WIPO White Paper on Blockchain and Intellectual Property (II part)
by Raffaella Aghemo
After analyzing the first part of the document issued by WIPO regarding the use and advantages of blockchain technology, the next part of the work goes into more detail, listing the use cases in a process such as that of property rights intellectual, composed of various phases, use cases I said both horizontal and vertical. The concluding remarks are immediately followed by the annexes, containing specifications relating to the contents of the main document.
Section 3 focuses on use cases. “Intellectual property, in a broad sense, indicates the legal rights deriving from intellectual activity in the industrial, scientific, literary, and artistic fields, and has traditionally been divided into two main branches:” industrial property “ and” copyright.” It should also be noted that there are branches of IP law and practice that fall outside the distinction between the two main branches, which are therefore called sui generis rights (rights “of their nature” ). Examples include sui generis protection of new plant varieties, non-original databases, traditional software and knowledge (TK), and traditional cultural expressions (TCE). With the digital transformation of the Fourth Industrial Revolution (4IR), intangible assets that could go beyond the classic branches of IP, namely industrial property and copyright, such as big data sets, algorithms, TK and TCE, are taking on more importance and, because they are not directly and completely protected by the classic main branches of the IP system.”
The value chain can be represented as a life cycle model with four phases :
• Generation: This phase includes all the steps from the initial idea with a potential IP value to the existence of an intangible asset suitable for IP protection. It can include the following sub-steps:
• Conception: in the conception sub-phase, the key activities are all those carried out by actors such as innovators, research and development departments, or, by analogy, creators. The objectives of such activities that are relevant to blockchain and distributed ledger technologies (DLT) during this sub-phase may include, if applicable, depending on the nature of the IP rights concerned, evidence of the existence and development of the future asset of IP and, in some cases, keeping it secret (mainly applicable to industrial property and trade secrets).
• Exploration: During the Exploration sub-phase, depending on the nature of the IP rights concerned, actors such as IP rights holders, innovators, and their legal representatives can explore the possibility of IP acquisition and make strategic, tactical, and operational decisions based on data. public and private sources (such as IP data, non-IP literature, litigation data, corporate data, market reports) that help them better understand a number of elements such as the technological landscape, key players, level of maturity, preliminary assessments
• Design: the key activities in the subphase Conception are continuous surveillance on technology to quickly identify and analyze new market trends and the freedom to operate (FTO), which is a common practice in technology-intensive sectors (mainly for an industrial property) to determine if there would be a potential infringement if the design stage IP business were commercialized. FTO implies a thorough review of information sources with specialized tools.
• Production of creative works and development of an IP protection strategy: The production of creative works plays an important role in the development of copyrighted content, including the production of books, music, visual arts, and performing arts (e.g. theater, dance, etc.)
• Protection: This phase includes all activities related to obtaining legal protection of an intangible asset in the form of IP rights, including the voluntary registration of ownership. In general, these activities can be grouped into four sub-stages: prosecution of IP rights, registration of ownership, retention of IP, and enforcement of IP. For other intellectual property rights such as copyright and related rights or trade secrets, these activities do not apply. In most countries, copyright protection is achieved automatically without the need for registration or other formalities
• Management: This phase refers to the activities that the IP rights owner can undertake to develop and increase the value of the IP rights portfolio. It can include sub-steps such as IP audit, IP portfolio analysis, IP life cycle analysis, Competitive Technology Intelligence (CTI) (gathering, analyzing, and applying publicly available information about external technology activities that could affect the activity of a company), and IP landscape.
• Marketing: This phase includes all those activities directly involved in generating revenue from the IPR portfolio. It can be divided into IP financing (valuation, guarantee, securitization, and fundraising), collection and distribution of creative works, and monetization ( licensing, franchising, joint venture, collection, and distribution of royalties).
“There are a number of important requirements to keep in mind when referencing this simplified and generalized representation of the IP resource lifecycle throughout this document. First, the reader should keep in mind that the activities identified at each stage of the IP value chain are not necessarily sequential. Secondly, the distinctions between the different stages of the life cycle are not rigid and rapid and can in practice overlap. Thirdly, not all steps take place for all IP assets and not always sequentially, especially in the case of unregistered IP rights. In particular, enforcement actions (before courts or administrative bodies) will generally be taken once the IP is in the commercialization stage. Fourth, the processes can differ between the different branches of IP systems. This would be the case with copyright since the Generation phase usually coincides with the Protection phase because work is usually protected at the time of creation; while registration is available, IP offices do not play a role in copyright protection as they do for industrial property rights; the management phase can often be mixed with the commercialization phase, especially when copyright is managed and at the same time licensed by a CMO. Unlike industrial property rights, copyright data is mostly held by private parties and not by IP or public offices.”
