Unblocking the Global IP Rights System

Blockchain Technology and its Impact on Intellectual Property Rights Administration

Nobody patented the Blockchain.

The inventor (or inventors) of this peer-to-peer e-cash technology had acted anonymously. The stated goal of this socioeconomic experiment was explicit and revolutionary. Blockchain, via its Bitcoin digital spores, was to provide an alternative to the fiat currencies issued by government-anointed central banks. In keeping with its unconventional birth in 2009, the Blockchain experiment hadn’t sought government-regulated intellectual property (IP) protection.

Yet as the digital spores from blockchain technology now register as far afield as the economic seismographs of central banks, patent applications based on blockchain innovation have surged. In light of this commercial interest in blockchains we pose the question: will the administration of IP rights be drawn into Blockchain’s fast-expanding gravity well?

TL;DR

An IP rights system is a (complex) form of record keeping that makes a marketplace more efficient by reducing uncertainty for market participants. A good IP system achieves this by creating a level of ambient trust that may be relied upon by market participants. This involves hindering counterfeiters & imitators while helping to protect the investments of inventors. Participants in a marketplace with effective IP regulation can freely trade on brand recognition and confidently invest in innovation.

Bitcoins aside, the nature of a blockchain is to support tamper-proof digital record keeping amongst strangers. The ambient trust from this kind of “distributed ledger” is uniquely well suited to reducing uncertainty in marketplaces. Thus there is an intrinsic similarity between the capabilities of a blockchain and the mission of an IP rights system. Whilst there is much ground to cover on this topic, we conclude that blockchain (distributed ledger) technology is well positioned to transform IP offices into more effective and far more efficient marketplace regulators. Given that both blockchains and IP offices will play an expanding role in the global digital economy, an understanding of the intrinsic link between blockchain capabilities and the mission of the IP system is critical.

The “reduction of market uncertainty” perspective is key to understanding why blockchain technology will be increasingly relevant to the IP rights system.

The first block landed like a feather

At 6:15pm GMT on January 3rd 2009 the first “block” of the Blockchain was cryptographically ushered into existence, the act of which yielded 50 “Bitcoins” (a prize in digital tokens now valued at over $250,000 US dollars). The novel mathematical apparatus behind this first, and still dominant, public blockchain had been published and developed by a programming virtuoso (or collective) going by the pseudonym Satoshi Nakamoto.

In simple terms, the blockchain apparatus is a widely duplicated electronic file. This file contains a shared ledger of digital transaction records that observers agree definitely happened. In the “post-truth” era of 2017 a blockchain ledger is something of a North Star — in that all observers agree: a) no single party controls the ledger, and b) it constitutes an irrefutable record.

This shared agreement on historical record arises from a clever protocol that effects a consensus between parties who neither need to know nor trust one another. Such distributed consensus is necessary for minting and spending a digital currency (like Bitcoin). However far broader outcomes arise from this intrinsic nature of a blockchain, including the ability to irrefutably prove ownership of an asset, prove the existence of a record at a point in time, and to prove non-tampering of records.

For example one might submit a data record to a blockchain for observers to witness at a particular date and time, with the verified record then inscribed onto the distributed ledger. At this point the inscription can never be removed or tampered with, and it becomes patently obvious if the same thing is inscribed again. This conceptually simple mechanism has some transformative real world outcomes when combined with the Internet (the dominant technology for information replication).

The advent of this powerful trust technology on the Internet has already spawned a sprawling economy of cryptocurrencies, notary services and other “smart contracts”. Reputationally the Blockchain is now variously referred to as the “internet of agreements”, the “internet of trust”, “the future for financial services infrastructure” and, since its birth, “magic Internet money that will see its demise any day now”.

In terms of what blockchain technology offers to regulators one can point to reduced administrative burden, resilience to fraud, increased regulatory transparency and far lower cost of maintaining regulatory ICT systems. As this 2017 chapter of the 4th industrial revolution draws to a close, no regulator should underestimate the disruption coming from blockchain technology.

