According to NITI Ayog’s Report of January, 2020 entitled “Blockchain: The Indian Strategy”, Blockchain technology can broadly be defined as a new type of network infrastructure (a way to organize how information and value moves around on the internet) that create ‘trust’ in networks by introducing distributed verifiability, auditability, and consensus. The report further adds upon the current market situation of the Blockchain technology as it is estimated that it could generate USD3 trillion per year in business value by 2030. The World Economic Forum (WEF) anticipates that 10% of the global GDP will be stored on blockchain by 2025 and lists blockchain as one of 7 technologies that are anticipated to revolutionize various aspects of our lives.
PROPERTIES OF BLOCKCHAIN TECHNOLOGY
ROLE OF BLOCKCHAIN TECHNOLOGY IN IPRs
- Blockchain is tamper-evident, which makes the use of shared Digital Ledger Technology (DLT) which aids in recording transactions in a Public or a Private Peer-to-Peer (P2P) network.
- The exchange records of transactions are kept simultaneously across a system of random computers and/or servers, each of which is called as a “node”.
- The Digital Ledger which is distributed across all the member nodes in the network equitably, permanently records in a sequential chain of cryptographic hash-linked blocks (a block contains the transaction information which is to be recorded), the history of asset exchanges that takes place between the peers in the network.
- New data blocks can be added to a blockchain only through agreement between the various nodes of the network, a mechanism known as Distributed Consensus Protocol. The protocol involves agreement on the ledger content expansion with the aid of cryptographic hashes and digital signatures to ensure transaction integrity.
- Each node of the network keeps its own copy of blockchain’s data (a process called “mining” which also involves the active maintenance of the data and transactions over the ledger) and keeps the other nodes honest – if one node changes its local copy, the other nodes reject it. Thus, all the nodes are based on the principle of equity and there is no centralization of control over the ledger, in any sense. This aids in the removal of any Third-Party intermediary possibly being involved in maintaining the ledger.
- Blockchains record information on a timestamped chain that extends forward infinitely, or rather immutably. All confirmed and validated blocks are linked and chained from the beginning of the chain to the most recent block. Thus, the blockchain technology creates a trustworthy and transparent record management system by allowing multiple parties to act as active stakeholders by validating the integration of the transactions in the expanding chain.
Businesses that rely on IP-protected materials (e.g., media, advertising or software) for value creations are facing several key challenges in the current era at a time where data boom has resulted in the generation of almost 90 % of all-time data in the last couple of years. The vastly-increasing data coupled with the need to protect it for reasonable basis of the same is extremely important in subsisting the joint interests of individuals across various jurisdictions. The introduction of new blockchain-enabled tools to represent unique assets and to manage the development and payments for IP, will drive innovation across the value chain.
ADVANTAGES OF USING BLOCKCHAIN TECHNOLOGY IN IPRs
CURRENT AND POTENTIAL APPLICATIONS
A) SMART IPRs
- Blockchain technology is decentralized in its basic framework which is the foremost advantage when thinking about establishing a secure, efficient and reliable system for managing the precious information containing the ownership details of the IPRs and assets.
- The P2P network facilitates reduced transaction speeds thus enhancing the functionality of the system as a whole.
- There is no requirement of any intermediary and hence the effective control with respect to IPRs management can be trusted upon the operating nodes.
- A hybrid system involving Blockchain technology being controlled for IPRs management can be impressive in the current regime.
- Blockchain technology, thus being completely decentralized, digital and free from any discrepancies of external influence and interference, can help in creating a system of IPRs management and enforceability with potentially global jurisdiction, surpassing the physical barriers of geographies.
- The immutable ledger alongwith the encryption security provided by hash-functions could greatly enhance the IPRs management and subsistence in the longer term. Blockchain technologies have the potential to bring greater simplicity, transparency, less intermediaries and ultimately foster innovation among SMEs and Universities that had a difficult access to the patent world.
- Blockchain technology can provide for better management of intangible IPR assets as it allows for their commoditization for reusing, exchanging and assignment of monetary value to the same.
- There can be improved partnerships and the mutual trust that can potentially be built on the underlying principles of visibility into media assets, contract terms and the audit log of transactions between multiple stakeholders. Thus, by removing the long-standing constraints to IPRs management, businesses will develop new operating capabilities and strategic market opportunities.
B) SMART CONTRACTS
- According to WIPO, recording IPRs in a distributed ledger rather than a traditional database could effectively turn them into “Smart IPRs”.
