Blockchain and IP: Exploring The Two Sides Of The Coin
By: Faith Obafemi:
Be it in hype or substance, blockchain is a phenomenon everyone is learning to become familiar with as heralding the dawn of the fourth industrial revolution. Beyond the financial services industry, enthusiasts of Distributed Ledger Technologies (DLT) are adopting blockchain for virtually one new use case daily, from agriculture to zebra-crossing smart cities. A survey by Deloitte showed that the future of blockchain is one filled with myriad opportunities for which individuals, companies and even governments are trying to position themselves. Almost half of the executives surveyed by Deloitte said they would be investing at least $5 million in exploring blockchain this 2019. It is expected that these investments in R&D (Research and Development) would result in innovations that need to be protected under IPRs (Intellectual Property Rights).
Intellectual property (IP) for something like a car or solar-powered fan is easier to manage than digitized IPs. If I paint you a landscape and sell to you, no one else would have a copy of the landscape except you. By the way, that’s a P2P (peer-to-peer) transaction, they are facilitated without a middle-man. Where the problem arises is when we go digital. Let’s assume I take a photograph of a beautiful sunset with my digital camera and sell to you. Since it’s a digital photograph, there is no guarantee I won’t sell the same sunset photograph to another, or even upload online for millions to download. How amazing would it be to have a solution where, when I send you the digital sunset photograph, I will no longer have a copy, but you will? To solve this “double spending” problem for digital assets (including and especially money), blockchain was born.
From the above, we can connect the dots to a two-sided approach to blockchain and IP. On one side of the coin, innovations involving blockchain-based solutions can be protected under IP. On the other side of the coin, IP can be better protected using the fundamental features of blockchain, like time-stamping, transparency and immutability.
We would be exploring both sides of the coin in this article.
What is Blockchain?
First things first, bitcoin is not synonymous to blockchain.
Blockchain is like electricity, bitcoin is like a bulb. Blockchain is to bitcoin what electricity is to a bulb. Without the blockchain, there would be no bitcoin. And, just like lighting bulbs is not the only thing electricity can be used for, so also, crypto is not the only thing a blockchain can be used for. There are a thousand and one use cases already developed or being developed worldwide.
In simple terms, blockchain is a digital record or a digital database which is replicated on several computers. Data, information and transactions are permanently recorded on the blockchain. It is distributed because the nodes (computers) that make up the blockchain network are scattered around the world. It is decentralized because it is not controlled by any single entity, rather decisions are reached via a consensus algorithm. It is immutable because once new data is entered, it cannot be changed, deleted or altered. It is unhackable, because hacking the blockchain will be an expensive and time-consuming task.
What is IP?
Whether you’re reading this on a phone, tablet or PC, there’s no escaping the fact that, these devices are all products of human imagination. You can hold the physical devices, but you cannot hold the imaginations that resulted in their production.
Intellectual property is thus the ownership of human imaginations. To guarantee ownership, these imaginations need to be expressed, either in written words, drawings or artistic forms. It is the expressions that are protected. Thus, even if you have dozens of book ideas like me, you cannot claim copyright, until you actually write the book and publish it. IP is protected under different categories such as patent, trade secrets, copyrights and trademarks.
Here, we will look at how innovations involving blockchain-based solutions can be protected under IP.
When you write a book, no one else can publish the same book in their own name or sell the book without your permission. This is because you own the copyright to your book.
Similarly in the tech world, when a software programmer writes codes for an application or computer program, he or she owns the copyright to the code. This means another cannot simply copy and paste the codes, and sell or use it.
However, it is possible for the owners of the books or code to make their work freely available for anyone to copy and use for whatever they like, or even to contribute to the work, by adding paragraphs to the book or more lines of code to the software. For books, this is called creative commons, while for software, this is called open source.
Blockchains, at least the public/permissionless ones are usually open source. Meaning, anyone can download the software and begin using it, make reviews and suggestions, or even make changes to the software and release as their own work. Satoshi Nakamoto, an unknown entity known as bitcoin founder, made the Bitcoin blockchain codes open source.
Interestingly, even though the first popular DLT (blockchain) is open source, individuals, corporate entities and governments have all been rushing to patent blockchain-based technologies, most of which are a spin-off from open source. The financial services industry saw the first application of blockchain technology. No surprise then that the first set of blockchain-related patent filings was made by banks and other financial institutions.
