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Blockchain and IP

8 November 2023
  • Dr. Mohan Dewan assisted by Adv. Shubham Borkar

At the outset, the terms “Blockchain” and “Intellectual Property (IP)” don’t seem to overlap as the former is a part of relatively new technology, whereas the latter is a set of systems to legally protect such new technologies.

Blockchain was invented in the early 90s, principally for saving contents that could not be changed over time, and cryptographically storing digital documents with time stamps to prevent tampering in a decentralized way. Like artificial intelligence (AI), another groundbreaking invention that was to follow, it was in hibernation for almost 2-decades. In 2004, for the first time, cryptographic tokenization was achieved with “proof of work”, i.e., using energy-intensive computation.

Then came the 2008 mortgage crisis in the USA accompanied by economic recession that made an anonymous individual going by the name Satoshi Nakamoto (unidentified till to date), employ blockchain along with its cryptographic tokenization to create Bitcoin blockchain and its in-house token BTC.

Initially, very few people understood its potential, and like all new technologies, Bitcoin was used for several illegal activities including money laundering, black market, etc. However, as the technology matured, in 2014 with the advent of Bitcoin 2.0, Bitcoin blockchain technology and the currency were separated.

Further in 2015, with Ethereum, created by the then Bitcoin enthusiast Vitalik Buterin, for the first time, the concept of Smart Contract came into existence, wherein the contract with all its terms and conditions are written in codes in computer languages including Solidity, Rust, and the likes, that are mostly derivatives of JAVA and the execution is through cryptographic signatures.

Following this, various consensus mechanisms including but not limited to Proof of Stake, Proof of History, Proof of Storage, etc., were developed, to replace the proof of work consensus mechanism owing to the lower energy efficiency of the latter. Thus, Blockchain technology started to be in use for various solutions apart from its direct use as an open ledger in financial transactions.

As mentioned at the very beginning, there is an uncanny similarity between Blockchain-led Crypto and the Intellectual Property (IP) domains, which is intangibility. Blockchain-created currencies are called cryptocurrencies, as they are encrypted software programs, completely intangible, thus, making them similar to IP assets. This intangibility render these 2 domains to go hand in hand in the future.

Having talked about the inherent similarity, there is a fundamental dissimilarity in operation. Blockchains are prima facie decentralized unless the lionshare of the nodes, i.e., the junction points of a meeting of different users are owned by a centralized body in the case of the PROOF OF WORK mechanism. This imposed centralization may be done for another consensus mechanism as well, even in an easier way, i.e., just by purchasing enough amounts of tokens and putting the same into staking, i.e., purchasing the in-house asset of a blockchain and putting the said assets into stake against a validatory control.

Traditionally the IP mechanism, on the contrary, is predominantly centralized. An IP gets recognition not in a decentralized way, but by a central government, either elected or selected.

Blockchain has no geo-political border, whereas, IP is traditionally territorial. Therefore, till the time of homogenization of governance across borders, the IP- mechanism may equate to Blockchain.

Therefore, at the very best, as of now, the system for running the IP infrastructure may be improvised using blockchain technologies. However, with the development in the last 3 decades, several Universal mechanisms have been adopted in different domains of IP.

For example, the Universal Copyright Convention (UCC) and the Berne Convention are international instruments of copyright protection. For trademarks, the Madrid Protocol with a universally accepted NICE Classification is in place. For the protection of Industrial Designs, the Hague system for registering up to 100 designs in 77 contracting parties covering a total of 94 countries is very much in place. Even for patents, unions of countries have come up with streamlined mechanisms for addressing the issues of acceptance of office actions or nature of examination or addressing the demand for local acceptance or even a translation to a particular language, etc. ARIPO, OAPI from African countries, EUIPO from Europe, etc. have already formulated mechanisms easing the filing and prosecution for an applicant of a patent. Therefore, the use of blockchain with a universal principle even in the IP domain seems very much achievable through assigning validator status to the stakeholder countries, owing a certain number of nodes in a blockchain. This would surely substantially decentralize the operations, however, as the control of such nodes would be decided in a smaller and empowered group, the centralization would actually be at the foundation, i.e., while deciding respective stakeholding in a blockchain. Given the understanding that in such a case, the stakeholders would be governments of participant nations, said governments would be carrying socio-political agendas in a scenario wherein the selection of a government is not homogenous, a lot of challenges must be addressed through the upgradation of technologies. Without prejudice, below are some areas where there may be a happy marriage between blockchain and IP.

A product with a brand value may or may not be authentic. The decentralized consensus mechanisms of Blockchain (Proof of Work is truly Decentralized, while there is still scope for manipulation in other consensus mechanisms) may easily identify the authentic product and/or any authentic representation of an authentic product, as against a counterfeit.

Ownership/ Trust:
The most trusted way of determining ownership or even authenticity is perhaps, a trustless way, wherein there is NO NEED to trust any third party when it comes to determination of ownership or transfer of ownership.

A TRUSTLESS transaction is done using the principles of Probability. Thus, the elimination of third parties in a trustless mechanism easily gives information of ownership.

This is best exemplified in the case of an NFT (Non-Fungible Token) marketspace, wherein assets like representation of a valuable paper painting or digital painting or any physical assets may be put on a blockchain as a token, which is not fungible, i.e., not replaceable by another identical item.

Normally, Blockchain is an open ledger. Except in the case of a PRIVATE Blockchain where the identities of the participants are cryptographically locked, generally, blockchains reveal all the information of something on the chain including the entire transaction history.

As counterfeiting is one of the bigger challenges faced by IP practitioners, this would help track such offenses in one go.

Like cryptocurrency coins, any asset may be tokenized, at least theoretically. Once tokenized, a free transaction in the blockchain using its consensus mechanism becomes easier as well as safer. Thus, IP-related assets may be put into transactions.

The efficiency of such transactions has largely been enhanced by the use of Smart Contracts, wherein the contract with all its terms and conditions are written in codes in computer languages.

IP Management:
As earlier mentioned, at present, an IP- management entirely governed by blockchain is not possible as it is the Government of respective countries that award the IPs. However, in the case of managing IPs, for example, the entire storage function including the docketing of IP assets may be done using Blockchain technology.

As earlier mentioned, blockchain may determine the IP- rights of an asset undoubtedly; said asset may be saved on a blockchain instead of any centralized storage. In this case, it seems that the use of AI in this might be a game changer.

In the future, a country’s government may own a blockchain, and irrespective of the centralized ownership, the rest of the functions may be made entirely decentralized. For example, filing of applications, initial review of filing, examination of the application, issuing of office action, and the like, may easily be executed with smart contacts in a blockchain with a consensus mechanism.

This is where the blockchain may be used most efficiently. Licensing of any assets may be done through this mechanism, including the representative digital assets, with no theoretical risk of counterfeiting.

Financial Rewards:
Blockchain-mediated transactions can’t be altered, manupulated or copied, therefore, it presents a very efficient mechanism of financial reward for the creator of an art or the inventor of a technology. In addition, as the entire activities are on chain, and thereby open to everyone, it is not possible to escape without paying a prescribed fee.

On the flip side, blockchain-driven mechanisms generally would ask for payment for even let’s say browsing or searching, said mechanism may not seem fit for IPs wherein all the information is placed before the public. Time will tell whether the blockchain system is mature enough to adopt such a mechanism, however, this may be improved with continuous development.

Therefore, Blockchain may work with country-specific restrictions imposed. At least, blockchain technologies may be used to streamline the procedures in the IP office as well as future IP- transactions.