Malaysia: The New Intellectual Property Kid On The Blockchain

Last Updated: 6 November 2018
Article by Lam Rui Rong

Lam Rui Rong discusses the use of blockchain technology in the protection of intellectual property.

Blockchain is known as the technology underpinning the Bitcoin cryptocurrency. Cryptocurrencies are intangible and have no physical representation. A claim to a cryptocurrency can only be proven by an entry in the Blockchain ledger.

Similarly, intellectual property rights are also intangible rights. A claim over certain types of intellectual property, such as a patent, trademark or industrial design, is usually proven by an entry in a register kept by the intellectual property authority such as the Intellectual Property Corporation of Malaysia ("MyIPO"). In Malaysia, the prima facie evidence of your rights over the aforesaid intellectual property rights would be an entry in MYIPO's registry which proves that you are a bona fide proprietor of that right.

These similarities with cryptocurrency have led to great interest in the possibilities of the application of the Blockchain technology to the protection of intellectual property rights. This article sets out some possible use of the Blockchain technology for the protection of intellectual property rights in a Malaysian context.

WHAT IS BLOCKCHAIN?

It is useful to first understand the basics of Blockchain. Whilst most would be familiar with Bitcoin, the Blockchain technology is slightly less understood. In keeping up with its enigmatic nature, there is still no universally accepted definition of a Blockchain. As a technology that is lauded to bring about the 'Fourth Industrial Revolution', Blockchain's debut to the world was done with little fanfare, through a paper unassumingly titled "Bitcoin: A Peer-to-Peer Electronic Cash System" by Satoshi Nakamoto (a pseudonym). A Blockchain can be identified by the following key features:

  1. a system of record;
  2. peer-to-peer networks (when two or more PCs are connected and share resources without going through a separate server);
  3. cryptography technology; and
  4. consensus algorithms.

In essence, Blockchain is a database which records events using peer-to-peer networks, with the consensus of its key players in the network and protected by cryptography. Each event that is recorded is immutable. Any change will require more than onehalf of the computing power of the network. Anyone with an internet connection and the unique key to the Blockchain will be able to access the database.

USE TO COMBAT COUNTERFEITS AND PIRACY

The Problem

Intellectual property rights are highly valuable assets to companies and, in some industries, are considered the most valuable assets of a company. Counterfeiting and piracy are among the biggest and most persistent problems to both companies and consumers. The Organisation for Economic Co-operation and Development (OECD) in 2016 reported that counterfeit and pirated goods were worth nearly half a trillion dollars a year, or around 2.5% of global imports. Closer to home, in 2017, the discovery of counterfeit infant formula in Malaysia that caused children to fall ill raised serious concerns throughout the nation.

In simple terms, counterfeiting is the manufacturing and sale of goods that is an imitation of brands customers know and trust. Counterfeits can be found across all industries including apparel, pharmaceutical drugs, electronics and general consumer goods. Counterfeits hurt companies' hard-earned brand and tarnish the existing goodwill and reputation. They may also pose a real danger to consumers. This is because counterfeit goods are generally made from lower quality materials and components and without the necessary quality control. The danger of counterfeit medications and electronics may sometimes even be deadly. Today, the rise of e-commerce compounds the problem and makes the fight against counterfeits even more challenging.

Malaysia already has existing laws such as the Trade Descriptions Act 2010, border measures as set out in the Trademarks Act 1976, and the Copyright Act 1987 in place to deal with the issue of counterfeits and piracy. However, the real challenge lies in the enforcement. At present, there is a lack of a streamlined method and cooperation amongst the relevant enforcement agencies. For example, the border measures provided for in the Trade Marks Act 1976 are rarely invoked because of the complexity of the process. In addition to that, counterfeit goods are by nature difficult for the average consumer to identify and distinguish. In the counterfeit infant formula situation, the brand owner had to release images comparing the genuine product with the counterfeit product to educate the public to identify the counterfeit product. At present, even when enforcement officers suspect a consignment or a batch of product to be counterfeits, the officers will still need to contact the brand owner and wait for a representative to confirm whether it is indeed a counterfeit product. This process is time consuming and simply inefficient.

The Blockchain-based solution

A company can implement a private Blockchain-based intellectual property ledger with details of the owner, licensee, sub-licensee and any other details necessary to identify its product, such as the registration number. With access to the ledger, both the enforcement officers and consumers will be able to instantly confirm the genuineness of a product.

