ニュース＆リソース
Blockchain and IP rights
Blockchains, crypto assets and distributed ledger technology are all experiencing increasing interest and rapid adoption. There are multiple websites, YouTube channels, blogs, articles, and communities committed to exploring their possibilities, development and application.
Here we discuss the basic features of the technology and provide a brief overview as to how this emerging technology could impact intellectual property rights and IP legal practice. The technology is complex and its application is vast, and so this article is intended to introduce only the very basic features. Please contact one of our attorneys if you would like to discuss any of these points, and how they could apply to your business, in greater detail.
What is a blockchain?
Blockchain originally became well-known for its association with Bitcoin. Bitcoin was developed to allow an electronic currency to be transferred directly from one party to another without the need to go through a government-controlled financial institution. This was originally set out in a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” released on 31st October 2008 by a mysterious inventor known as Satoshi Nakamoto.
A bitcoin is essentially an electronic coin, and it is represented by a chain of transactions that each transfer the ownership of that coin from one party to another party.
To transfer ownership of a coin (i.e. a bitcoin) a new transaction is generated and added as a block to a stack of transactions. That new transaction will include the public key of the new owner and is digitally signed by the existing owner with the existing owner’s private key. This process transfers the ownership from the existing owner to the new owner, the new owner being represented by their public key. Each transaction or block (a mathematical proof of ownership) is transmitted to all participants in the relevant network (i.e. computer nodes) to be verified by each node and once verified, is added to the block.
Once a block is full of transaction data, the block is finished with a block header that is a hash digest of all the transaction identifiers within that block. That block header is recorded as the first transaction data in the next block in the chain, progressively leading to a chain of mathematical blocks called the “blockchain”. The content of a blockchain is often called a ledger.
However, blockchain technologies have now extended far beyond bitcoin. The technology can be used to support transactions of any type and the transactions use identity tokens (also called digital bearer bonds) to uniquely identify something that can be owned, or own other things.
The real innovation and some of the greatest value in this technology is that it ensures integrity in the ledger by distributing the verification and validation process without the need for a central authority. This means the technology is considered to be practically unhackable because to change any of the information on it would require a simultaneous attack on the majority of the copies held on the distributed nodes.
What is a smart contract?
To enable more complex transactions some blockchain and distributed ledger technologies use “smart contracts” which are essentially a computer code that implements transactions of a contract. This code may be executed on a secure platform, such as Ethereum (a layer 1 platform), that enables the recording of these transactions in blockchains. The smart contract ensures that all terms of the contract are complied with before the transaction is recorded on the blockchain.
For example, the smart contract may support the purchase of an asset, such as an IP right. The information input to the smart contract may be the identity of the seller, the buyer, the asset and the sale price in a chosen currency. The smart contract (computer code) ensures that the seller is the current owner of the asset and that the buyer has a sufficient amount of the chosen currency. The smart contract then records a transaction that reflects the transfer of ownership of the asset to the buyer along with a transaction that reflects the transfer of the correct amount of the chosen currency from the buyer’s account to the seller’s account. If either transaction is not successful, then neither of the transactions is recorded.
When a smart contract executes a transaction, a message to record that transaction is sent to each node that maintains a replica of the blockchain. Each node then executes the computer code, and the transaction is recorded on the blockchain.
Blockchain technology and IP rights
The ability to give complete transparency along with immutable privacy and security means that the use of blockchain and the distributed ledged methodology has industrial applications in almost every area of technology.
This is especially the case for IP heavy areas of technology such as pharmaceuticals, consumer (luxury) goods, automotive industry, and digital rights management. Blockchain technologies offer advantages such as IP authentication and provenance.
There is now rapidly growing awareness within the world of IP as to the impact of these technologies. The World Intellectual Property Organization (WIPO) has now established a Blockchain Task Force, the German government is actively and publicly working on a blockchain strategy with special emphasis on the creative arts sector, and the European Union Intellectual Property Office (EUIPO) has established its own blockchain for trademarks and designs in the EU.
The impact on IP rights will also be far reaching. For example, the ability to record IP rights in a distributed ledger offers huge advantages in the management of IP rights, effectively turning them into “smart” IP rights and registries. This would provide for the ability to hold all the information regarding any IP right in an immutable record giving every participant the ability to access and verify the information.
IP audits and due diligence could be simplified, and indeed all aspects of collecting information on IP rights and transaction would be speeded up.
Evidence for creation and use of unregistered IP rights would be simplified and verified with the blockchain effectively providing a time stamp record.
Smart contracts could be used to establish and enforce IP agreements and allow the rapid processing of payments to IP owners.
An artistic creation, such as a song or image, can be encoded in digital form and payment made with digital currency, see the rapidly growing popularity of non-fungible tokens (NFTs).
There is also enormous interest from both IP offices and private companies, especially luxury brand owners such as LVMH, to combat counterfeit goods with blockchain technology.
Future of Blockchain technology
Many applications of blockchain technology are still very much in the early stages of development. The technology is complex and there are uncertainties regarding future regulations by governments and the legal recognition of the smart contracts.
The large amounts of computer resources required to effectively store transactions and the large amounts of power required to maintain the integrity of the blockchains is also problematic.
The security of the blockchains will also be negatively impacted by the rapid advancement of quantum computing technology, especially with regards to Shor’s algorithm and the currently used public key cryptographic techniques.
Ownership of IP rights could also be tokenized, meaning that the goods can be marked with a code which is represented by a token on the blockchain, which potentially creates future problems with enforcement.
However, the technology is moving so quickly and developments happening so rapidly, that the human ingenuity of some of the brightest minds working in this space will inevitably solve these problems or mitigate the risks. The coming years will be no doubt prove the scalability and widespread adoption of the technology thereby ensuring its place in every marketplace in our future lives.
If you have any questions on this topic, please contact Andy Cloughley at andycloughley@mskpatents.com.
Article written by Emma Bevan.