, but the threat is really there. Now, patent troll doesn’t have as much fear because you really can’t counter sue them first, but even they approach you gingerly. And usually they just want to, so-called wet their beak. Like they just want a license they don’t want to shut you down. Like some of your competitors might, but again, they’ll say we have these patents, you might find it useful to have a license on them. And so they’ll invite you to negotiate a license with them that’s how they usually do it.

Stephan Livera:

I see. And so I guess the difference as well is when it’s competitors going after each other, they’ve got a war chest and they sort of are like, nation’s at war. And in sometimes they just sort of give a little bit here, take a little bit there and say, okay, fine. We’ll let you kind of use this one. So you don’t sue me on this one. That kind of dynamic, right?

Stephan Kinsella:

Yeah. What happens is they usually have a long drawn out lawsuit and they spend millions of dollars on attorneys. And then they finally settled like Apple and Samsung. And of course, all they do is they pass the cost down to the consumers in terms of higher prices. But what happens is small companies can’t enter that fray. So they they’re dissuaded from ever entering in the first place, that field, which is why you have a small number of smartphone makers. So it kind of creates oligopolies and cartels in a sense, but with patent trolls, they basically cut. They’re like, think of it like the tax man, they’re coming at you. They want a little, they want a little cut. So the cost that Jed mentioned earlier, the cost of defending the suit is not just the cost of defending. And that’s even if you win, but if you lose you had to defend yourself and you might have to pay their attorney’s fees. And then you have to pay a royalty for 15 years or something like that, which will hurt your business model, because they’re not the only patent troll that’s going to come after you. There could be a dozen or a hundred that might come after you after that. And each one you’re paying 2% royalties to right. Which makes some business models increasingly non-viable.

Stephan Livera:

So in terms of what can be done what are the main ways that people can counter this kind of thing? Oh, and actually one other point that people might be thinking is, what about just open source licensing? Maybe if they just stay only to using things that are already out there in the open does that protect them?

Jed Grant:

It’s pretty hard to innovate if you don’t write any code, if you just use what’s already there. So yeah, you should definitely build on open source and you should definitely open source. There’s no doubt about it. But when you’re, when you’re innovating, you’re going to be writing new code and you’re going to be doing new things. And those are what are going to get attacked because someone will claim that they did at first and they have the rights.

Stephan Kinsella:

And as a practical matter, most patents that are so-called infringed, they’re not really done because the infringer knocks off or rips off or copies what some of the company did. They don’t even know about these patents. They just happen to innovate something that is the common sense thing to do to solve this problem. If someone else has filed a patent on a similar enough idea that they stumble into this.

Stephan Livera:

And actually, Stephan, I’m also curious, you were calling out a point earlier around how, in some sense, the existence of these intellectual property laws drives a kind of centralization into large competitors, because they’re the only ones who can afford to play this game and fight those battles. Would you say that’s arguably happened in terms of social media as well?

Stephan Kinsella:

I think you could make an argument there. I think in that case, it’s probably more due to copyright than patents. So I mean, Microsoft, their vast wealth and holdings is due in part to their copyright over their code all these years and the operating system Google as well, to an extent Facebook, I mean, if you could copy Facebook business model and the way their software works, then you could have, it’d be easier to have a competitor to Facebook which is blocked now. And also Facebook might not have as much money in the first place to grow as large if they didn’t have some monopoly rents coming in from patent and primarily copyright.

Stephan Livera:

In terms of the different intellectual property types. I presume then the focus here is mainly around patents, right? It’s not around other types of intellectual property?

Jed Grant:

For COPA, that’s open crypto Alliance and Copa and Lott net are all focused on patents. That is really where the problem lies with innovation. Copyright I’ll let Stephanie answer that on the other types of IP.

Stephan Kinsella:

Yeah. Although of course there’s some, there’s some copyright threats being bandied about right now about the white paper which is another IP type threat to certain players in the Bitcoin system. But yeah, our primary focus, our only focus is patents because this is the big threat right now.

Jed Grant:

Yeah. I had a thought about that copyright threat that’s being bandied around right now. If, if a copyright is asserted on that paper does that take it out of prior art?

Stephan Kinsella:

No. So the prior art just means it’s published and known, so it could be used as priority as well. And by the way, other types of IP or play here too, like trademark and defamation, which have been some defamation suits have been filed as well. But in trademark, if you remember there have been threats to use trademark to say that the BTC guys couldn’t call their chain Bitcoin because someone else claimed a trademark in that name. So there’s lots of threats from IP to various aspects of the crypto space. But the biggest one by far I think is patent, especially the emerging number of patents that have been filed in the last couple of years Jed said.

Stephan Livera:

Yeah. So I guess to summarize then some of the key impacts really are mostly, as you’re saying around patents, and this may impact the possibility for Bitcoin businesses because it might stop them offering certain features or may stop development along certain lines of approach whether that is the cryptography used or whether that is some other feature that a Bitcoin business is trying to offer. So I guess just bringing it to what people can do about it in terms of trying to stop this essentially what’s the ask here in terms of OCA, is it funding? Is it other kinds of support what are you looking for?

Jed Grant:

Funding is what we need to get going. I mean that’s the gas that’s going to make this car go. We need visibility. We need people to understand. So we need people to self-educate to come to us. We’re totally open and to understand the risks. I mean there are a lot of people in the space that are simply anti-patent, they’re open source and that’s great. But as Stephan said, they’re going to stumble into a mine at some point if they don’t pay attention to it now. And so raising awareness and getting the word out, but obviously in order for us to accomplish what we would like to accomplish, we can’t do that without financial support.

Stephan Kinsella:

And you could have you could have also an adjunct to that. There is a streak among the Bitcoin community. We want this thing to work and to grow, and there’s a strong streak of hostility towards this closed mentality. Some companies have voluntarily stopped doing that. Like Tesla announced that, they’re not going to assert their patents. Cause they want the electric car industry to grow. So they’re a bigger slice of a huge pie. And I think Twitter, several years ago, it’s something where they made an agreement with all their employees where they tried to shackle tie their own hands. Twitter said we’re not going to be a patent threat to anyone. We’re just going to have our patents for defensive reasons. The way they tied their hands was they made an agreement with their employees, every employee who invents an invention that the company owns the company would have to get that employees permission to sue someone with the Pat aggressively. So in other words, they’re trying to say, we’re not a patent threat. And I would think that some developers who are even working for some of the companies that are acquiring these patents are not in favor of this kind of aggressive use of patents and the threat of patents, pressure could be used by them to put, to try to dissuade these companies from acquiring or using these patents in a threatening way.

Stephan Livera:

Okay. So in terms of where listeners can find you guys online, where can they find open crypto alliance?

Jed Grant:

https://www.opencryptoalliance.org/ all one word it’s the best place to find us. You can also find us on social, but the website’s the best place to start.

Stephan Livera:

Excellent. and for anyone who wants to find you guys, where can they find you?

Jed Grant:

You can find me on LinkedIn or on my business, but LinkedIn is easy enough. If you do want to connect to me on LinkedIn, please do put a note and say, you heard me on this podcast and I will accept your invitation.

Stephan Livera:

Excellent. And you Stephan?

Stephan Kinsella:

Well, yeah, I’m @nskinsella on Twitter and Facebook and I have my website is stephanskinsella.com.

Stephan Livera:

Excellent. well, thanks very much guys! And I think I’m hopeful that we see some response from the community around stop stopping these patent trolls before they get too big.

Jed Grant:

That would be great.

Stephan Livera:

Thanks so much.

Jed Grant:

Thank you very much for having us.

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