IP Rights are a “Big Deal”

It is worth noting that the identity of Satoshi Nakamoto remains a mystery, the original Blockchain invention is in the public domain, and the program code that operates the Blockchain is freely licensed to anyone with the wherewithal to make use of it. Ironically this freely available, wholly unregulated, and unencumbered invention is shaping up to have a major impact on the global regulation of IP rights.

IP rights have been an increasingly big deal since well before the first block was laid on the Blockchain. In 2015 some 2.9 million patent applications were filed around the world, the sixth straight year of increases in innovators seeking patent protection. In the same year some 6 million trade marks were filed and over 800,000 industrial designs registered.

As software and automation “eats the world” the utility of intellectual property rights within the global marketplace is seen as increasingly crucial to future economic prosperity. Where an ill-tempered dog may act to protect a physical premises, registering an IP right has a big role to play in protecting territory in the global digital landscape.

There are several major “industrial” IP rights that one may register (file and pay for) in protecting creations of the mind. Note that there’s also copyright, which arises automatically (although generally needs to be registered if one wishes to enforce it). Successfully registering one of the “industrial” IP rights noted below helps put the law in your corner if a dispute arises.

A Patent is a legally-defensible monopoly that’s granted to assist in making the best return one can from inventing a useful and novel apparatus (in exchange for publicly disclosing how the apparatus works).

A Trade Mark is a defence against your brand (such as the trading name you use) being “passed off” by an imitator in a particular market.

A Design is a defence against the visual elements of your unique creations (e.g., products) from being imitated in appearance (an increasingly important protection in the age of 3D printing).

The record keeping and rules involved with managing these industrial IP rights constitute an IP rights system.

Administering a system of IP rights

The granting of monopolies has a long and storied history. The economic use of patent monopolies to stimulate invention is oft credited for nurturing the first industrial revolution.

What was once a national regime has now expanded along with the general globalisation of markets to become extra-national. International treaties now govern the administration and enforcement of IP rights on the global stage. Whilst a very complex field with many intricacies, we can take a step back and consider four broad activities that are involved with this global system of IP rights administration:

Filing of IP rights — creating new things and doing paperwork in the correct manner with a very keen eye on date stamps, often enlisting an agent to engage with an IP office on your behalf.

Examining & assessing IP rights — this is specialist work from IP lawyers and patent examiners requiring significant scientific skill and critical human judgement.

Registering & tracking IP rights — the responsibility of international and sovereign IP offices as governed by local legislation and global treaties.

Legally enforcing IP rights — a difficult and expensive endeavour that does seem to be bending to a degree of automation in dispute resolution.

One should note that there are very significant inefficiencies baked into the regulatory framework for intellectual property administration around the world. Patent laws are complex and still quite inhomogeneous internationally. Successfully patenting an invention is very expensive and even more expensive to enforce.

Much of the system is opaque and only accessible to IP professionals (agents) making it more expensive and inaccessible for individuals and businesses to engage with this system of governance. This runs counter to the operation of an efficient marketplace, and thus counter to the remit of the IP rights system.

A growing consensus from IP authorities

Around the world intellectual property laws are regulated by IP offices. These are sovereign or international bodies established to administer IP rights according to prevailing legislation and treaty. Their legislative remit is to enable inventors, artists and businesses to derive economic advantage from their creative toils.

In June 2017 at “The Global Debate on Intellectual Property, Trade and Development: Past, Present and Future”, WIPO director general Francis Gurry stated that an “enormous shift of financial and innovative power” from the public to the private sector has taken place, to be observed for example in the almost exclusively private administration of domain names. He expects that IP administration on the blockchain will become part of this process (de Geyter 2017).

A number of IP attorneys and consultants publicly state that they believe in future use of blockchain technologies for IP administration. The Ministry of Economy, Trade, and Industry (METI), Government of Japan, has also shown interest in application of blockchain to IP administration.

