ASICBOOST stirs up trouble again: Ebang obtains exclusive license, Shenma and Samsung are sued, reviewing the history of patent wars

"Shenmasi chose to stand with ASICBOOST back then, but unexpectedly it would be the first to be sued by ASICBOOST."

On November 30, Wu Blockchain exclusively disclosed that Ebang announced that it had obtained the exclusive right to use the ASICBOOST Korean patent from the patent holder Circle Line International. The patent holder of ASICBOOST has sued Samsung in Korea for patent infringement, demanding that Samsung stop supplying chips to Shenma, as well as huge compensation and destroying the manufactured products. The lawsuit is still in the court acceptance stage, and the future outcome is difficult to predict.

ASICBOOST is a SHA256 calculation optimization algorithm developed by cryptographers Dr. Timo Hanke and Sergio Lerner. By optimizing the module structure of the block header structure in the SHA256 calculation, ASICBOOST can theoretically improve the efficiency of SHA256 calculation by 20%-30%. For Bitcoin mining activities that rely heavily on the efficiency of SHA256 calculation, ASICBOOST will undoubtedly bring a significant performance improvement.

Due to the great application value of this technology in the field of Bitcoin mining, in 2014, inventors Dr. Timo Hanke and Sergio Lerner chose to submit applications in the United States, Europe, China, and South Korea, seeking to protect this technology as a patent. However, this move immediately attracted strong criticism from the Bitcoin community. Many people are worried that once this technology is applied for a patent, Bitcoin computing power will be monopolized by a small number of ASICBOOST miners, and ASICBOOST technology is in the hands of the patent holder, which will lead to the centralization of Bitcoin mining activities.

In May 2017, after several changes of hands, the ASICBOOST patent application landed in the hands of a company called Little Dragon Technology. At that time, the mining machine giant Bitmain was at its peak, and the Bitmain threat theory was quite popular in the cryptocurrency circle. Many people were worried that Bitmain's monopoly on mining machines would threaten the decentralized nature of Bitcoin.

Xiaolong Technology saw the opportunity and first sent a public lawyer's letter through the US GeTech law firm, accusing "certain Bitcoin chip and mining machine manufacturers" of intentional patent infringement without naming them. Then it brought together several mining machine manufacturers including Shenzhen Microbt, Halong Mining, and Bitfury to form a patent alliance called Blockchain Defensive Patent License (BDPL), claiming to establish patent open source standards in the blockchain field and open all BDPL members to free use of the organization's patents, including the ASICBOOST patent that is still under application.

At that time, many people believed that Xiaolong Technology's series of actions were aimed at Bitmain. Because Bitmain has accumulated technology for many years and has a huge patent library, it is unlikely to choose to open source its patents and share technological achievements with other competitors like the newly established Shenma. Therefore, once the AB patent is authorized, Bitmain will inevitably face huge patent fee claims from Xiaolong Technology. Xiaolong eliminated the long-standing suspicion and hostility of the Bitcoin community towards ASICBOOST technology by making the ASICBOOST technology "free and open source".

However, after entering 2018, the entire cryptocurrency industry fell into a bear market, and the sales of mining machines were much lower than before. ASICBOOST also had a bad year, and its patent applications in China and the United States suffered major setbacks. First, in August 2018, the State Intellectual Property Office of China formally rejected ASICBOOST's Chinese patent application, determining that the patent only involved "pure mathematical calculation methods, without using technical solutions", "did not substantially solve any technical problems", and did not meet the authorization requirements of Article 2 of the "Chinese Patent Law". Previously, Bitmain applied for a similar patent in China, which has not yet been authorized. No company in China has this patent.

Then in September 2018, the U.S. Patent Office also rejected ASICBOOST's patent application in the United States on the grounds that the object of protection claimed by the patent was an "abstract concept" (algorithm) and did not meet the patentable technical requirements of Section 101 of the U.S. Patent Act.

At the end of 2018, the ownership of ASICBOOST patents changed quietly again. The patent applications in the United States, Europe and South Korea were transferred to a mysterious BVI company called "Top Galore Limited", while the application for the Chinese patent fell into the hands of a natural person "Yang Jie". It is worth noting that after the ownership of the Chinese patent application was changed, the name of Xindong appeared for the first time on the payment information page of the patent in the database of the China Intellectual Property Office.

After this change, ASICBOOST faded out of people’s sight and gradually fell into silence. In 2018, Bitmain also announced the launch of firmware supporting ASICBOOST, and other manufacturers followed suit. For a while, people seemed to have forgotten the threat from ASICBOOST patents.

However, changes have occurred again. As the cryptocurrency market gradually recovered in 2020, the ASICBOOST patent has quietly returned. In April 2020, the European Patent Office finally gave the green light to ASICBOOST's European application and agreed to grant the patent right for the application; in June 2020, the Korean Patent Office followed suit and made a grant decision. So far, ASICBOOST has obtained patent rights in both Europe and South Korea. Especially the patent rights in South Korea, it can be said that it has occupied the strategic point of mining machine production in one fell swoop.

As we all know, due to the tight 7nm production capacity of TSMC in the past two years, major mining machine manufacturers have sought to cooperate with Samsung and choose to produce mining machine chips in Samsung's wafer fab in South Korea. Shenma's best-selling M20/M30 series are Samsung 8nm chips. The authorization of the ASICBOOST patent in South Korea will undoubtedly have an impact on it. Once the ASICBOOST patent holder wins the case in South Korea, it will mean that all Samsung chip mining machine manufacturers except Ebang will lose the support of ASICBOOST, thereby losing more than 20% of mining efficiency, which is undoubtedly a major blow to mining machine manufacturers that rely heavily on South Korean wafer fabs.

It is interesting to note that Shenma chose to stand with ASICBOOST, but after its rise, it was the first to be sued by ASICBOOST . However, the parties are currently in close consultation, and it is likely that they are fighting and talking at the same time. After all, the patent holder and Ebang are only asking for money rather than attacking Shenma. Ebang itself is no longer focusing on the mining machine business but transforming into an exchange.

Professional lawyers pointed out that the protection period of a patent is calculated from the date of patent application, which is 2014, so it is also retroactive to Shenma's previous products. However, patent compensation varies from country to country. The amount of domestic patent compensation is often not high. The most lethal is usually an injunction. Domestic courts generally issue an injunction to the losing party, which means that the infringing products can be produced but not sold. In the United States, on the contrary, courts generally do not issue injunctions, but the amount of patent compensation is often very high. South Korea is also a civil law country, so it is similar to China. (Head image from eastshore.xyz)

This article was consulted and assisted by patent attorney Dong Bing. If you need patent-related business consulting services, please contact Wu Shuo Blockchain.