Federal Circuit Upholds Ruling That Blockchain Gemstone Tracking Patent Is Ineligible

On Wednesday, March 27, 2024, the Federal Circuit U.S. Court of Appeals affirmed the dismissal of a patent infringement lawsuit. The court ruled that the patent at issue was not eligible for protection under US patent law.

The patent in question, US Patent No. 10,469,250, was owned by Max Rady and claimed a process for recording unique identifiers of physical items on a distributed digital ledger called a blockchain. Specifically, the patent described using scanning technology to analyze imperfections or defects in physical objects like gemstones in order to create a unique “fingerprint” for each item. This fingerprint would then be recorded on a blockchain if the item had not been registered before, for the purposes of tracking, authentication, and supply chain management.

Rady had filed a lawsuit against consulting firm The Boston Consulting Group and mining company De Beers UK, alleging that they had infringed on his patent. The defendants argued that the patent was directed to the abstract idea of collecting, processing, and storing data and did not constitute eligible subject matter for a patent under US law.

The district court agreed with the defendants and dismissed the lawsuit, finding that while the invention recorded fingerprints on a blockchain, it did not improve the functionality of blockchains. On appeal, the Federal Circuit also ruled that the patent was ineligible. In its analysis, the appeals court noted that identifying unique characteristics of physical items to track them has long been a standard business practice and that the patent did not purport to invent any new scanning or blockchain technology.

In its ruling, the Federal Circuit stated that the focus of the patent claims was on gathering and recording data, which are considered abstract ideas. While the invention aimed to address the problem of counterfeiting, its goal of asset tracking did not make the claims any less abstract. The court found that the patent failed to provide a specific technological solution or explain how the scanning technology and blockchain were being used in an innovative way. As the claims relied only on conventional components operating as intended, the Federal Circuit affirmed the dismissal, concluding the invention lacked an “inventive concept” required to render it eligible for patent protection.

Please contact BlockTribune for access to a copy of this filing.