Open-source developers and the Bitcoin community welcome the recent decision of the English High Court in United Kingdom Wright & Ors v BTC Core & Ors [2023] EWHC 222 (Ch). The Court held that the file format used to create blocks on the Bitcoin Blockchain System (the "Bitcoin File Format") lacks sufficient content to be classified as a 'work' to which copyright could attach.
The Court refused to grant leave to serve proceedings for copyright infringement in the Bitcoin File Format as the applicant had failed to satisfy the court that literary copyright does subsist in a Bitcoin File Format. The Court held that there was a lack of evidence of sufficient content to be classified as a 'work' to which copyright could attach.
Background to the Bitcoin File Format Decision
The action was brought by Dr Craig Wright, who claims to be Satoshi Nakamoto, the original author of "Bitcoin: A Peer-to-Peer Electronic Cash System" (the "White Paper"). Dr Wright claims to own the copyright in the White Paper and the Bitcoin File Format and the database rights in three databases, namely:
(1) Bitcoin Blockchain;
(2) the Bitcoin Blockchain (as it stood on 1 August 2017 at 14.11 – up to and including block 478,558) ; and
(3) another part of the Bitcoin Blockchain made in another period (the "Databases").
The proceedings concerned Dr Wright's application to serve a claim out of the United Kingdom jurisdiction concerning:
- The infringement and subsistence of copyright in the alleged literary work of the Bitcoin File Format
- Infringement of copyright in the White Paper
- Infringement of database rights in the Databases
In order to grant a claimant permission to serve a claim on someone outside of the jurisdiction, the court must be satisfied that the matter raises a serious issue to be tried. This means that the claim must have a real (as opposed to fanciful) prospect of success.
Dr Wright brought the claim because he objected to two 'Airdrops', each of which allegedly effected 'significant' changes to the Bitcoin System, and deviated from the principles and protocols he had created and specified. An airdrop is when a project takes a certain amount of the project's cryptoassets and sends them for free to people who meet particular requirements.
The first Airdrop resulted in the BTC Blockchain and occurred on 1 August 2017. The second Airdrop occurred on 15 November 2018 and created the P2P BCH Blockchain.
Dr Wright alleged infringement of database rights and copyright to prevent the further operation of the BTC Blockchain and the BCH Blockchain without his consent.
Copyright in the Bitcoin File Format ("Fixation")
The judge was satisfied that the claims in relation to the databases and the White Paper raised serious issues to be tried and granted leave to serve the proceedings in relation to those claims outside of the jurisdiction. In terms of the allegations concerning Bitcoin File Format, Justice Mellor concluded that there was no serious issue to be tried as Dr Wright had failed to adduce any evidence that the Bitcoin File Format met the copyright fixation requirement under UK law.
Section 3(2) of the Copyright Designs and Patents Act 1988 (the "1988 Act") provides that copyright does not subsist in a literary work unless it is original and until it is recorded, in writing or otherwise (the concept called "Fixation").
Justice Mellor's decision on the Fixation issue and whether copyright can subsist in a file format was concluded after reviewing three previous CJEU and UK cases, including the decisions in SAS Institute Inc1; Technomed Ltd2 and Software Solutions Ltd.3
The court accepted that Dr Wright had expended substantial skill and judgement in creating the Bitcoin File Format thus would have met the originality/creativity element of the copyright test set out in the 1988 Act, and that it is possible for certain file formats to contain sufficient content to be classified as a 'work' (such as XML file format). However, Justice Mellor stated that Dr Wright had not identified any relevant 'work' containing content which defines the structure of the Bitcoin File Format.
Justice Mellor rejected Dr Wright's contention that "when the software runs and the hashing problem is solved, a block is created in the Bitcoin File Format," thus satisfying the Fixation requirement, nor did the court accept that the Fixation requirement was met because third parties had designed the structure of a block in the Bitcoin Blockchain.
Fixation will remain a requirement for digital technologies
Justice Mellor stated that Dr Wright had been given four opportunities to explain his case, in particular what in the Bitcoin File Format, as expressed in each block, would comprise 'content and not just structure', but he had failed to do so. The court held that the blocks identified by Dr Wright as having recorded the Bitcoin File Format did not contain 'content indicating the structure' - instead, they were just blocks which conformed to that structure. Justice Mellor held that there was 'no flag or symbol in the block which signals this is the start of the header' or 'this is the end of the header', or an equivalent of the sort of content which is found in an XML file format. Therefore, the structure of the Bitcoin File Format is not fixed in a copyright sense in material form in those blocks.
The Court observed that it is not surprising that a block does not contain content (whether flags or symbols) which would indicate structure as this would be unnecessary and also 'a very inefficient use of memory'.
The Court went on to state that, although the law of copyright will 'continue to face challenges with new digital technologies', it did not see any prospect of the law in its current form allowing copyright protection 'of a subject-matter which is not expressed or fixed anywhere', therefore confirming that Fixation will remain a requirement for digital technologies.
Key Takeaway
Technology is developing at a rapid pace and the courts are having to apply existing legal principles to tackle challenging points of law. The judgment reaffirms the importance of Fixation in literary works and provides useful guidance on how to assess copyright when evaluating code. The case serves as a reminder of Bitcoin's open-source nature and reinforces the idea that anyone can contribute to its development without fear of legal repercussion. It's a victory for open-source developers and the Bitcoin community.4
That said courts may find it a challenge to use existing legal frameworks in light of new and emerging technologies.
As for Dr Wright, this is not the end of the chapter as Justice Mellor granted permission to serve proceedings outside of the jurisdiction in respect of his claim for copyright in the White Paper and infringement of database rights.
Special thanks to Claire Gorman (trainee) in the creation of this article.
Footnotes
1. SAS Institute v World Programming Ltd [2010] EWHC 1829 (Ch) ('SAS No.1') and Case C-406/10, [2012] RPC 31, ('SAS No.2') and CJEU ruling: [2013] ECR I-13971 ('SAS No.3').
2. Technomed Ltd v Bluecrest Health Screening Ltd [2017] EWHC 2142.
3. Software Solutions Ltd v 365 Health and Wellbeing Ltd [2021] EWHC 237 IPEC.
4. https://cryptobreaking.com/go/bitcoin
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