Horizontal use cases include:
- Decentralized Identifiers (DIDs): Creating DIDs for the actors of the IP ecosystem allows for faster interactions along the different stages of the IP value chains.
- Timestamp: A digital timestamp is proof that a document, file, or any type of relevant digital content existed or was set up in a digital location, for example, by attaching it to a blockchain at a particular date and time.
- Arbitration and dispute resolution (ADR) services: blockchain in ADR can be used to increase security against evidence related to the dispute and communications between parties, maintaining confidentiality and automation through the implementation of smart contracts.
- Transactions via smart contract: if the smart contracts are used to facilitate trade through blockchains, actors can sign transactions via smart contract and receive tokens (coins) that represent a certain value or the right to use a service/asset as agreed through this smart contract.
- Version management: Many IP assets are constantly and rapidly transforming (e.g. annotations in progress, value-added datasets), and therefore transparent and reliable version management is important to maximize legal certainty regarding rights to intellectual property in those resources.
- Proof of existence: blockchain can substantially improve legal certainty on intellectual assets by providing immutable proof of the existence of these assets.
Vertical use cases include:
- IP (Generation / Protection) register: the inclusion of creative or innovative assets and the details of its generation in a blockchain would create a timestamped record and proof of reliable generation that the owners could use to manage and market their asset immaterial, while also protecting against misappropriation or violations.
- Evidence of generation: Uploading next generation IP assets and the details of their generation to a blockchain would allow for a timestamped record to be recorded and reliable proof of generation. Owners can use it to safeguard it from potential misappropriation and breaches, such as complex data sets, such as sequence data generated by genomic sequencing.
- Track and trace of the source of origin (Protection / Marketing): the blockchain can be used to combat counterfeiting of goods by tracing the routes and recording all the interested parties involved in the final delivery of the products to the customer.
- IPR enforcement (Protection): blockchain technologies allow for the creation of a decentralized platform where all parties involved in IPR protection (law enforcement authorities, right holders, IP offices, and other parties) have access to relevant information relating to to the product. This platform would allow law enforcement authorities and IPR holders to share (confidential) data securely, thus helping to support the fight against counterfeiting.
- Exchange of priority documents (Security): IP offices can create a common infrastructure for exchanging priority patent documents with each other. This will allow all IP offices to have the same level of control and security over information, as well as end-to-end traceability and greater automation. Additionally, applicants may be relieved of the need to submit documents to the Office of First Filing in the patent approval application process in the IP offices of different countries.
- Certification Mark (Protection): This use case refers to the creation of a distributed registry of certification marks in which the marks and information relating to each of them, including holders, certification authorities, and the approval process, as well as the management of the applications received for the use of the trademark, are archived
- Proof of trademark use (Protection): blockchain can provide reliable information and dated proof of actual use, and frequency of use of a trademark in commerce, both of which are relevant for proving first use, actual use, character distinctive / acquired secondary meaning or goodwill in a trademark.
- Continuation of the application of plant variety protection (Protection): the blockchain solution could create an immutable record of “events” in the life of a protected variety, globally. It could include the time when a Plant Variety Protection Application (PVP) is filed, reviewed, and granted. It may also address the practicalities of collecting, storing, and providing such evidence. It could also be relevant to any PVP matters after it has been granted (e.g. maintenance of existing rights, nullity, and cancellation).
- IPR Transfer (Management): Blockchain has the potential to support all parties involved in this process, facilitating the creation and management of evidence of the transferee and assignor agreement for the IPR transfer.
- IP Licensing (Commercialization): Blockchain could bring a secure, reliable, and scalable distributed transaction process to IPR licensing. It could introduce traceable and verifiable ownership and accurate distribution of royalties, allowing the possibility to pay directly the right holders, reducing the recourse to intermediaries.
In the private sector, blockchain can certainly be used as part of the generation of tamper-proof documentation bearing a precise date and time, attributable to a specific individual or entity. “Some platforms that integrate this utility are already available from important and established suppliers such as, Bernstein, MyTitle, Creativity Safe, Origin Stamp or Zertifier as well as services developed by law firms specifically for clients. “
The digital registration service provided by these entities is usually divided into three phases :
• Upload: this phase consists of uploading a specific digital item of any type — for example, research notebooks, confidential information, etc. — in an encrypted cloud service connected to a blockchain via an Application Programming Interface (API), the purpose of which is to create a transaction registered on the blockchain, bearing date, time and owner. Such a transaction is localized with an ID, which is the hash, associated with the encryption of a particular document. This document is usually encrypted by adopting the so-called “zero-knowledge” technology, which means that the provider offering the API service that connects the final consumer with the blockchain does not have access to the uploaded document. In fact, only a digital fingerprint of the document, translated into hash, will be registered on the blockchain.
