Patents, in the popular imagination, conjure up images of geniuses, scientific marvels, and inevitably, the word “innovation.” And so it was this week when Circle announced it had purchased nearly 1,000 patents from fading tech giant IBM. The stablecoin firm hailed IBM as a “pioneer in technological innovation” and claimed its new bag of IP would “advance the infrastructure that powers global, internet-native finance.” Is that so?
While the market seemed to like Circle’s move, sending the company’s stock up 2%, it’s hard to see what the purchase has to do with innovation, or how it will benefit the blockchain sector more broadly. Most obviously, if IBM is so innovative, why have its own blockchain efforts proven a bust, and why is its broader business strategy in tatters?
This is a company that, addicted to the revenue from its mainframe business, largely missed both the cloud and AI revolution, and that most people associate with the past rather than the future. On the blockchain front, IBM did make a small ripple almost a decade ago with projects to develop a version of Ethereum for the corporate world. But as with many of its recent endeavors, the company’s leadership appeared to prioritize marketing over execution.
As for that patent portfolio, IBM for years made an annual ritual of announcing it obtained more patents than anyone else. Unfortunately, this is less a marker of innovation than IBM’s talent for drafting patent applications—a valuable skill but not one that has led to much real-world innovation. Which brings us to Circle.
Circle has been on the crypto scene since 2015, and has built an impressive business. But the company has mostly been a one-trick pony, collecting interest on its USDC stablecoin without developing any other major business lines. CEO Jeremy Allaire hasn’t tipped his hand on what he plans to do with the patents, but in the worst case scenario, they could be ammunition for a litigation campaign. In this scenario, Circle could use its newly bought IP to coerce competitors into paying royalties or to intimidate startups from competing at all. Or it could assign them to shell companies known as patent trolls to wage shakedown campaigns, in the same way a floundering Microsoft did in its pre-Satya era.
It’s possible Circle is merely using the patents to gain negotiating leverage versus the banks and card companies that are planning to launch a competing open-source stablecoin. But whatever the company is planning, it’s hard to foresee any outcome that will benefit the broader crypto industry. One can only wonder what Satoshi would think if his movement, which was founded on decentralization, ends up captured by a company using patents, a form of government-granted monopoly, to bully blockchain developers.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
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