Heralded by some as the future of financial transactions, there is no doubt that blockchain technology has the potential to shake up the world of finance. Already, financial institutions are looking to capitalise on the technology to create fast and low-cost payments for customers, investing millions of pounds in the process. However, the usefulness of blockchain technology is not limited to finance and banking.
With its relatively low cost of maintenance, increased transparency, lessened administrative burden and resilience to fraud, blockchain is an attractive prospect to a whole host of different sectors and businesses. So what is blockchain, and could this disruptive technology have any application for intellectual property and its management?
What is blockchain?
Put simply, blockchain (or distributed ledger) technology is a way of creating a shared database, which can record and track transactions and assets. Therefore, in theory, any database or ledger could be created and maintained using blockchain. And it does not have to solely lodge digital assets. For example, startup Everledger has used blockchain to create a database of diamonds, to ensure that they are not being used by militias to fund conflicts.
Blockchain is not governed by one single user, so no centralised version of a ledger exists. Instead, it can be widely accessible to the public or to large groups (depending on permissions granted). The chain is also updated with each transaction, so users can see the chronological activity for that particular blockchain. This means that, once something is on the database, it cannot be removed.
In practice, changes to the blockchain work as follows:
- Someone requests a transaction
- This is broadcast to a network of computers, known as nodes
- The nodes use algorithms to verify the transaction
- 'Miners' aggregate transactions into blocks which allow the nodes to reach consensus about the validity of the transaction
- Once this has been verified, the transaction creates a new data entry on the ledger by linking the block to another block in the chain by using computational power to solve the cryptographic puzzle in the other block
- A cryptographic signature is included in the new block
- The transaction is complete
Blockchain enthusiasts have praised the technology for its resilience to fraud, its transparency and relatively low cost of maintenance. As a result, many businesses are asking whether they might be able to use this technology to update existing systems, including in relation to intellectual property.
Uses in IP
One of the most obvious applications of blockchain technology is as a registry of IP rights, to catalogue and store original works. In the UK, copyright is unregistered and comes into existence automatically on creation of an original qualifying work. This means that, unlike registered trade marks which can be recorded and viewed on various registries around the world, there is often no adequate means for authors to catalogue their works.
As such, ownership can be hard to prove. It can also be difficult for authors to see who is using their work, and equally difficult for third parties using a work to know who to seek a licence from. The result of this is that authors are often unable to stop infringements or to make the most of monetising their works.
Using blockchain as an IP registry may help give clarity to copyright authors, owners and users. By registering their works to a blockchain, authors could end up with tamper-proof evidence of ownership. This is because a blockchain transaction is immutable, so once a work has been registered to a blockchain, that information cannot ever be lost or changed. In theory, third parties could use the blockchain to see the complete chain of ownership of a work, including any licences, sub-licences and assignments.
Platforms such as Blockai and ascribe are taking advantage of blockchain technology in this way, allowing authors to make a record of copyright ownership, which can then be used to see where and how the work is being used on the internet, and to seek licences from third parties. Registering a work in this way gives the author a digital certificate of authenticity which can help third parties identify the author of a work, and authors or owners to tackle infringements. Nathan Lands, CEO of Blockai says: "The blockchain is the perfect solution for providing proof of creation. It’s a permanent immutable record. Meaning, once the record is there, it's there forever and will never change." One result of this is that orphaned works could become a thing of the past, as there will always be an unalterable record of copyright authorship.
Currently, once an author uploads his or her work to the internet, it becomes extremely difficult to maintain control of that work, and to monitor who is using it for what purpose. With blockchain platforms such as Blockai and ascribe, once a work is registered and verified, authors can search across a whole host of different sources simultaneously to see who is using their work, thereby making it easier to identify and stop infringements and put in place licences for any use they wish to authorise.
Micropayments and licensing using smart contracts
With copyright, in particular, it is difficult for people wishing to use the mark to know who is the author or owner, and how to get a licence. Often, people will end up using the work illegally rather than seeking a licence because of the difficulty (or high price) of doing so.
Blockchain may also offer possibilities for licensing works by reducing the cost of transactions and creating a direct link between authors and users. Nathan Lands of Blockai comments that "the ideal future system is where there is a universal database for claiming ownership of creations and for paying royalties and making it as simple as possible for people to do the right thing."
One useful feature of blockchain is smart contracts, which could assist in the sale and licensing of intellectual property. A smart contract is basically a computer program code which has the ability to facilitate, execute and enforce a contract by itself. The terms of the contract are pre-programmed, so that the parties can do business without the administrative burden and cost. For example, in IP, this could mean that licences are self-executing upon use of a work.
Smart contracts can also be tied into micropayments for use of content. This would work by the author assigning a Bitcoin address to a work, which then allows a potential user to make a small payment to the author in return for this use. As a result, the author can be remunerated without having to pay the high transactions costs of existing financial networks. Such a method is simpler and more transparent than many other existing means of payment for authors.
Tech business Ujo has used blockchain in its business model, to rectify what it describes as the "inefficiencies in the music industry". In one of its projects, Ujo worked with singer-songwriter Imogen Heap to release her song 'Tiny Human' on blockchain. Users were able to purchase licences to download, stream, remix and sync the song via smart contracts, with each payment automatically split on the blockchain and sent to Imogen Heap directly. This example may serve to demonstrate how artists can use blockchain to better control and exploit their creative works, to improve collaboration and achieve fair and efficient remuneration. This could have a massive impact on collecting societies in the future, if more artists choose to cut out intermediaries who collect on their behalf and use platforms like Ujo.
While the use of blockchain in the world of intellectual property is relatively novel, it has enormous potential. Of course, with any emerging technology, there are drawbacks. 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. Also, as the blockchain is immutable, once an entry is made in the blockchain it is impossible to correct. Widespread use of blockchain is probably still some way off, and many people will have to be persuaded as to its usefulness. However, where there are outdated and inefficient systems (or none at all) in place, we may see blockchain being introduced to streamline and simplify the management of intellectual property.