Can blockchain protect copyright

Great potential for change: blockchain and intellectual property

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Blockchain
Reading time 10 min.

Blockchain is part of the digitization movement that has affected many branches of industry in recent years and is now also changing the consulting industry. Often it is in the same breath as the cryptocurrency Bitcoin called. However, this is only an example of the application of blockchain technology. Blockchain technology will also transform the legal way of working. In the context of legal tech applications, the possible uses are diverse and not limited to specific areas of law. Blockchain-based solutions such as smart contracts will make it possible to automate services and simplify transactions. While blockchain technology is usually discussed against the background of IT and data protection law, this article addresses the questions of which Intellectual property rights ("IP Rights") are eligible for the protection of blockchain technology and in what way the owners of IP rights can benefit from it in any way.


 

 

Blockchain - The most important facts

The blockchain is a virtual chain ("chain") chronologically lined up data blocks in which the transactions of the network participants ("nodes") are first verified and then saved. The verification is carried out by certain actors in the network (so-called"Miner") who have computers with sufficient computing power to solve a highly complex mathematical equation.Proof of work"is rewarded by the respective client by crediting a virtual monetary benefit.

The special thing about the blockchain method is the decentralized storage. It takes place at the same time for all users and cannot be changed afterwards. Step by step, a complete, transparent and forgery-proof documentation of transactions is created in a database, which eliminates the need for validation services by intermediaries such as banks, insurance companies or government agencies.


Secure IP rights to blockchain applications

The IP rights include, above all, registered industrial property rights such as patent, trademark or design protection law as well as unregistered copyright that protects creative services and databases. There are also other absolute rights such as trade secret rights, naming rights and personal rights. The aim of the absolute rights is to enable the commercialization of a technology or a brand and thus to create incentives for innovations and investments.

The importance of intellectual property law is growing steadily in view of the rapid technological advances in the age of digitization and is consequently also of considerable relevance with regard to the protectability of blockchain applications. Since, on closer inspection, this technology is computer programs or software, protection is primarily assessed according to the Patent and Copyright Protection Act.


More blockchain patent applications than ever before - only a few effective

The euphoria about the potential of blockchain has also increased the number of patent applications in this area. A search for the term “blockchain” in the register of the DPMA in November 2018 revealed 208 pending patent applications for a wide variety of inventions.

This gold rush mood in the industry is not reflected in the same way in the number of successful patent registrations. According to an article published in the patent blog "patentlyGerman" in February 2018, there are only 21 validly granted patents in the USA and only one European patent. Since then, various press releases can be found according to which "blockchain patents" have been granted. At the same time, the number of checked and registered patents on blockchain technologies is manageable.

There are two main reasons for this:

On the one hand, the patentability of computer programs is excluded by law. Only the algorithms and procedures on which the blockchain computer program is based have a chance of protection.

On the other hand, many components of blockchain technology lack the necessary novelty of the invention. Since the publication of the idea for the virtual currency Bitcoin under the pseudonym Satoshi Nakamoto in November 2008, the basic technology around blockchain has been state of the art. In addition, the Ethereum blockchain, which is mainly used for smart contracts, was also made public in 2014.

For the future, it remains to be seen how many of the outstanding registrations will be effectively registered. Quite a few observers are already warning of a "patent war", in which holders of older patent rights make life difficult for users of the protected technology with claims to cease and desist.


No IP rights to cryptocurrencies

Cryptocurrencies as a digital means of payment are undoubtedly "intangible goods", but the need to protect them through the system of IP rights is to be rejected.

Intangible goods only establish IP rights if they are assigned to a legal subject as an absolute right. Such an assignment is appropriate if the creation of intellectual property is based on direct physical or mental exertion. However, this is not the case with the ownership of Bitcoin or other cryptocurrencies. The de facto exclusive ownership is not an individual service, but only results from the assignment of an actual disposal option. For this reason, cryptocurrencies do not deserve the protection against copying of IP rights.

