India: Blockchain & IP

Last Updated: 27 December 2018
Article by AMLEGALS  

1. INTRODUCTION

what Is blockchain?

There is no denying the fact that Blockchain is 'as ingenious an invention' as it is misunderstood.

People mostly associate Blockchain with online currencies or "Cryptocurrencies" like "'Bitcoins".

While it's true "Cryptocurrencies" are predominantly based on the Blockchain technology but the technology itself is much more than being part of Fin-Tech ecosystem. 

The brainchild of a person or group of people known by the pseudonym - "Satoshi Nakamoto", Blockchain technology works by allowing digital information to be distributed but not copied.

Blockchain enables transactions to be recorded in what is described as a "decentralized ledger".

Working something like a shared Google document, the ledger is a public database that records transactions between two or more parties in a permanent way and distributes a copy to all relevant parties, without the need for a third party to authorize the transaction.

These records are kept across a multitude of computers (called nodes), 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.

Even theoretically, its alteration would require cracking the cryptographic security employed, retroactively altering previous blocks, and simultaneous tampering of 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.

In simpler terms, Blockchain technology creates a trustworthy and transparent record by allowing multiple parties to a transaction to verify what will be entered onto a ledger in advance without any single party having the ability to change any ledger entries later on.

It would not be wrong to say that Blockchain Technology has created the backbone of a new type of Internet.

2. nexus between blockchain & intellectual property

In order to understand the actual relationship between Intellectual Property (IP) and Blockchain, it is necessary to first understand the technology and flow of Blockchain and then about advantages that Blockchain technology can actually provide.

A. TECHNOLOGY AND FLOW IN BLOCKCHAIN

Transactions: Each transaction transfers from one subject to another and is represented as a transaction from A to B, B to C or C to D.

Therefore, the blockchain keeps track of all the transactions occurred from its inception till the last stage occurred at any given point of time.

Blocks: All the transactions are grouped in blocks. Each block collects all the transactions occurring in a given timeframe and keeps a reference to the preceding block. Hence, they are linked as a chain.

Nodes: The blockchain is spread over network computers i.e. the "nodes". Each node contains a replica or local copy of the entire Blockchain.

Majority consensus: Decisions on the network are made according to a majority consensus. Each node modifies its local copy of the blockchain to make a mirror or replica status of the majority of the network nodes. 

Mining: Nodes could either passively store a copy of the blockchain, or actively take part to the maintenance of the blockchain, in the so called "mining" process.

Wallet: A wallet only stores credentials (a complex, unchangeable combination of automatically assigned numbers and letters), which enable blockchain users to transfer cryptocurrencies they own.

A unique addressee is always assigned with each and every wallet. A person willing to send any amount of cryptocurrency to another person, the recipient's address will have to be specified along with the desired amount and with his/her credential, the transaction will be validated for its completion.

This results into a complete flow of transaction under blockchain.

B. ADVANTAGES OF BLOCKCHAIN

Blockchain will be an integral technology for growth of each and every industry because of its potential uses.

Different types of data can be added to a Blockchain, from cryptocurrency, transaction and contractual information to data files, photos, videos and design documents.

Blockchain is also extremely secure and reliable. Any discrepancy in a record can be quickly identified and resolved.

Prime Objectives of Blockchain are: Accountability, Security, Transparency, Identification and Chain linked events.

Thus, Blockchain is an effective solution where a public record of transactions is required to be kept up to date quickly and effectively, while not necessarily needing any regulator or third-party authenticator.

This is where IP and Blockchain have a common platform.

C. LIMITATION OF IPR

IP rights (IPRs) are currently regulated by third party authenticators.

These authenticators are the Governments or administrative bodies of the geographical regions where the IP holder wants to secure and enforce rights.

The limiting factor of such a system is its inherent physical limitations. This system is already starting to show cracks.

The issues of piracy of copyrighted Literary, Dramatic and Musical works are a serious concern, which have been propelled extensively by the advent of internet sharing techniques, and as the market gets more globalized and digitized, it will become more imperative to look for a more feasible and reliable alternative.

Nonetheless, concerns regarding IPRs are not only limited to enforcement issues. Proper management of IP assets is also proving to be an equally challenging work. Thus IPRs, in tandem with larger contractual obligations, need a fresh look in the current digital landscape.

