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Canada: next hotspot for blockchain patents?

February 06, 2018

Canada has always had a large mining industry. Fully 57% of the global mining financings in 2016 were done on the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV).

But a new type of mining industry is setting up in Canada: Bitcoin mining. Racks and racks of dedicated servers designed to perform complex hash operations are necessary to compete in the race to mine a block in Bitcoin. Those racks of servers need a lot of power and expensive cooling. Bitcoin mining operations have typically sought out cold dry climates with abundant cheap electricity. Up to now, that has principally been China, and Inner Mongolia in particular.

A recent crackdown by Chinese authorities has disrupted mining operations in that country, leaving miners searching for a new favoured jurisdiction. Canada has a cold climate and, in some areas, cheap power. Northern Quebec is blessed with plentiful hydroelectric power. Alberta has surplus natural gas for which the market price is currently so low some producers cannot justify shipping it. In one recent example, natural gas producer Iron Bridge Resources Inc. announced its plans to use its gas to power a Bitcoin mining operation. Manitoba Hydro and Hydro-Quebec each report over 100 inquiries about setting up cryptocurrency mining operations. Bitfarms, Bitmain Technologies, BTC.Top, and Bitfury are each already running mining operations in Canada or are in the midst of setting up.

With the uncertainty in China and the apparent shift of mining operations to Canada, the importance of Canadian patents on blockchain technology increases. As we noted recently, Canada is an increasingly attractive jurisdiction in which to obtain patent protection on computer-related innovations. There has also historically been significant Canadian involvement in cryptocurrency developments, such as Toronto programmer Vitalik Buterin’s creation of Ethereum and the involvement of the large Canadian banks in blockchain-related R&D, either in-house or through funding accelerators.

Much of the innovation that goes into blockchain technology can be in the specific communications and algorithms used in the network. A difficulty for a patentee is finding and pursuing an infringer, i.e. a node of the network, that performs the innovative functions being claimed in a patent, particularly in a decentralized and pseudo-anonymous system like those used for cryptocurrencies. Miners present one clearly identifiable, and potentially lucrative, active node of the network that could be a potential infringer. For those companies and individuals that are in the midst of developing innovative solutions in and around cryptocurrencies and other blockchain-related applications, a shift of mining operations to Canada should be welcome news. Canadian patents are relatively cost effective to obtain and enforceable in a familiar and predictable court system.