We mentioned earlier that one receives copyright upon creation of an image, music, writing or other such “authored works”. This has been the first area where we’ve seen real impact by blockchain-centric businesses on intellectual property.There are already active startups who utilise the Blockchain to help creators defend their copyright or claim attribution (the hard part). Most notable in this space are Binded and ascribe. There are also very early stage attempts at Blockchain registration of industrial intellectual rights, for example at Diplr. A very successful example is the blockchain-powered attribution tracking platform mediachain, which was acquired by Spotify (in support of musicians) this year.

There are also advances in Blockchain-powered smart contracts that apply specifically to IP (in that they support executable natural language smart clauses) and a legal mechanism for arbitration of disputes (see Mattereum).

In terms of automatically enforcing trade marks, we can look to Namecoin, the first ever blockchain crypto-coin other than Bitcoin (i.e., the first so-called “alt coin”). Namecoin is a blockchain system that serves to allow the registration and protection of a name (primarily for website domain names). There are strong analogies between Namecoin and the regulatory trade mark system — and lessons can be learned here for the universal registration of trade names (identifiers) in how Namecoin addresses the Zooko’s triangle trilemma.

A whole-of-lifecycle approach to managing intellectual property on the blockchain is marketed by online service Bernstein. This new business aims to manage the whole innovation lifecycle on the blockchain, including research activities prior to invention filing or disclosure (very important regulatory milestones for a patented invention). Use cases that are supported by Bernstein’s blockchain-backed online service include securing trade secrets, enhancing confidentiality agreements, securing 3D design models, and strengthening defensive publishing (disclosures).

The The Coalition Of Automated Legal Applications — Intellectual Property Group (COALA IP) group has come out with a very detailed proposal on how blockchains can support, complement, or supplement IP.

Predictions

Consider that a new patent takes years to flow through the international IP rights system. A patent filed to a global blockchain-based registry could conceivably be created “in seconds or minutes”. Yet to be participants on a public Blockchain, IP offices will need to become au fait in applying digital signatures to public blockchains as part of everyday business. This may be some years away before it becomes commonplace.

And whilst registering IP rights on the blockchain could replace the practice of known as defensive publication, this is not sufficient to replace the core of an IP offices work. IP lawyers and examiners possess significant knowledge with regard to evaluating a patent’s novelty and other questions core to the IP protection process that are removed from the mechanics of record keeping.

Given that a Blockchain or its Ethereum-style counterparts don’t do any “thinking” at this point the Blockchain doesn’t have much disruptive impact on the process of evaluating (examining) inventions for novelty and utility.

The application of blockchain technology as regards IP rights is most likely to impact the areas of filing, administration, and to some extent enforcement. Consider these core activities:

Filing — an application for an IP right must be filed in a very particular manner with a national IP office (and quite often with the international office at WIPO). A blockchain is a particular useful technology for notarising and passing electronic documents. Look for blockchains to become the digital systems of record.

“Proof of Existence” / First to File — timestamps are extremely important in the administration of an IP rights system. One doesn’t do anything “new” by being second, so having a defensible “filing date” with an IP office is critical. In terms of establishing such timestamps, this lends itself to the core the functionality of a blockchain.

Administration — filed IP rights have an often long lifetime, passing through a variety of stages. The record keeping and reporting on the vast number of IP rights is a core activity of an IP office that is prime candidate for automation and offload to a blockchain ledger.

Enforcement — we’ve already seen automation technologies built on the Blockchain acting to undertake certain enforcement and attribution seeking activities on the basis of copyright.

In Conclusion

An IP rights system exists to reduce uncertainly in a marketplace, assisting participants in the marketplace to trade more efficiently. Participants don’t need to investigate every can of cola to ensure it’s not a poor imitation of their favourite; they don’t need to worry about investing heavily into a new invention in fear that their creation will be duplicated without recourse, they can write and publish freely knowing that a creative act will be honoured. The primary mission of the IP office — to reduce uncertainty in a marketplace — offers many use cases for the increasingly clear socioeconomic benefits of blockchain technology.

Copyright, 2017.