The typical sanction mechanisms of IP law would also fail with regard to cryptocurrencies. For example, an injunction in the event of the unauthorized use of Bitcoin could only trigger the ban on payment with the crypto value. It would be expedient here, however, to sanction the violation of the law by withdrawing authorization or by depreciating the “crypto account”. Due to the comparability with real monetary units and in the absence of special legal regulations, it therefore seems appropriate to apply the general rules of the BGB to crypto currencies.


IP management using blockchain applications

Now that it has been outlined at which points IP rights can be generated in the context of blockchain applications, the question of how the holders of IP rights to any kind of Intellectual property, e.g. to pieces of music, works of art or registration rights, can benefit in practice from the application of blockchain technology.


Blockchain-based registers

The concept of the blockchain is based on the idea of ​​creating a decentralized database that enables transactions to be verified and made transparent without the involvement of a central control authority.

In the field of commercial legal protection, databases in the form of state-run registers are of crucial importance in Germany. Although the entry in the register only has a declaratory effect, the effectiveness and enforceability of certain register rights depend on the time of publication and the correctness and completeness of the register.

With the use of blockchain applications, many work steps of public bodies could be carried out digitally automatically and thus not inconsiderable cost and time advantages could be achieved. However, a public blockchain cannot replace the special authentication function that the state has as an impartial third party in keeping registers. A complete replacement of the current system therefore does not seem possible at the moment and, moreover, not desirable.

However, the creation of new, unbureaucratic registers for previously unregistered rights, e.g. for copyrights or rights to inventions, could be more interesting than updating existing registers. The protection provided by the copyright, which is primarily considered here, arises in the second of creation and regardless of a register entry, but the existence of a blockchain-based copyright register would help to alleviate legal uncertainties with regard to the question of the exact time of legal creation or transfer of rights remove.

Such a register would have practical advantages, e.g. for rights of use to music or literary works, which nowadays are often only made available digitally via the Internet. Since a copyright register enables the transparent and secure representation of chains of rights, the authors could settle accounts directly on a transparent and forgery-proof basis with portals such as Spotify or YouTube and thus make intermediate collecting societies and private rights exploiters, including complex royalty regulations, superfluous.


Smart IP Contracts

So-called smart contracts are undoubtedly one of the common buzzwords in the context of blockchain.

This is understood to mean the automation of the execution of the contract, in which the entire contract or certain parts of it are fed into software that - if necessary for the execution of the contract - in turn with corresponding data sources (so-calledOracles") Can be linked via events in the real world (e.g. stock market values, production figures, weather data). Contractual conditions, formulated as "if / then" or "true / false" clauses, can be processed automatically using the information stored in the blockchain.

One speaks of Smart IP Contracts when they deal with IP rights. For example, the transfer or licensing of usage rights could take place automatically as soon as the agreed license fee has been paid. Or vice versa, if a recurring amount is not paid, the right to access the work could be withdrawn immediately.

What enables cost-effective and efficient user management in the field of entertainment such as music or film should, however, develop its true potential in industry and retail. Smart IP contracts can bundle potentially multi-layered and complex license relationships and, through the automation of processing, valuable resources can be used differently than through the accounting that was previously necessary. Areas of application can be seen in research and development contracts and manufacturing licenses. Smart contracts can be the key to a smart factory - a fully automated factory with automated processes not only in production, but also in handling the associated legal challenges.

However, with all this potential, it must also be borne in mind that blockchain technology and smart contracts are not omnipotent. When it comes to conditions in the smart contracts that cannot be managed according to the simple "true / false" logic, but rather complicated conditions with scope for judgment, a human decision is currently required. It remains to be seen whether, through elaborate databases, a kind of "data-supported referee" as "oracle"can act.


Conclusion

The potential for change in the area of ​​IP rights through blockchain applications cannot be denied. Nevertheless, the technology is currently also repeatedly encountering actual and legal obstacles, which must be removed in the future through the development of technical solutions and the creation of the necessary legal framework. At the same time, current IP law basically provides the necessary instruments to protect developments in this area at an early stage and thus to ensure their later effective commercialization.