ACIPR Logo

Alliance Center for
Intellectual Property Rights


AN ANALYSIS OF COOPERATIVE INNOVATION AND PROPRIETARY PROTECTION IN THE BANKING SECTOR

January 1, 2026

*Ms. Maria Therese Syriac M

INTRODUCTION

The major financial institutions across the world, like Bank of America and JPMorgan Chase, are filing patents for blockchain technology, which was built for an open, decentralised finance. They are building private infrastructure on public blockchain protocols, such as Ethereum. This is not just a corporate hypocrisy but a calculated move to endanger future transactions. The banks are patenting the entry points to a blockchain, resulting in different parties owning rights to a single technology. This creates a situation where no one can use it legally without incurring a substantial cost.

Now, this brings us to the question of how banks secure patents. In 2014, the decision in Alice Corp. v. CLS Bank International, the Court ruled that institutions cannot patent abstract ideas or basic mathematics. Since blockchain is cryptography, which is math at its core, most attempts should theoretically fail. However, the banks circumvented this decision by ignoring the blockchain and patenting the compliance layer. They are not patenting the ledger but the specific computer processes required to make that ledger legal for banking.

For example, JP Morgan's patents focus on identity verification and asset tokenisation specific to regulatory standards. They claim ownership of digital gateways that verify the user before the user enters the blockchain. This means that while the blockchain is free, the only way for a regulated bank to access it might be owned by a competitor.

The increased patent filings are a defence against severe leverage in the future. The accumulation of 50 blockchain patents by the Bank of America is not just about research and development rights. It is also about establishing a mutually assured destruction capacity against the disruptors of fintech. The financial institutions are preventing the open-source competitor from operating without infringing on a proprietary method through patents.

THE RISK OF OPEN-SOURCE LICENSE

The unmanaged risk for banks is the licensing structure of the software. While core protocols like Bitcoin use the MIT License, a huge portion of blockchain systems operate under copyleft regimes, such as the GNU General Public License. If a bank integrates the GPL code into a proprietary trading platform, the terms of the license can legally compel the bank to release its own source code to the public, as it is a derivative work. The obligation to release source code is triggered if the bank distributes the trading platform to external parties. This strips away the trade secret protection the moment these code bases are linked.

The banks must utilise open-source protocols for the settlement layer while attempting to seal their application layer to protect IP. The separation fails if the court decides that the proprietary software relies heavily on the open-source code. This forces the banks to close their entire stack, losing intellectual property rights and ownership.

While the financial institutions are under pressure to ensure separation of open-source code and their stack, they are being sued due to the rise of patent privateering. The non-practicing entities/companies that hold patent portfolios for the purpose of enforcing rights against operational companies sued banks not for blockchain technology, but the essential tools required to run the technology.

In the recent case of DigitalDoors Inc. v. J.P. Morgan Chase, DigitalDoors sued major banks, alleging they infringed on patents for data fragmentation, encryption, and storage compliance. A compliant banking system cannot operate without securing sensitive data. The financial institutions chose to settle the matter in July 2024. The settlement was a better strategy, as banks preferred to avoid courtroom litigation, wherein they might be forced to publicly disclose their technology stack to prove non-infringement.

MANDATORY FRAND LICENSING

The industry now relies on patent pools where the banks agree not to sue each other. This protects the major institutions but prevents new competition. However, the regulatory solution is to designate blockchain interoperability standards as a Systematically Important Digital Structure. Once designated, these patents should be subject to FRAND (Fair, Reasonable, and Non-Discriminatory) licensing obligations. This is the same regulation standard for telecommunications, like 5G.

Under the FRAND system, if a patent is deemed standard essential, that is, one must use it to comply with the standard, the patent holder cannot refuse to license it. They can charge a fee that is uniform and reasonable for everyone. Most importantly, the patent holder cannot get a court order to shut down a competitor’s system but can only ask for a fee.

The standard set by FRAND ensures that the financial system does not become gridlocked due to patent disputes, and the efficiency of the blockchain is not negated by the litigation costs.

CONCLUSION

While the technology behind blockchain is not an obstacle for cross-border transactions, the patent systems are still locally based. Blockchain-related IP issues need a harmonized patent system on financial technology regulation globally. Disparate laws impede the growth of the world economy; thus, international coordination becomes increasingly relevant. Further, there must be cooperation among institutions, developer and regulators.

Ultimately, the banking sector is left with two choices. Either it can accept a regulated framework that provides access to the layers of trade, or it can continue to patent and disable future financial transactions. The latter choice, however, will leave the system expensive and force the court intervention.

The goal is to respect genuine innovation and prevent the weaponisation of essential infrastructure for the greed of the institutions.

REFERENCES

  1. Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014).
  2. Tokens to be issued on the DLT platform created by JP Morgan, E&S Group (Dec. 6, 2025), https://www.ellulschranz.com/tokens-issued-dlt-platform-created-jpmorgan/.
  3. Stephen O'Neal, Bank of America Has the Most Blockchain Patents, But Is It Actually Going to Use Them? COINTELEGRAPH (Dec. 6, 2025), https://cointelegraph.com/news/bank-of-america-has-the-most-blockchain-patents-but-is-it-actually-going-to-use-them.
  4. Jason B. Wacha, Taking The Case: Is The GPL Enforceable?, CMU 451 (2004).
  5. Kelli Spearman, Protecting Blockchain Investments in a Patent Troll World, 26 JIPLP 174 (2019).
  6. Lauren Castle, JP Morgan Chase Among Big Banks Sued for Data Security Patents, Bloomberg Law (Dec. 8, 2025), https://news.bloomberglaw.com/ip-law/jp-morgan-chase-among-big-banks-sued-for-data-security-patents; Lauren Castle, Patent Owner Agree to Drop Data-Security Patent Suit, Bloomberg Law (Dec. 8, 2025), https://news.bloomberglaw.com/ip-law/jp-morgan-patent-owner-agree-to-drop-data-security-patent-suit.
  7. Lauren Castle, Patent Owner Agree to Drop Data-Security Patent Suit, Bloomberg Law (Dec. 8, 2025), https://news.bloomberglaw.com/ip-law/jp-morgan-patent-owner-agree-to-drop-data-security-patent-suit.
  8. Andras Jokuti, A FRAND in need: why establishing standardized technologies is so complicated, WIPO Magazine (Dec. 9, 2025), https://www.wipo.int/en/web/wipo-magazine/articles/a-frand-in-need-why-establishing-standardized-technologies-is-so-complicated-69933.
  9. India’s High Court of Delhi issues guidance on SEP licensing that seeks to harmonize decisions in other countries (Intex v. Ericsson), The Copyright Society (Dec. 9, 2025), https://copyrightsociety.org/indias-high-court-of-delhi-issues-guidance-on-sep-licensing-that-seeks-to-harmonize-decisions-in-other-countries-intex-v-ericsson/.
  10. Covington, Intellectual Property Issues in Blockchain and FinTech, Covington & Burling LLP 1, 2018, https://www.cov.com/media/files/corporate/publications/2018/12/intellectual_property_issues_in_blockchain_and_fintech.pdf

Author:

Ms. Maria Therese Syriac,
3rd Year B.A., LL.B. (Hons.) Student, The National University of Advanced Legal Studies, Kochi.

Disclaimer: The opinions expressed in the article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of the Alliance Centre for Intellectual Property Rights (ACIPR) and the Centre does not assume any responsibility or liability for the same.