INTELLECTUAL PROPERTY RIGHTS IN BLOCKCHAIN TECHNOLOGY AND CRYPTOCURRENCY

ABSTRACT

“Blockchain technology, or distributed ledger technology, is just a way of using the modern sciences of encryption to enable entities to share a common infra structure for database retention”. By Blythe Masters.

In this evolving world blockchain has the potential to protect stakeholders from intellectual property rights infringement.

This research paper analyzes three main aspects of this emerging technology.

Analysis of blockchain technology in which the author helps to understand the blockchain, key aspects of blockchain, its types, and advantages. Further, the author discussed about the future of intellectual property rights in blockchain in which we get to know that how blockchain can protect the IP Rights. Also, the author mentioned that how IP Rights can help in protecting the cryptocurrencies through patents, copyrights etc. Cases are also shown.

This paper is an attempt to shed the light on the upcoming future of blockchain and its impact on the legal perspective of intellectual property rights.

KEYWORDS

Blockchain technology, intellectual property rights, ledger, infringement, cryptocurrency.

INTRODUCTION

Blockchain is a decentralised ledger that is used to track and record transactions without the need for any trusted authority or central server. It is the technology behind cryptocurrencies like bitcoin, ethereum, dogecoin, litecoin, etc.

It is a chain of blocks that is linked using cryptographic hashes. Each block saved some relevant information using a previous hash and also generated a new hash for the chain to continue further. The first made block i.e., one that has no previous hash, is called the genesis block.

The research for blockchain technology started in the 1990s by Stuart Haber, W Scott Stornetta, and Mr. Satoshi Nakamoto in 2009 gave this research a new turn by creating bitcoin, the first digital currency.

Now- a-days, blockchain is used in various fields like real estate, management, hospital, etc but the field that caught everybody’s attention is intellectual property rights.

There are different types of intellectual property rights:

  • Patent- It is an exclusive right that provides protection to new inventions.
  • Copyright- It is a legal right that provides protection fo the original work of authorship. For example – music albums, online videos, movies, literary works, etc.
  • Trademark- It provides protection for the brand name and logo to the registered authority among third parties.

These intellectual property rights, which are at a risk of infringement due to its disputable grounds (territorial jurisdiction, access to anyone, and the possibility of being hacked), can be made secure using blockchain technology. As it is a secure, transparent, immutable record of all transactions and is nearly unhackable due to its irreversible policy.

Blockchain can be used to strengthen the panorama of intellectual property rights using smart contracts, reducing counterfeiting, and as an IP registry.

RESEARCH METHODOLOGY

This paper is an amalgamation of secondary sources like various website, journals, research papers, articles, and blogs. Also, analysis of the cases and judgements of different courts in different countries has been used for thorough research.

REVIEW OF LITERATURE

In this research paper, author used the resources like websites such as tech target, some blogs titled “Blockchain and IP and the new normal”, ASIANPLAW.COM, “Smart Contracts for Better Management of Intellectual Property Rights”, Kashishworld, “Blockchain and Intellectual Property Rights Protection Technology”, originstamp. The author also uses some cases judgements to provide more strength to the paper. All of these provide a better in-depth understanding to the researcher. Using all these verified resources, this research paper tried to make the concept of blockchain and IP much easier.

ANALYSIS OF BLOCKCHAIN TECHNOLOGY

“DNA is kind of like a blockchain – a memory of all the species that have come before.” By Reese Jones.

As previously mentioned, blockchain is a decentralised ledger where one can store their data using a previous hash. It solved the problem of double spending, as each unit of value was transferred only once. It is used to describe a value exchange protocol.

Key aspects of blockchain technology include:

  • Distributed ledger

As it maintains a chain system, the participants who are in the same chain can maintain copies of the same ledger, which accounts for transparency and removes the need for any trusted or centralised authority to do safe and secure transactions.

  • Cryptography/Cryptology

It is a method of protecting information and communications by using algorithms, formula, cyphers, or codes. It is used so that the adversaries cannot go through your work.The confidentiality and privacy of data are maintained using cryptography in a block chain system. Using cryptography, an encrypted message is sent to sender and recipient with a key only know to them. It also create accountability and responsibility for them as they cannot deny their reason for transmitting the knowledge.

  • Mechanism

Some examples of the agreement mechanism are: Proof of Stack (PoS), Proof of Work (PoW), Delegate Proof of Stack (DPoS).

Types of Blockchain

Different types of blockchains include:

  • Public blockchain:

In this type of blockchain network anyone can sign on to the blockchain to become an authorized user by using the internet. Here, cryptocurrencies like bitcoin originated and the concept of distributed ledger technology became popular.

Public blockchain are generally transparent and secure, but the network is slow. Also, one of the major problem is that if hackers gain 51% or more of computing power, they can ultimately alter it. This type of blockchain is suitable for NGOs or any social work group.

  • Private blockchain

In this type of blockhain, a single entity or a small network or company has all the controls. They are also known as permissioned and enterprise blockchain.

 They are more secure and fast, and they can prevent intermediaries from accessing the data.