Some have been pushing for making all blockchain-related innovations open source. In the alternative, others have suggested creating a patent pool. All in a bid to kick against IP trolls who seem to have found a new vibrant territory. In fact, for this very purpose, the US Chamber of Digital Commerce set up the Blockchain Intellectual Property Council (BIPC) whose sole duty is guiding against blockchain patent trolls.
A patent pool is a consortium formed by at least two industry players who each agree to grant a license to other members under a cross-licensing agreement. Cross licensing means: I have a patent for the seat belt, you have a patent for the side mirror. I give you license to use my seat belt IP in exchange for using your side mirror IP in building our respective cars. By the way, the seat belt was invented by an engineer at Volvo, but they decided not to patent it because safety was more important than making more money.
To facilitate growth and development, instead of working in silos, blockchain industry players can create patent pools that allow for cross-licensing of blockchain patents to participants in the pool. Examples of such are the Blockchain Intellectual Property Council (BIPC) and the Open Invention Network ( OIN).
In Maths We Trust
Here, we will consider the ways in which IP can be better protected using the blockchain. This is based on the premise that maths is a more reliable oracle. We are now in the digital age where, thanks to social media, other people’s work can be copied and disseminated to millions with just a click and without the owner’s permission or knowledge. Current DRM (Digital Rights Management) measures have been largely ineffective due to the internet freely providing the tools for unauthorized infinite reproduction of people’s intellectual property. Blockchain technology will enable IP creators to directly interact with their fans, track sales, license and conduct private auctions.
Smart IPRs and IP Registries
Currently, IPRs are recorded in traditional centralized registries, making it vulnerable to issues like tampering, manipulation and a fertile ground for IP trolls to operate. Moreover, each application must first pass through a verification process that takes a long time to confirm.
Also, some rights like patents and trademarks are territorial, meaning they are only valid in the country they are registered, while copyrights are generally universal. Whether territorial or universal, IP registries of different countries, although independent, have always worked together in managing IPRs. This is the reason for WIPO’s (World Intellectual Property Organization) creation of the PCT (Patent Cooperation Treaty) system, the Madrid System, the Hague System, and so on, as an avenue for collaboration.
Registering IPRs on a decentralized ledger like the blockchain will instantaneously convert it into a smart IPR, facilitating easy transfer of ownership and licensing. In essence, such a registry would be a Smart IP Registry. This makes for an easy decentralized connection between IP registries from different countries and regions.
With smart IPRs embedded in smart contracts, the blockchain can be used to guarantee real-time payments to IP owners and the enforcement of IP agreements. Creators can now have direct access to their audience, without the middlemen labels that milk them dry. MyCelia provides this solution by creating a platform that allows artists to sell directly to fans.
Combination of smart IPRs and smart IP registries means disputes resulting from issues regarding first to apply, first to register, first to use in trade and so on, would be things of the past. A transparent record that is time-stamped and immutable would make for easy proof, audit and tracing of the life cycle of an IPR.
Digitization of assets on the blockchain, in this case, intellectual property, by assigning a unique string of alphanumeric characters to it, is what tokenization is all about. Tokenizing IPRs would unlock their previously illiquid state, making transfer easy. This is made possible by fractionalizing or breaking down illiquid assets into bites and chunks that are easier to manage.
Proof of Authorship
As regards copyright which isn’t necessarily a registrable right in most jurisdictions, blockchain would play a prominent role as evidence in proof of authorship. As simply placing such work on the blockchain resolves any controversy before it even arises.
KODAK’s blockchain project called KODAKOne is building an ecosystem that allows photographers to have complete control over their image rights, namely who buy their work or to whom they license their work. The project will also have a native token called KODAKCoin to be used to facilitate faster transactions.
Proof of Originality
Counterfeiting, piracy and unauthorized use are some of the challenges IP owners battle with. This is especially rampant in industries that are IP-sensitive, like manufacturing, supply chain, pharmaceutical and publishing. By adding elements of scannable RFID (radio frequency identification) tags and storing the data of products on the blockchain, it is possible to verify the authenticity of goods, right from sourcing of raw materials until it gets into the hands of the consumer. This would be of great help to Custom Officers at the border, retailers and consumers. WaltonChain and VeChain are blockchain projects working on this solution.
With the blockchain, we can now have a digital footprint for IPRs. Technology is constantly advancing. Blockchain, as we know it today, might be different in two, five or ten years time. However, one thing is sure, that as globalization continues to permeate every nook and cranny, we can expect blockchain’s fundamental features of transparency, traceability, time stamping and immutability to be the bedrock of whatever system wins tomorrow. Amidst all these, IPRs will be created and protected.