Blockchain and the future of IPRelated Practice Area: DLT & Fintech
Ten years from its genesis, blockchain is being touted as the greatest technological innovation since the emergence of the worldwide web back in 1991. 2017 was truly the year that blockchain made it to the mainstream, thanks to the meteoric price-hike of cryptocurrencies, particularly Bitcoin and Ethereum, which are built upon blockchain technology.
This phenomenon enticed the masses, who saw an opportunity to get rich quick, prompting every man and his dog to dabble into the crypto frenzy on the premise that someone else might pay a higher price for the asset. (the greater fool theory)
However, 2018 was the harbinger of doom for these herd “investors”, with crypto prices plummeting, in great part attributed to the liquidation of funds raised through ICOs on Ethereum’s fundraising mechanism. The high sales volume placed the masses into disarray, prompting many to offload their crypto assets, producing a ripple-effect (pun intended) throughout the entire crypto-market. So, what should we make of these recent developments, have we reached crypto apocalypse, or does this cloud have a silver lining?
Beyond cryptocurrencies and fintech, blockchain has a wide array of uses which may not seem obvious to the man in the street, however before delving into such uses, it would do well to go over the fundamentals of blockchain technology.
Blockchain originated as a transaction ledger for Bitcoin, however over the past decade it has largely developed and its use has spread exponentially to other areas. Essentially, distributed ledger technology (DLT) or blockchain, is a technological arrangement which makes use of a peer-to-peer network connecting various computers scattered across the globe, in order to develop a decentralized and ever-evolving chain of time-stamped records (blocks).
These records are kept across a multitude of computers and each new block is built upon previous blocks and contains the data stored on all previous blocks. Its decentralized nature, coupled with military-grade cryptography, contributes towards its security. Since all blocks in the chain are interlinked and the earlier blocks provide the basis for subsequent blocks, the blockchain is virtually unalterable.
Its alteration would require cracking the cryptographic security employed, retroactively altering previous blocks, and moreover simultaneously tampering the records held across all computers connected to the distributed ledger. This makes it highly-resistant to cyberattacks, as there is no central point of vulnerability to target.
Another key feature of blockchain technology is transparency; the chain is an open and accessible record of all past transactions to all certified users. Each chronological entry into the chain is recorded and may be accessed by each user, allowing them to trace transactions and thereby eliminating the need for central record keeping.
The capacity to create accessible, unalterable, secure, and transparent records through distributed ledger technology, presents great potential beyond the area of cryptocurrency and finance.
Potential IP Applications
Intellectual Property presents a plethora of potential uses for blockchain including; the registration, evidence, negotiation, management, and enforcement of such rights. Choice of law and jurisdiction are the greatest stumbling blocks which challenge the wide-scale application of blockchain in this sphere. This constitutes the predominant difficulty for IT-related law in a wider sense and the benefits of addressing this drawback could be far-reaching and would largely transform the digital landscape as we know it.
Since the emergence of the internet, traditional models for IP enforcement have proven to be largely ineffective, thus providing a great incentive for the industry and regulators to think outside the box and seek innovative ways to protect intellectual property rights. Going forward, blockchain technology offers a potential avenue that should be explored as a means of addressing the difficulties right-holders have faced within the digital landscape over the past few decades.
i. Registerable IP Rights
Many Intellectual Property Rights require registration, including Patents, Trademarks, and Designs, but also Copyright in certain jurisdictions (such as the US). Perhaps the most obvious application for blockchain within the realm of IP is their registration. Rather than having such rights registered in a traditional centralized database, they can be registered on a decentralized blockchain instead, with the additional benefits that blockchain technology offers, as expounded earlier.
IP offices could also utilize centralized adaptations of blockchain technology to record the full life-cycle of IP rights. Thus, one could create immutable records detailing the entire development of an IP right as from the date of its application, outlining registration, first use, licensing, assignment, and so on.
Through blockchain-based trademark registers, IP offices could be notified instantaneously of any relative use and frequency of use of a trademark within the market, together with any distinctiveness or goodwill it may have acquired. This would lead to “smart” IP rights while addressing the practical disadvantages of collating and storing such records.
Its utility is especially obvious in defending against claims for revocation for non-use. Moreover, the possibility to trace the full life cycle of an IP right would also be useful for audits, assignments, mergers, and acquisitions.
A multitude of government agencies across the globe, including IP registries, are actively exploring the possibility of transitioning into blockchain-based solutions.
ii. Unregistered IP Rights
Blockchain technology could also prove useful in relation to unregistered IP rights such as works covered by copyright. Such works often face issues relating to evidence of their conception. By uploading their work to a blockchain, creators could give their works a digital footprint, one which is furthermore a time-stamped and immutable record evidencing its creation, coupled with details of its creator and any other relative information which one may choose to include.
Such platforms are already being developed, particularly in relation to photographs. Together with the advancement of artificial intelligence, this has enormous potential for creators; one can foresee a future where works could be uploaded on a blockchain and AI could scour the web using the work’s hash to detect infringing works or other unauthorized uses of protected works.
iii. Digital Rights Management
DLT-based archives could aid persons wanting to access information relating to creative works or other IP rights, such as the identity of creators, performers, or right-holders. This would largely facilitate the licensing of copyrighted works or other IP rights.
Coupled with the concept of “smart contracts” this could prove transformative for the content industries.
Smart contracts are computer codes running over a blockchain, containing a set of pre-defined rules through which the parties to the contract agree to regulate and execute their relationship. Once the pre-defined rules are satisfied, the agreement is executed automatically through the code; thus facilitating, verifying, and enforcing the pre-agreed terms.
Thus, for example, one could license a copyright-protected work and the relative royalty payments could be executed to the licensor in real-time once the work is used by the licensee.
The transparent and immutable nature of blockchain technology would also set creators’ minds at ease that they are getting their fair share of royalty payments.
iv. Anti-Counterfeiting & Supply Chain Management
Blockchain also offers untapped opportunities in the sphere of tangible goods. Ledgers showing the relative ownership or authorized licensees enables all persons in the supply chain, including consumers and authorities to distinguish genuine products from counterfeit goods.
Another avenue to combat counterfeiting would be incorporating scannable blockchain-connected tags or imprints to goods, providing the ability to trace goods on an immutable blockchain. This would also enable producers of goods to enforce their contracts and locate leaks or theft within the distribution system and could also be used to satisfy regulatory requirements such as warranties and obligations related to sourcing of materials.
While the technology is still relatively in its infancy, its development and proliferation could prove to overcome many of the hurdles which IP right-holders have been facing ever since the emergence of the internet.
Earlier this year, the EU Commission launched its “blockchain observatory”, focused on monitoring the development of the technology and identifying areas for policy, legal and regulatory action. It has already identified certain areas where the technology could be applied including identity and government services, healthcare, energy, and environmental reporting.
IP should be included among these sectors in the near future, more so in light of the EU’s ever-increasing competence creep in the area of IP, where harmonization is ever-increasing and where it could reap great benefits.