“You can think of private blockchain as being the intranet, while the public blockchain are more like internet”. By Godefroy.

  • Hybrid blockchain

It is a mixture of public and private blockchains. In this, the organization can set some part of the data as a public blockchain (which can be accessed by anyone) and the confidential data can be set as a private blockchain. It protects privacy but allows communication with third parties.

  • Consortium blockchain/ Federated blockchain

It is very similar to hybrid blockchain, but here the private blockchain can be accessed by a particular group and not just by a single entity. It is generally more secure and efficient but less transparent than the public blockchain. [1]

ADVANTAGES OF BLOCKCHAIN

There are various advantages of blockchain. Some of them are listed below:

Blockchain provides a transparent network with a secure environment. It also provides better speed with reduced costs. In blockchain, there is low chances of hacking your data. Although, the data is accessible to them who have the prior permission to go through with it from the owner. The data is immutable which provides you proof of ownership.

FUTURE OF INTELLECTUAL PROPERTY RIGHTS IN BLOCKCHAIN

In today’s world, anyone can access the work of an intellectual property right holder without their prior permission, and due to the vulnerability of the territorial boundation, the limited jurisdiction area, and the long way to attain the intellectual property right, the creator’s work is at stake.

For example-Third party people can take the pictures of the work of the artist and sell them without the artist’s knowledge or permission,

In a landmark judgement, i.e., STAR INDIA PVT. LtD. v. MOVIESTRUNK.COM&ORS [2](2020) Delhi HC, similar things happen. In this case, the plantiff, Star India, accused the defendant of streaming his copyrighted work online. Later the court granted an injunction and damages and ensured the rights of the plantiff.

Blockchain technology can play a very vital role in protecting the intellectual property rights. It can help keep the record secure, transparent, and immutable. Through this, the intellectual property rights management can become easier.

HOW IT WORKS?

PROOF OF OWNERSHIP

On the day the intellectual property right owner saved the information in the block, the encrypted ID of the relevant person, the timestamp, and all the other things got registered in the block. One major advantage is that once the information is saved, it cannot be altered.

For example- if an intellectual property right owner saved his copyrighted music album in the block using previous hash, a new hash was generated for the next person to continue the chain. Now, if that intellectual property right holder wants to change the information, he/she has to send the proposal to everyone linked in the chain, and if the proposal gets approved by majority of people, only then can the data be changed. Although it needs a lot of computing power and a lot of time, which is not possible. So blockchain provides an untampered proof of ownership to the court if someone commits IP infringement.

SMART CONTRACTS

These are the contracts in which we provide access to the data stored in the block upon imposing certain conditions. These can be used to enforce IP agreements. So, whoever is going through the data needs to provide its digital signature, which creates a legally binding contract. They provide self- executing IP licences.[3]

For example- If a music album is shown on the market, the creator can save it on the blockchain and claim a certain amount of royalty to ensure continued access to the digital asset, so that the IP right aren’t violate.

Smart contracts also help in better transparency and can also be used to make micropayments to offer controlled and monitored access to the content by allocating a specific address to work. It also prevents unethical use of your work.

BETTER GOVERNANCE

As there are territorial bounds on the intellectual property right and each jurisdiction has a different regulatory framework, it is difficult to claim something internationally. As blockchain is a decentralised network, it provides a unified platform where everyone can agree, which ultimately results in better governance.[4]

It promotes equality for small organizations, as they have to go through a very long and complicated process to register their IP rights, but through blockchain, they can easily file their IP registry in the block and claim them.

LEGISLATIONS

  • In 2016, Vermont passed legislation declaring that blockchain records accompanied by a written declaration of a person attesting to the details of the transactions are admissible. Under section 12 U.S.A. §1913, blockchain records are also presumed to be authentic pursuant to the Vermont Rules Of Evidence.
  • [5]In June 2018, Hangzhou Internet Court admitted blockchain as authenticated evidence in a copyright case in which the plantiff used a third party blockchain deposition service to secure online webpage evidence of the alleged copyright infringement.
  • In India, for enforcement and jurisdiction over transactions over a blockchain network, Section 65 B (Admissibility of electronic records) of Indian Evidence Act,1872 is used.

CRYPTOCURRENCY’S IP RIGHTS

As blockchain is the technology behind cryptocurrency, it is important to talk about IP rights in the area of cryptocurrency.

Cryptocurrency is an unregulated digital currency. The main examples are- bitcoin, ethereum, litecoin, etc but they are misused by posing unethical practices on the internet.

STATUS OF CRYPTO IN INDIA

  • On April 6, 2018, the Reserve Bank of India issued a circular[6] titled “RBI cautions users of virtual currencies against risks” by stating that it is a threat to consumer protection, market integrity, and money laundering.
  • In the case “Internet and Mobile Association of India v. RBI [2020 (2) (TC 528), the SC favoured cryptocurrency and the reversed the ban on it.
  • In 2020, the RBI announced a bill to regulate all private crypto affairs i.e., the Crypto and Regulation of Official Digital Currency Bill, 2020.