• Certification: once the document has been uploaded to the “ digital cloud “ and encrypted on the blockchain, the blockchain network operator issues ownership certificates that contain all the relevant information or to be presented to the competent authority or simply as a personal document certifying possession of a specific document at a given time. The relevant information can consist of the name of the holder, the date and time of the encryption, the identification of the transaction ( hash ), and all the accessory and additional information that can be customized and filled in (e.g. there may be a section on the certificate blockchain called “notes” or “comments”, for which IP owners can describe the characteristics of the encrypted document).
• Verification: as mentioned above, since services are often offered following a zero-knowledge technology, the certificate can only prove the existence of a specific content/document that has been encrypted on the blockchain and that reports a certain transaction number ( hash ), in the sense that the document is not contained in the certificate provided. The problem of verifying authenticity therefore remains. To verify the authenticity of the encrypted document on the blockchain, and not a modified version or a copy of it, this solution requires a tool to verify which specific document was uploaded generating that transaction. “ To this end, to verify the authenticity of the transaction, it is necessary to verify two factors :
a. The existence of the transaction associated with the hash. As for the location of the transaction, blockchains such as Ethereum and Bitcoin already offer specific free services that allow the search for a transaction in their entire blockchain, by entering the hash on those platforms. If the service is being provided via a different blockchain, the provider must grant third parties access to the transaction ID to locate it.
b. Possession of the original document uploaded. On the other hand, to determine whether or not this transaction contains a specific document and not a modified or later version, the providers have enabled a service normally referred to as a “verification tool” (the trade name of this tool may vary from provider to provider), which, by uploading the same original document initially encrypted, will confirm the correspondence with the blockchain transaction by recognizing the exact same fingerprint uploaded previously. If the original document is different even in the smallest details such as a comma or a space, and if the next modified version is loaded on the verification tool, the latter will reveal the mismatch and will not confirm it.“
“As far as the patent realm is concerned, the generation of timed proofs offers inventors and patent holders protection from their preparatory documentation right up to the filing of the patent application. This would simply function as a digital notary, with the difference being fast, discreet, confidential, and available 24/7.
Similarly, in the field of patents, another potential application of blockchain solutions is called defensive publications. Defensive publications are strategies that use the publication of technical development as a tool to create prior art and thus prevent the granting of patents on that invention. “ However, to successfully determine such defensive publication as prior art and to include the current state of the art, such content must be accessible to patent examiners and must bear a specific date, both points equally suitable for a blockchain -based solution combined with InterPlanetary File System (IPFS) (to ensure compliance with the requirements set by law to take the necessary measures to protect the information, the file containing the trade secret is encrypted in a local IPFS, with timestamps on the blockchain and accessible via a “zero-knowledge platform “.)
In the public sector, there is a proposal for an international patent application system based on an authorized blockchain called Patent Application System Based on Blockchain (PABC), which would aim to connect patent offices around the world and promote the exchange of patent data between of them in a highly secure blockchain environment, albeit with problems currently experienced by patent systems such as the inefficiency, cost, and uncertainty of obtaining a patent in multiple countries. It appears that there may be several technical and legal challenges to implementing the proposal. First, someone should create a global patent system network. Each IPO would act as a node in a blockchain network to verify relevant applications and approve all operational records on a patent application so that those records can be admitted by all competent patent offices on a decentralized level rather than just one specific office at the time, although the offices may not be able to share information on unpublished patent applications with other offices in the network, as some offices or applicants would not be allowed to share it under their laws.
Meanwhile, the IP Register in Blockchain project of the European Union Intellectual Property Office (EUIPO) has implemented a blockchain-based append-only database, distributed and managed among the participating IP offices, with access to the history of each entry. in relation to trademarks and designs filed at the participating IP offices.
Then move on to the section relating to copyright and related rights, where a reference to the phenomenon of NFTs cannot be missing: “ It is said that NFTs bring scarcity to the digital space by associating a unique identifier of a digital resource (for example, an artwork in digital format), which allows the author to sell it as an original work, or one of a limited number of copies of the original if chosen by the author. NFTs are intangible and represent unique digital objects, which means that such digital work is unique, original and no other object will have such characteristics or attributes. Thanks to the use of NFTs, for now mainly powered by the Ethereum blockchain, creators can draw up smart contracts through which a series of conditions can be established that determine the life of the digital object associated with NFT. Among these, the most relevant is the percentage of resale to be paid to the author, which among the economic exploitation rights are to be considered assigned (in some jurisdictions, if not expressly established in writing, the economic rights are to be considered not assigned ). However, the question that revolves around the nature of the NFTs themselves must be resolved, whether these are to be considered personal property or IP licenses and, finally, what is determined by the content of the smartphones contract. Indeed, the nature of the smart contract of the NFT will determine the rights of the purchaser of this NFT, taking into account that the territorial differences may apply according to the applicable legislation.”
