Successful management of intellectual property (“IP”) assets such as trademarks, copyrights and patents involves much more than simply securing their protection in order to attain their full value. Considerable effort is required to implement an effective IP strategy – one which is even greater in respect of non-registrable IP rights such as copyright and (unregistered) designs, since their lack of registration against which to reconcile transactions often results in issues concerning even the basic legal considerations of ownership, creation, jurisdiction and use. The fluidity of the internet and relative ease of infringement complicates matters even further. Blockchain technology, with its immutable characteristics and peer-to-peer review, might well be the solution to these issues. This article will explore the potential IP management use cases of the Blockchain technology.
With the exception of European Trademarks and Registered Community Designs, IP rights remain mostly unharmonized. Furthermore, despite an increasing level of integration of information between national and supranational IP offices is in place, ultimately each nation has its own IP systems and registration offices. Furthermore, transactions involving IP rights do not require registration for effectiveness between the parties – registration in terms of publication is only required in order to give effect against third parties. This implies that it may well be the case that the registered owner of a particular IP right, as officially indicated in the IP office database, is not necessarily the current owner. Likewise, when conducting a due diligence procedure at an IP holding, the IP may have been burdened with security which has not necessarily been registered and thus may not necessarily be traced. IP rights that are not registrable do not even provide a database to start with.
A lack of certainty in this context may be said to exist in the status quo. The Blockchain’s characteristics clearly make it very well suited to be an underlying technology for the creation of a database that can address these issues. A Blockchain database is capable of storing a tamper-proof and immutable record, enabling the creation of an unalterable “digital certificate of authenticity” to become possible. This digital certificate may address a multitude of issues including ownership, evidence, publication and first and genuine use. Using trademarks as an example, an ideal Blockchain based database would enable a user to access the product’s digital certificate of authenticity and this would demonstrate where the trademarked product came from (its origin) and who owns the rights to that trademark (its ownership).
However, issues do arise under current laws in terms of actual proof of ownership and origin in law and in fact. If a user is able to access the digital certificate of authenticity of a certain product, does the owner of that product as recorded on the Blockchain indicate the actual ownership of the product’s intellectual property? Extant legislation would need to be amended in order to address whether this digital certificate denotes actual legal ownership, and if this is the case, Blockchain based registries would also need to become acceptable as evidence in a court of law.
Since the Blockchain creates an immutable yet traceable chain of entry logs, Blockchain-based IP registries could be a viable method for owners of IP to exert more control over their creations. Moreover, transaction issues and in particular internet licensing, could be facilitated through the use of “smart contracts which are embedded within the Blockchain. These contracts can be pre-programmed into the Blockchain to self-execute at pre-determined instances. Smart contracts are able to self-monitor the terms of agreements, automate contract performance, certify transactions and facilitate or evidence payment transfers.
A clear example of the beneficial use cases of these registries is the streaming of music and micropayments. An artist could release a single onto a Blockchain based registry where the register would enable the artist to note how many times the single was streamed. Moreover, the artist’s e-wallet could be linked to the product the song for payments to be executed in exchange for streaming of the song. Smart contracts could be in place so that, once the song is played by a user, funds are automatically transferred to the songwriter’s account through the self-execution of the smart contract. The songwriter would be instantly notified of the use of the material and any royalties owed would be instantly debited from the user’s digital wallet. Blockchain would enable the artist to be in direct contact with the audience enabling them to potentially reap larger rewards for their original creations and have a more precise indication of the number of times that a song has been played. Smart contracts would also enable the artist to create various contracts which would self-execute depending on the intended use of the song. For example, if the song is intended to be used in a commercial context, such as part of a musical score in a film or on the radio, a different smart contract would execute as opposed to if the song were to be used for private purposes by individual user.
Proof of Authenticity
Applying Blockchain technology to management and distribution of goods would permit goods to be indelibly stamped and capable of “telling their own story”. A consumer would be capable of tracing the good back to its origin and certificate of authenticity and thereby be able to distinguish between counterfeit products in market circulation. A consumer would also be able to ascertain that a particular good has been produced in the country indicated on its label – a crucial consideration for certain goods, such as wines, cheeses and meats.
In addition, Blockchain would certainly find its way into the high-value or collectible market, including items such as jewellery, art or rare memorabilia, where owners would be eager to confirm provenance and have an in-depth understanding of that item’s history and legitimacy before purchasing. Undoubtedly, the Blockchain guarantees a higher degree of certainty, one which is not yet in place under extant practices.
Likewise, Blockchain technology could enable more accessible, efficient and cheaper enforcement procedures by rights-holders against counterfeit goods. The record in a Blockchain database could represent definitive proof as to the owner and origin of the product, allowing proprietors and users to trace the product back to its genesis block and confirm its authenticity.
Parallel Importation & Grey Markets
The ability to add unalterable blocks of data to a Blockchain database would be of particular relevance to many sectors where territorial management of rights is crucial, such as the manufacture, distribution and franchising industries. A Blockchain database could reveal the location and distribution of goods at all times, tracing them from manufacture, delivery and finally sale to a consumer.
Traceability on the Blockchain database could enable manufacturers to monitor and control leaks from their distribution networks. Products could be embedded with unalterable tags and the absence of such tag would easily get caught out in checks. This concept would also apply to tags bearing incorrect information on the authenticity of the product.
Undoubtedly, these characteristic would be most useful for right-holders’ in order to control grey markets, where illegal parallel importation of products may tarnish right-holders’ profits and goodwill.
Without a doubt, Blockchain presents a welcome opportunity to make IP rights management more certain and stream-lined, less expensive and more transparent. Indeed, Blockchain use cases for intellectual property clearly cannot be underestimated by businesses, authorities and governmental agencies.
This article forms part of a weekly series called “Unravelling Blockchain”. The previous article can be found here: http://camilleripreziosi.com/en/news-resources/1/2463/how-will-blockchain-impact-capital-markets
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