In this series of blog posts, we take a look at the current state of play regarding blockchain technology as well as the legal setting with a European and German focus.

In the context of the digital use of copyrighted works, the concept of the “value gap” has been around for some time. The question is whether authors and rights holders are sufficiently involved in the revenues generated by the use and the display of their works on online platforms. The European Commission has recently addressed this issue within the framework of its strategy for a Digital Single Market, more specifically in the context of its draft for the Directive on copyright in the digital single market (COM (2016 593 final)), and it called for more rigorous monitoring for certain platform operators. Whether rigorous obligations will come into effect is still unclear. The fact that blockchain technology offers options for the traceability of the license chain to the author, and thus its participation in the revenue generated on the Internet, is undeniable. So a good question is: where does it make sense to use this technology?

Authors could continue to be involved through a number of methods. Existing solutions such as digital rights management, micro-payments, paywalls, subscription-models for news websites or streaming offerings have their strengths and weaknesses. In particular, they do not consider the author. A blockchain-based network, which reflects the chain of the rights transparently and invariably, could contribute to a fair distribution of revenue. In principle, the model can be applied to all works that can be digitally consumed, whether the work is audio, video, image or written text.

According to estimates, 850 start-ups worldwide are working on the use of blockchain technology. A look at a few start-ups handling copyright protected works and currently applying blockchain, albeit some still in the developmental stage, aims to provide a practical perspective on the above-mentioned issues.

The “Copyright-Blockchain” The idea behind the principle of decentralized copyright management is based on the storage of creative works as well as their metadata in a comprehensive blockchain. This would make it possible to track the distribution of digital content in real time, to verify authorizations, to allow certain uses and to calculate these precisely. The authenticity of a work could also be verified in this way. This is already under way, for example pay-per-use offers exist which use blockchain technology. These include PeerTracks, Ujo Music, Mediachain Attribution Engine, Blokur, Mycelia, Aurovine, Stem, Bittunes and Decent.

The London startup Ujo Music provides musicians with an online infrastructure where artists can publish their music independently, irrespective of any major labels and music publishers, and can then define and manage their own marketing and exploiting information. At the same time, a payment infrastructure is available in test phase. The author of the piece of music determines the price for a download, a commercial remix or the use by music portals. The payment at Ujo Music takes place via the cryptocurrency Ether. All transactions and splits can be tracked this way.

The platform PeerTracks is a music streaming service and music sales platform which allows direct payment on the basis of blockchain and guarantees the authors 95% of the revenue. The service uses blockchain for the transactions and transfers the money directly from the user to the artist. By means of smart contracts, artists can determine the conditions under which their songs can be used. Each individual uploaded song is then attached to a smart contract. The payment is automatically executed within a few seconds while listening to songs and shared between all right holders. In addition, it enables users of the platform to acquire value stamps from artists. They get access to the entire catalogue without advertising breaks, they can discover new artists and trade with the artists’ value stamps. Holders of these coins will then receive special products, such as a special recording or a backstage pass for a concert. As the popularity of the artists grows, the value of the respective sub-currency grows.

By means of the startup Ascribe from Berlin, authors can register their digital works free of charge in a blockchain and make the associated usage rights public. In this framework, the data is neither lost, nor is it subsequently changed. The big challenge, however, is to verify in a decentralized network which data is genuine and which might be counterfeit. The blockchain currently solves this problem by means of economic incentives (bitcoins), to play not against, but with the rules.

The provider Blockai uses the blockchain for writers and artists to record the creation of new works with time stamps. Each user has a profile which manages the respective certificates and allows access to specific content. Once uploaded, the use of the works can be tracked, copyright infringements can be detected automatically and the owner can be informed about unauthorized access.

Our last case example, The Brooklyn-based Mediachain Lab offers a stock photo service and uses blockchain technology to link media content to its respective authors. Users search for keywords or upload a picture to find identical or comparable content together with their right holders, place of origin, and the topic. The photos can then be used, with automatic attribution to the author. With this software, authors can reach a larger audience while maintaining control of their data.

What legal aspects need to be considered?

Blockchain can serve as a means to trace the license chain and to pay for usage. As always in the context of blockchain, there is the problem of matching the technical solution, the smart contract, with the actual legal situation. This can be achieved if the programming anticipates the typical performance problems and offers alternatives, which also enable the reverse processing of transactions which were impermissible or invalid under the applicable law. It is also a good idea to focus on a solution mechanism for non-automated conflicts, which have been agreed upon by all parties. This could be a system-immanent arbitration or other arbitration.

It is important to note that the model blockchain, must offer sufficient legal certainty. Only then can it be used in comprehensive rights management systems such as those for collective rights management and administration through collecting societies.