Furthermore, many big companies today have a substantial portion of their industrial framework over internet, and thus physical and geographical limitations are diminishing for such companies. Accordingly, Blockchain is being seriously considered as a possible successor to this 'Physical System'.

The 'classic-physical' model of IP rights enforcements is proving to be inadequate in this new Digital Age.'

3. BLOCKCHAIN & IP - POTENTIAL APPLICATIONS

Advent of Internet has provided a great encouragement to the IP industry to think outside the box and look for new and novel ways to protect IPRs.

In the context of IP-heavy industries, Blockchain technology offers various obvious possibilities:

  1. IP Registries

The most natural and obvious application for Blockchain within the realm of IP is their registration. Instead of opting for registering in a traditional centralized database, a decentralized Blockchain can be employed instead.

IP offices could also make use of a centralized, Blockchain-technology-based, repository to record the full life-cycle of IP rights.

This will help in developing an indisputable register to list out an all-inclusive timeline of an IP, right from the date of its application.

This will really be extremely useful when dealing with claims for 'non-use revocation'. This would also be useful for audits, assignments, mergers and acquisitions.

Even unregistered IP rights (copyrights, etc.) can benefit greatly from a Blockchain based system as it could greatly aid in the issues relating to evidence of their conception and original authorship.

  1. Smart Contracts & Digital rights management (DRM) 

With an advancement of technology, smart contracts can be programmed to perform simple functions.

Smart Contracts have to be evolved gradually with constant review and updation since the specified conditions will also change with time. Smart Contracts can execute themselves, when specified conditions are met, without any manual intervention.

Smart Contracts work on automatic mode with suo motu authority till the specified conditions are met.

For example, coupled with the concept of 'Smart Contracts', 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.

Blockchain or Distributed Ledger (DLT-based) archives could aid and facilitate the licensing of copyrighted works or other IP rights via use of such 'Smart Contracts'.

  1. Anti-Counterfeiting & Supply Chain Management

Blockchain also offers many untouched opportunities in the sphere of off-line ecosystems regarding IP Rights.

Coupled with scan-able Blockchain-connected tags or imprints to goods, providing the ability to trace goods on an immutable Blockchain, Ledgers showing the relative ownership or authorized licensees would enable all persons in the supply chain, including consumers and authorities, to distinguish genuine products from counterfeit goods.

This would also enable producers of goods to enforce their contracts and could also be used to satisfy regulatory requirements.

4. BLOCKCHAIN & IP - CHALLENGES

Although Blockchain has the potential to revolutionize the current IP ecosystem, yet as of now, there are many drawbacks and side-effects of an entirely Blockchain based ecosystem.

Though some jurisdictional Courts have taken cognizance of Blockchain as admissible evidence, it will take a long time for its full fledged adoption in law.

Further, due to slow ticking transaction processes in Blockchain, IP experts will still be required for legal matters and examinations.

The second major obstacle for widespread use of Blockchains is its incredibly high energy consumption.

Powering all "nodes", and simultaneously providing for adequate cooling facilities for a continuous operation becomes extensively high energy consuming process.

These two downsides alone make Blockchains one of the most expensive databases one could imagine.

5. CONCLUSION

While the technology is still relatively in its early stages, its growth and propagation can help solve many of the problems that IPR-holders have been facing ever since the advent of the internet.

As observed above, there are deficiencies in the Blockchain technology, including the fact that it relies on huge processing power and can only cope with a limited number of transactions per hour.

The biggest strength of the Blockchain ecosystem is that it is immutable.

Once an entry is made in the Blockchain, it is impossible to corrupt it, and this makes it apt for a world that demands greater transparency and accountability.

Common use of Blockchain is probably still some way off, and many people will have to be convinced as to its practicality.

However, where there are old-fashioned and ineffective systems (or none at all) in place, we may see Blockchain being introduced to streamline and simplify the management of Intellectual Property.

We at AMLEGALS foresee that, through a wide scale adoption of Blockchains in IP sector, especially for digital and internet based businesses, IP infringements- including copyright, can be contained in coming years.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reade should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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