Who is leading the Global Blockchain Patent Race?

Bitcoin has regained popularity as a result of its recent resurgence, but other blockchain applications have been quietly developing. Some of them have the potential to make a significant impact on people's lives.

Blockchain technology opens up new channels for the safe distribution of digital information and has the potential to disrupt numerous sectors.

Unsurprisingly, this has resulted in firms all around the world attempting to safeguard emerging blockchain technologies.

Despite its popularity in the cryptocurrency space, blockchain applications go well beyond finance. Patent applications in legal technology, for example, include blockchain-enabled smart contracts. Blockchain may also be used to trace and authenticate items in worldwide supply networks.

The increased patenting activity surrounding blockchain demonstrates the growing worldwide interest and investment in this technology.

Understanding Blockchain

The term "blockchain" refers to a distinct method of storing data. Blockchain technology, also known as a "distributed ledger," stores and distributes data over an entire computer network. Its goal is to create an accurate digital trail of transactions that can be easily verified.

Some see blockchain technology as the future of the financial services infrastructure. According to one estimate, the technology has the potential to speed up transactions, improve the security of financial infrastructure, and reduce operational expenses by $20 billion per year.

The Race for Blockchain Patents

Companies such as Huawei, Xiaomi, Alibaba, Tencent, and DJI demonstrate that China is a world-class, technologically progressive, and fiercely competitive country. Along with these firms' technological strength comes a slew of patent applications.

It comes as no surprise that China is also leading the race when it comes to the global blockchain patents filed.

Since 2017, China has seen a surge in the adoption of blockchain technology by both startups and large corporations. Over 10,000 blockchain-related patents have been submitted with the China National Intellectual Property Administration (CNIPA), according to the online patent search engine Innojoy.

According to a report by the Intellectual Asset Management Magazine, Ant Group, which owns AliPay, one of China's most popular mobile payment apps, has submitted a total of 2,298 patent families.

Ping An Group, a Shenzhen-based insurance business comes in second. They have filed 1,215 blockchain patent families since 2016, accounting for 69% of its total blockchain patent families. With 1,666 patent families, Tencent, China's other internet behemoth, comes in third.

The same report shows that in terms of the number of blockchain patent filings, Chinese businesses have a clear advantage.

Nine Chinese firms are among the top 10 in terms of blockchain patent family numbers, including Ant Group, Ping An Group, China Unicom, and Baidu. The patents filed by the nine firms accounted for almost one-third of all blockchain patent filings worldwide. The only non-Chinese business in the top ten is IBM.

Why Is China Leading?

The simple answer is that the Chinese government subsidizes the application process. This contributes to the astounding amount of blockchain patents submitted. This system alleviates the financial strain off of companies and is particularly beneficial to startups.

In 2019, President Xi Jinping promoted the advancement of blockchain technology, claiming that it will “lead the next wave of China's digital transformation” and called for greater study, investment, and regulation.

As such, more than 35,000 firms responded to Xi's appeal by registering their company names and significant business connecting to the word "blockchain" and expanding their business into blockchain industries. These businesses now want not just to claim “blockchain bragging rights,” but also to submit more blockchain-related patents.

But this doesn’t mean Chinese companies actually own the most number of patents. In fact, only a few patents have been granted to Chinese businesses.

The Real Leaders

There has been an “arms race” in the last few years as companies in China and the United States filed patents to protect their blockchain-related technologies. Despite this, blockchain patent applications have a notoriously high failure rate.

As of late 2019, approximately 10,000 blockchain-related patents had been submitted with the CNIPA, according to Forkast Insights' inaugural China Blockchain Report, although only a handful had been awarded.

Globally, 3,924 patents have been granted for blockchain technology so far. This is according to a 2020 report by the Blockchain Global Patent Authorization. Patents given to US companies account for 39% of all patents granted, followed by Korea at 21%. China actually comes in third with 19%.

But if we look at individual companies, Alibaba holds the most patents, with 212 granted blockchain patents against IBM's 136. Coinplug from South Korea is third with 107 in total. China’s Tencent has 42.

A Closer Look into the Patent Race

The subsidies provided by the Chinese government are partly the reason why China leads in the number of blockchain patents being filed. But this subsidy system also results in a high noise-to-signal ratio. This explains why non-resident firms receive 68% of patents filed, compared to 26% for residents.

To give an example, China has 35,000 “blockchain” firms registered. However, many are just shell companies that add the word "blockchain" to their name as a sort of signal to pique the attention of investors.

Only 730 of these 35,000 enterprises have a government-mandated blockchain service number, implying that fewer than 2% of blockchain companies in the country are performing what their name indicates.

A Broader Look into Blockchain Patents

It has been a long time since new technology generated the amount of buzz that blockchain has managed.

The technique may be used for any business that requires a reliable record of transactions. Blockchain technology enables the establishment of new digital connections by providing new methods for authentication and authorization which minimizes the need for centralized administrators.

The number of patent filings in the field lends credence to blockchain's potential. Serious firms are realizing that securing large IP territory on blockchain might be quite beneficial in the long run.

Globally, Chinese firms are likewise cautious to file equivalent patent applications in other nations. This may confine the expansion of these firms to the domestic market. This hesitancy may have contributed to China's ranking of fifth in the world in terms of granted patents.

Based on the application-to-approval ratio, it is not unreasonable to infer a lack of quality in China's huge number of blockchain filings. However, the dramatic difference between authorized patents of residents and non-residents may signal an opportunity for global corporations to submit their patents in China since they may be more competitive than domestic enterprises.