HOW CAN WE PROTECT CRYPTO THROUGH IP RIGHTS?

  • Patents

Cryptocurrency can be patented if it serves any useful function. The consensus algorithms, privacy protocols and smart contracts are eligible for patent protection, but as it is an evolving field, obtaining patentability criteria is very challenging.

Various companies have filed blockchain- related patents, like IBM, Toyota, Bank of America, Capital One, etc.

“Blockchain software companies may end up being amalgamated into existing software giants, at which point blockchain patents will just become part of the existing patent war” by Vitalik Buterin.

  • Copyright:

Non- fungible tokens (NFT) are the most targeted area. Any intermediary can click the photo of the NFT and can sell or repost it.

Also, NFT created using copyrighted items from others is a matter of concern. One of the famous cases is that of weird whales, in which a 12year old boy made a series of pixilated artworks, and the status of case is still uncertain.

  • Trade Secrets

Processes, algorithms, formulas can be protected as trade secrets through a non- disclosure agreement even though they are not patented.

Note- Bitcoin has a trademark in the US, although it is not patented.

Overall, Trademark litigation, IP strategy, and IP portfolio management have become major areas in the litigation sector.

In March 2017, the Chamber of Digital Commerce in Washington established the Blockchain Intellectual Protection Council.

CASES

“Although an individual coin on an established blockchain like ethereum or bitcoin is nearly unhackable, the IP surrounding them remains vulnerable to infringement,” by John.M.Mulachy.

  • [7]In 2018, Telegram Messanger, which provides an encrypted message service, filed a suit against Florida based Lantah, which had filed a trademark application for its crypto brand. It used the word ‘gram’, for which Telegram already holds trademark rights. The U.S. district court for the northern district of California granted a motion for preliminary injunction, restricting the defendant from further using the word ‘gram’ as it was similar to the plantiff’s trademark and thus was poised to cause confusion.
  • [8]TATA SONS PRIVATE LIMITED v. HAKUNAMATATA TATA FOUNDERS &ORS.

This case is related to trademark violations. The defendant, Hakunamatata, dealt under the name TATA coin/$TATA. The Delhi High Court refused to grant an injunction against this word as the defendant wasn’t targeting Indian customers and was present outside India.

This case clearly shows the vulnerability of IP rights infringement under crypto.

“Crypto lies at the intersection of software and finance, two research areas that have historically been difficult for the patent system to come to grips with”, Mulachy stated. He further stated that “Software implemented invention and so-called business methods have often been found too abstract to be eligible for protection under 35 US§101”.

SUGGESTIONS

  • The major problem in blockchain is the loss of wallet, which means the loss of the key that is used to identify transactions and that results in the loss of proof of ownership. Therefore, an IP authority for the backup of these keys must be made.
  • A universally accepted regulatory framework must be framed as there are various countries where it is not accepted as evidence in court, which increases the administrative cost and time.
  • There is a lack of adoption and a skill gap, so companies can use blockchain as a service (BaaS), which allows them to get the benefit of blockchain without spending heavily.

CONCLUSION

To conclude, blockchain technology and its use in intellectual property rights are still evolving topics. The arena of blockchain technology is very wide, and its future scope lies in intellectual property rights management. In the world where, through the internet, using some unethical practises, one can violate the intellectual property rights of the holder. On the other hand, blockchain provides a safe and secure environment.                             

Although cryptocurrency needs some protection as well with IP rights, the laws here are not well framed enough, as discussed in the paper. It takes time to protect them through IP rights.

All in all, this field is emerging and holds a good future scope.

BY; TRIPTI BANSAL

COLLEGE: DHARMASHASTRA NATIONAL LAW UNIVERSITY, JABALPUR


[1] tech target, www.techtarget.com (last visited july 13,2023).

[2] star india pvt. ltd. v. moviestrunk.com & ors. (2020) cs (comm)408/2019cs hc delhi (india)

[3] Smart Contracts for Better Management of Intellectual Property Rights, Kashishworld(July.13,2023, 5:37 AM), https://www.kashishworld.com/blog/smart-contracts-for-better-management-of-intellectual-property-rights/amp.

[4] Blockchain and Intellectual Property Rights Protection Technology, originstamp (July 13, 2023, 5:44 AM), https://originstamp.com/blog/blockchain-and-intellectual-property-rights-protection-technology/.

[5] Hangzhou Huatai media culture media co.,ltd. v. shenzhen daotong technology development co.,ltd. Zhe 0192 Civil Case, First Court No.81,Hangzhou Internet Court of the People’s Republic of China (2018)(china).

[6] Ajit Prasad, RBI cautions users of virtual currencies against Risks, (2013), https://www.rbi.org.in/commonperson/English/Scripts/Press Releases.aspx?Id=2522.

[7] Blockchain and IP and the new normal, ASIANPLAW.COM (July.13,2023,6:24 AM), https://asianplaw.com.

[8] tata sons private limited v. hakunamatata tata founders & ors [cs (comm) 316/2021] (2021)

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