- This can potentially lead to audit trails which can improve the auditing process and make it smoother.
- Simplification of due diligence exercises can also be sought, especially required in mergers and acquisitions where the complete auditing record has to be checked and ensured upon the non-existence of any sort of ill-intentions in the desired objectives.
C) DIGITAL RIGHTS MANAGEMENT (DRM)
- These are lines of codes that are stored on the blockchain and automatically gets executed when predetermined terms and conditions are met.
- The idea of Smart Contracts was first put by Nick Szabo in 1994 when he visualized the potential of using them in blockchain-related applications of functionality of a car based on its smart key obtained upon fulfilling the terms of the contract.
- They can be used to establish and enforce IP agreements such as licenses and payments-facilitation to the IP owners with reliability and security through cryptographic hash operations.
D) ANTI-COUNTERFEITING AND ENFORCEMENT OF IPRs
- Digital rights management (DRM) is a way to protect copyrights for digital media. This approach includes the use of smart contracts and related technology to limit the copying and use of copyrighted works and proprietary software.
- Time-based rentals of protected works, subject to the validity period of the package with respect to the appropriate payment, is the mainstream area involving the usage of these rights without presumptuous monitoring of the user activity.
E) RECORD-BASED EVIDENCES OF USAGE OF IPRs AND THEIR RESPECTIVE OWNERSHIPS
- The Distributed Ledger Technology (DLT) would enable every stakeholder in the supply chain network to work upon validating a genuine product by authentication on the blockchain network and promptly recognizing the counterfeited one.
- In the apparent future, it would be of significant importance to add upon the query-search mechanism with keywords, tamper proof seals and originality imprints like sustainable water-marks (or other certification marks), in order to challenge counterfeiting proactively.
F) SUPPLY-CHAIN MANAGEMENT
- The DLT records which confirms upon the ownership and tracked usage of the same can help create an impactful brand-value in the market with enhanced transparency and apparent reliability of the IP.
- This can also be useful in cases of infringement indicating the purported involvement of “passing-off” against an infringer. Thus, the reality of the ownership of the respective IPRs could be verified instantaneously, especially extending in cases of unregistered IPs’ like literary works and other Copyrightable contents.
LIMITATIONS AND POTENTIAL HURDLES
- The ability to track goods on an immutable ledger could help brand owners enforce their contractual arrangements regarding distribution and spot leaks in their distribution system as well as helping to identify parallel imports or grey market activities.
- This would also enable producers of goods to enforce their contracts and could also be used to satisfy regulatory requirements. The applications of integrating the blockchain technology into the current IPRs regime is vast and immense. Apart from the above ones, other applications like Smart Properties, Government election processes, etc. can be considered as extensions to the same topic.
- Although some jurisdictional courts allow blockchain as evidence, its full adoption into law is still far off. Further, this technology can be slow, so the presence of IP experts is still necessary for legal matters and examinations. Thus, the concept of removal of third-party intermediaries from almost all the sectors is highly-unlikely – the intermediaries would probably change their forms.
- Blockchain has an inherent disadvantage in itself that energising all nodes and providing appropriate cooling is an extremely energy-consuming process. These two constraints make blockchain one of the most expensive databases imaginable.
- There will always be the issue of aligning multiple national and regional judicial frameworks and traditions. Any universal IP register would have to pass the desks of several bureaucrats who might see it as a threat to their jobs. Blockchain technology, however, if implemented strategically and smartly, can revolutionize the IPRs management and their enforceability and other aspects being constrained in the current regime.
- The EU Commission has plans for a Blockchain Observatory and the US Congress recently created a Congressional Blockchain Caucus.
- Binded blends integrations with the US Copyright Office, Instagram and Twitter to monitor how copyrighted images are being used.
- The Mycelia Project’s Creative Passport is the digital container for verified profile information, IDs, acknowledgements, works, business partners and payment mechanisms for all music makers.
Even though the idea of creating a more efficient blockchain-based system for the management and monetization of IP rights is still in its infant stage, novel blockchain-based applications for management of IP rights continue to appear with remarkable frequency. Just as the increasing use of bitcoin will not replace traditional financial institutions, the same is true for blockchain use in the IP world – rather, the two systems can co-exist and complement each other. Blockchain technology, when integrated in a hybrid-approach system for IPRs management and control, can revolutionize the way IPRs are granted, monitored, scrutinized and explored.
1) Blockchain and IP Law: A match made in heaven? – WIPO Article.
2) Blockchain: The Indian Strategy – NITI Ayog Paper.