In 2019 the Italian Society of Authors and Publishers (SIAE) announced a partnership with Algorand for the development of a blockchain platform for the distribution of royalties. The project saw the first tangible results in March 2021, with the creation of over 4 million NFTs representing the more than 95,000 authors associated with the SIAE. The partnership aims to share the project with other collective management organizations (CMOS ), as the ultimate goal is to accelerate the digital conversion of the works to facilitate their protection. While NFTs are powered by smart contracts, they also have different scopes and applications. As a matter of fact, smart solutions contracts can facilitate the negotiation of licenses both individually and collectively by CMOS.
In Canada, the Access Copyright Foundation created the “ Attribution Ledger ”with the aim of linking a creative work to its legitimate creator and rights holder in a reliable and authoritative way. The blockchain-based initiative is based on three main considerations:
1. the identity of the content;
2. the rules and protocols required for the verified attribution; And
3. an open and transparent system that unchangeably links the work, the metadata about the work, and the entity or person capable of authorizing the use of a work.
Each license includes contractual information relating to the licensed content, who can use the IP and under what conditions, the duration and termination of the agreement, and the economic conditions. Since the license agreement could be defined in a smart agreement, the license terms, prices, and duration of the agreement could be stored as part of the blockchain-related to the licensed IP. This allows for verification of license entitlement and also allows you to build market intelligence by analyzing market prices and license duration by industry.
We, therefore, need an interoperability system that allows the various infrastructures to talk to each other and make the flow and governance of data fluid and easy. There is a lack of standardization of many of these aspects. In terms of governance and processes, discussions and leadership are not sufficiently transparent and remain very far from being representative of society or even of global interests as a whole.
The Global Blockchain Business Council has identified two key challenges regarding blockchain standards :
1. align standards and codes of conduct across jurisdictions and sectors; And
2. ensure that stakeholders of all sizes have a say.
governance framework, or governance of the network, should be discussed at an early stage and agreed upon prior to implementation. The framework will be radically different depending on the blockchain solution, whether we consider a solution based on a public network without authorization or we design a use case on a public or private authorized network. The protocol consensus mechanism will be different in each case.
There are four fundamental elements of governance
governance framework, network promoters should take into account the following four key elements:
- values and objectives
- dispute resolution mechanisms
There is therefore a strong tension between the information imprinted in the blockchain and the legal reality: situations may arise when the on-chain information conflicts or differs from that in the real world or in the external data system (off-chain information ), for example, when a transfer or cancellation of an IPR is recorded in an off-chain registry but is not reflected in the chain. If the information on the same object is different, there is the question of what information should be taken, but this is not a new challenge compared to other digital technologies. This problem is also related to the blockchain oracle problem. For the coherence and security of information in the blockchain, countries such as Liechtenstein have introduced the role of “physical validators,“ whose main function is to ensure the connection between the physical object and the token that represents the rights related to it.
Legal uncertainty also in relation to smartphones contract. They are just computer codes, often self-executing, that make use of blockchain properties in many contexts. In some cases, these codes can be used to execute an existing legal contract (for example, the smart contract is the means of executing a classic contract in natural language) or it may constitute a legal contract itself (i.e., the computer code itself would include the legal agreement in its entirety). In the first case, we are talking about a smart legal contract, while in the second, we talk about a smart contract with legal implications. In the latter case, dispute resolution mechanisms should be integrated into the smart contract and provide a clearly articulated legal basis in the event of a dispute or error.
Finally, a mention also to the problems inherent to Tokens: tokens are given on a blockchain that represents a certain value, right, or obligation. The smart contracts are used by users of a blockchain network to transfer tokens from the wallet of one of those users to others. Tokens represent certain rights and obligations that in the past would have preferred to be represented by hard copies and traded as such. Tokens can have different functionality depending on the specific use case. These are mainly divided into four categories: investment tokens, utility tokens, currency tokens, and hybrid tokens, however, the differences between them seem minor. Additionally, tokens can combine multiple features. From a legal point of view, this is problematic: depending on how a token is classified, the regulatory obligations differ. There is uncertainty as to which token classes fall within the scope of existing regulations, also due to the absence of uniform definitions.
Finally, the attachments refer, the first to IP ecosystems (network of various actors who interact with each other in a collaborative and competitive way in an IP environment using resources to generate, protect, manage, make available, and/or commercialize intellectual resources), the second to a survey conducted from July 2020 to August 2020, with a number of responses equal to 546, the third on IP-related cases and the fourth on the opportunities offered by DID, decentralized digital identity.
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Raffaella Aghemo, Lawyer