As the USPTO adopts increasingly pro-patent policies, the very innovation that built crypto’s success now hangs in the balance. The question isn’t whether patent warfare will intensify—it’s whether the decentralized future can survive it.
By mid-2025, the combined market cap of cryptocurrencies had eclipsed $3 trillion, fueled by a wave of regulatory clarity, major protocol upgrades, and widespread social acceptance. Every day, users now rely on digital wallets to send value across continents, while decentralized finance platforms hold over $200 billion in assets under management.
Several factors have led to a watershed moment in the success of cryptocurrencies. In July 2025, the first comprehensive federal framework for stablecoins, known as the Genius Act, was enacted in the United States.
By mandating full reserves in US dollars or short-term Treasuries, month-end disclosures of holdings, and robust anti-money-laundering controls, the law facilitated the transformation of stablecoins from regulatory curiosities into mainstream instruments. Almost immediately, major financial institutions, such as Franklin Templeton, BNY Mellon, and Citigroup, began integrating compliant tokens into their balance sheets. This surge in clarity and confidence accelerated innovation—but it also alerted opportunistic patent holders that blockchain technologies had become a lucrative target.
However, as the tremendous potential of blockchain technology appears within reach, a threat is emerging – patent enforcement. Non-practicing entities (referred to by some parties as “patent trolls”) have quietly amassed broad patents relating to core blockchain functions and are asserting these patents in court.
For many reasons, cryptocurrency platforms historically were not well-suited for venture capital investments, including:
- Regulatory Uncertainty: Cryptocurrency platforms operate in a rapidly evolving legal landscape, where new laws and policies can drastically affect their operations and value. This unpredictability makes it challenging for venture capitalists to assess risk, forecast returns, and structure investments with confidence.
- Decentralized Governance: Unlike traditional startups with clear leadership and ownership structures, many crypto projects are governed by decentralized communities. The absence of centralized control can complicate decision-making, dilute accountability, and limit a VC’s influence over strategic direction or exit opportunities.
- Lack of Conventional Equity Stakes: Venture capital relies on acquiring equity and exercising shareholder rights. However, on cryptocurrency platforms, investment often takes the form of tokens whose legal status remains ambiguous. Tokens may not convey voting rights, profit-sharing, or legal recourse, making it difficult for VCs to secure their interests or benefit from future growth in a familiar, enforceable way.
Nonetheless, venture capital’s enthusiasm for cryptocurrency reached new heights in 2024, with investors deploying $11.5 billion into projects spanning layer-2 rollups, cross-chain bridges, and decentralized identity platforms. And, at the same time, nontraditional corporate treasuries—ranging from tech giants to public pension funds—are holding digital assets, signaling broad confidence in blockchain’s long-term value. “GameStop Joins $50 Billion Institutional Surge Into Bitcoin as Treasury Asset,” PYMNTS, June 12, 2025.
Several next-generation networks captured developer attention: Solana processed over 1 million daily transactions with sub-cent fees, Avalanche’s enterprise-grade subnets hosted bespoke private chains, and Polygon’s zkEVM mainnet fused zero-knowledge proofs with Ethereum compatibility. The rapid maturation of blockchain technology showcased both its technical prowess and its growing appeal to institutions.
Patenting software and blockchain inventions has always been fraught.
Section 101 of the US Patent Act excludes “laws of nature, natural phenomena, and abstract ideas” from eligibility. Courts apply the two-step Alice test, first asking whether a claim is directed to an abstract idea—such as a generic process for verifying data—and then whether the claim recites an “inventive concept” that transforms it into patentable subject matter.
Of course, the leadership of the US Patent and Trademark Office (USPTO) has a great deal to say in how patents are granted and enforced. The acting Director of the USPTO, Coke Morgan Stewart, is a career patent examiner with two decades of policy experience.
Over the past year, the USPTO has emphasized patent quality measures, expanding third-party prior-art submissions, and issuing new examination guidelines for blockchain and smart-contract applications. However, under the Trump administration, the USPTO has embraced a decidedly pro-inventor stance that shifted the balance toward patent holders on several fronts.
Most significantly, the USPTO has adopted what became known as the “NHK-Fintiv” framework, which gives Patent Trial and Appeal Board (PTAB) panels discretion to deny inter partes review (IPR) petitions when parallel district-court litigation is pending. By doing so, he insulated many granted patents from being challenged in the PTAB, effectively raising the cost and complexity of attacking asserted claims. Prior to the application of the NHK Fintiv framework, inter partes reviews were a powerful tool in defending against patent assertions, especially when the patent owner was a non-practicing entity.
Further, recent legislative proposals dovetailed with USPTO policy to fortify patent owner positions. For example, the PREVAIL Act, introduced in May 2025, aims to curtail PTAB review avenues and restore broad injunction rights, reflecting—and reinforcing—the USPTO’s pivot toward strengthening, rather than challenging, awarded patents. Together, these recent leadership decisions, policy shifts, and pending legislation have tilted nearly every stage—from application examination to post-grant trial—toward upholding and defending patent owners’ interests.
For innovators in the crypto space, this means that patents covering blockchain methods are likelier to issue and will be more difficult (and expensive) to invalidate, raising the stakes for any participant who might run afoul of a patent assertion.
The non-practicing entity business model thrives in environments where rapid innovation outpaces clear legal precedent. Their business model is simple: acquire patents—often by purchasing portfolios from large corporations or desperate inventors—then send demand letters or file lawsuits against numerous targets at minimal upfront cost. The targets are often startups, open-source teams, and volunteer developers whose legal budgets are tiny compared to the cost of mounting a full defense. Settlement offers as low as $50,000 can look like a good investment to avoid years of litigation expenses, which exceed several million dollars in the US courts.
The most immediate patent threat to crypto innovators is Malikie Innovations Ltd., which holds patents that allegedly cover elliptic curve cryptography—the bedrock of Bitcoin’s signature scheme. Malikie’s lawsuits against Core Scientific, Marathon Digital Holdings, and others allege that routine signature verification and key-generation processes infringe its patents. Malikie has proposed settling the lawsuits based on per-signature fees. If Malikie is successful in imposing such fees, the cost of validating blocks could skyrocket, forcing some miners to consolidate or exit entirely, increasing the costs of bitcoin transactions and potentially threatening the network’s decentralization.
The promise of crypto and other Web3 technologies – open, permissionless innovation – hangs in the balance. While regulations like the GENIUS Act and institutional investments underscore blockchain’s maturity, patent trolls are staking claims to fundamental protocols, seeking fees and other remedies that could choke off development.
To protect the ecosystem, community members must rally behind defensive initiatives such as the LOT Network, Cryptocurrency Open Patent Alliance, and Unified Patents’ Blockchain Zone, where participants pool resources to combat NPE patent assertions before they threaten active projects. Further, developers should document their work in public repositories to establish prior art, and industry stakeholders must advocate for legislative reforms that tighten patent clarity requirements and limit abusive litigation tactics. Finally, all blockchain innovators should strategically obtain patent protection for their innovation as a defensive measure against patent infringement assertions.
Only by weaving legal vigilance into the fabric of decentralized innovation can the crypto space remain an unlocked ledger – empowering builders and users without fear of a patent ambush.