The company can set up a permissioned network and place restrictions on who is allowed to participate in the network. In other words, this would be a private Blockchain. The permanency and immutability feature of the Blockchain makes it a reliable source for the enforcement agencies as well. For example, enforcement officers with access to the Blockchain can immediately ascertain whether the product is a genuine product, and who the owner or licensee is. It will save time, resources and improve the enforcement against counterfeit products in Malaysia.

A popular suggestion, and in fact one that has caught on with some industry players, is the idea of adding scannable Blockchain connected tags or tamper proof QR codes that are linked to a Blockchain ledger of the genuine products. Whisky aficionados will be delighted that the Scottish Highland Ardnamurchan Distillery has started adding a unique QR code on its bottles using the Blockchain in its fight against counterfeit whiskies. A scan of the Blockchain connected QR code will reveal whether that bottle is a genuine bottle from that distillery.

From the Malaysian perspective, the above method fundamentally solves the problems with the current enforcement system. Companies merely have to inform the enforcement agencies of the existence of these Blockchain connected tags or QR codes and for the enforcement officers to perform a check of whether these products are genuine or not. Products without these Blockchain connected tags or codes or that cannot be verified against the relevant Blockchain ledger will be treated as counterfeit or fake products and can be prevented from reaching the Malaysian market. This reduces the red tape and increases the efficiency of the enforcement process.

COPYRIGHT PROTECTION AND LICENSING

Copyright is an aberration in the intellectual property rights protection realm, being an unregistered intellectual property right. This means that there is no registration requirement, and a failure to register does not mean that copyright does not subsist in the work. Under the Copyright Act 1987, a copyright owner can file for a voluntary notification of copyright pursuant to Section 26A the said Act. A statutory declaration by the owner of the copyright is admissible in evidence in any proceedings and shall be prima facie evidence of the facts contained therein.

The Problem

Since there is no registration requirement, MYIPO does not have a complete record database of all copyrighted works. MYIPO will have piecemeal records based only on copyright owners who chose to file a voluntary notification. Therefore, in Malaysia, there is no single database which can be referred to in order to ascertain whether a piece of work is copyrighted or not. This becomes a problem when it comes to licensing and royalty collection activities as there is difficulty in figuring out who to pay and how much to pay them.

This has been a persistent problem in the Malaysian music industry. Prior to February 2018, there were four music licensing bodies in Malaysia, namely the Music Authors' Copyright Protection Bhd (MACP), Public Performance Malaysia Sdn Bhd (PPM), Recording Performers Malaysia Berhad (RPM) and Performers Rights and Interest Society of Malaysia Berhad (PRISM). All four bodies worked in silos and that often resulted in confusion as to who to contact. In an attempt to streamline the licensing body, the Music Rights Malaysia Bhd ("MRM") was launched as the sole licensing body for collective music royalty collection activities in Malaysia. However, MRM still does not publish any information to help identify the copyright owner. MRM also does not cover copyright works other than music.

The Blockchain-based solution

The proposed solution is to implement a Blockchain-based ledger where copyright owners can log in details of their works and other relevant details such as the composer, producer and publisher, to enhance the efficiency of royalty and rights management. Some Blockchain start-ups such as one known as Binded have already explored the possibility of protecting each copyright record on the Blockchain with a unique fingerprint, or in technical terms, a "cryptographic hash", which will contain the details of the copyright owner. All these records will be kept and secured on the Blockchain.

This idea of the unique fingerprint or cryptographic hash can also be expanded to help creators prove that they created the content. As an illustration, when the creator uploads a work to the Blockchain secured database, it will be time stamped and be linked to the creator's private key on the Blockchain. Therefore, it can be used as proof of the identity of the content owner using the private key which is unique to each individual and also proof of the time stamp. Just recently, the Hangzhou Internet Court, in an online copyright infringement suit accepted the authenticity of screenshots that were preserved by a third-party platform which uses Blockchain technology. The Judge in that case went into an in-depth analysis of the Blockchain technology and found that it was reliable and effective for evidence preservation.

CONCLUSION

Blockchain continues to hold the attention of the world, and it appears that the possibilities are endless with it. Whether the Blockchain ultimately lives up to its expectation or not, it is clear that the Blockchain technology is a catalyst that can revolutionise the protection of intellectual property rights. It would be an area of great interest to businesses keen to improve protection of their intellectual property rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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