Blockchain Technology and IP Protection

Whilst cryptocurrency may have existed since 2008, in the last few years it (along with the technology that underpins it, the Blockchain) has penetrated the public consciousness like never before. Blockchain technology was and is lauded for its transparency and its ability to decentralize the transmission of information. These are desirable conditions for the creation of a new global currency, with hundreds of cryptocurrencies now part of the public lexicon, each with a different purpose and specific set of features.

Despite the tangible and well-documented value of creating cryptocurrencies, Blockchain technology’s true impact must be seen beyond just digital payment and speculation. Its ability to create public records quickly, relatively cheaply and, most importantly, securely makes it perfect for several vital administrative tasks. Casting votes in an election, documenting the sale of property (both physical and digital) and facilitating insurance and medical aid claims could all be accomplished by using Blockchain technology. Blockchain technology also creates the scope for smart contracts, which can execute themselves, creating a space for companies and even governmental arms to function autonomously, free from human intervention, procrastination, or corruption. It is, thus, not too grand a statement to predict that the future of human interaction (and with it, the future of intellectual property protection) could be altered forever by Blockchain technology.

How does Blockchain technology work?

Despite the advent of the digital age, the storage and transmission of information has not changed principally for centuries. For the most part, information worth transmitting is recorded in a ledger of some sort, with related ledgers grouped together into a single database. A central authority, like a bank or trade mark registry, manages the database in question and records any changes to that database. The accuracy of the database is dependent on safeguards put in place by the central authority, whilst the flow of transactions is facilitated in part by the trust placed in the central authority by the participants to the transactions.

Blockchain technology, at its essence, is also a ledger. However, it does not rely on a central record keeping authority to record the transactions. Blockchain technology decentralizes the record of the transactions, as each interested party has access to the same single database. Transactions are only recorded when they can be authenticated by each of the computers making up the network. This verification is done automatically on behalf of each computer within the network and, once this has taken place, the block is added to the chain and cannot be removed by anyone.

The test case – How Blockchain Technology has impacted the concept of currency

The first and most well-known form of Blockchain-based cryptocurrency is Bitcoin (BTC). The technology behind BTC (and cryptocurrency in general) combines cryptography with a decentralized public ledger, held and verified simultaneously by the various role-players involved, in order to create a currency system that doesn’t rely on tangible notes or coins or on a centralized financial arbiter to operate effectively. When BTC is sent from one digital wallet to another, the individual details of that transaction are recorded and broadcast to the network of BTC users, so that each user can verify the accuracy of the transaction. This verification is done automatically and, once verified, the transaction is bundled with other transactions into a block, which is then added, through the mining process, to the chain containing all the network’s BTC transactions. Miners are rewarded for facilitating this process with new BTC which is created as a byproduct of the process. This has an inflationary effect, which stimulates the currency, as well as an incentivizing effect, making mining attractive. Whilst BTC mining is now a professional industry, the basic theory behind cryptocurrency allows for any user of the currency to function as a miner, creating a model where the technology is perpetuated, stimulated and facilitated by the users themselves.

BTC’s success is based on the low transaction cost and the assumption that every transaction is verified by every participant, even if automatically. The decentralized and (at least partially) anonymous nature of BTC has stimulated its usage for illegal transactions, whilst the volatility associated with the exchange between fiat currency (GBP, USD etc.) and BTC (and, more recently, cryptocurrency in general) has led to a global trend of BTC speculation. As a result, large-scale research into cryptocurrency and Blockchain technology is being conducted by governmental agencies and traditional financial institutions. Whilst dedicated funded research by these two industries is likely to fuel development in Blockchain technology, it may also lead to a limitation of the space occupied by cryptocurrency, creating parameters that are more easily identifiable with those systems already in place. However, as a byproduct of increased research, the potential that Blockchain technology has outside of the cryptocurrency space may be realized.

Intellectual Property protection and Blockchain technology – how one can help the other

Patent protection is designed to reward both innovation and competition. It incentivizes invention by allowing inventors to monopolize the product of their ingenuity for a limited time period, whilst creating a safe system in which details of new inventions are published, thereby encouraging further improvements and, ideally, alternatives, stimulating development across a number of industries.  Once a patent lapses, it is available to the public to copy and use, thereby enriching public knowledge and commerce.

This system is not without its drawbacks. The legislative guidelines underpinning patent protection in various jurisdictions around the world have not always kept pace with modern society, whilst the cost of patent protection is prohibitive to many first-time inventors. Obtaining patent protection is also no guarantee against being beaten to market by a competitor, either because of a technical weakness in the patent description or because of the prohibitive costs associated with litigation. The territorial nature of Patent protection exacerbates these difficulties, placing meaningful patent protection out of the reach of many laypeople. International patent law, despite continued attempts to do so, is not entirely harmonized, which creates further difficulties. Enter: Blockchain. Blockchain technology, in theory, can revolutionize the way in which patents are protected, by creating a decentralized global system of authentication, minimizing the scope for disagreement, and reducing the costs associated with patent protection.

Blockchain technology’s real benefit to the world of Intellectual Property would be in the form of authentication of ownership, done through a process called hashing. Hashing describes the process of transcribing a document into a unique line of code (which is called a hash). Much like fingerprints are (incorrectly) believed to be, every hash is unique, with even a small discrepancy in the original text resulting in the creation of a completely unique hash. It is impossible to recreate the underlying text from the hash – the cryptography employed makes it unrecognizable and it is a one-way operation. The hash’s only real purpose is verification – as only the holder of the original document will be able to recreate the same hash twice. Hashes can be bundled together and stored on a Blockchain, providing a decentralized, easily verifiable, and completely protected record that something was in existence at a certain time. Thus, a system is created whereby information is stored and verified publicly, without also needing to be disclosed.

In theory, a Patent specification could be recorded as a hash and added to a Blockchain of national (or international) patent specifications, which would provide an easily verifiable piece of evidence that the patent had been filed on a specific date. Not only could this streamline the system of Patent protection around the world, but this system could also impact other areas of Intellectual Property record keeping. Trade marks, for example, could benefit from the certainty Blockchain technology would create, as it would assist in global indexing and would further the movement towards a true global Trade Mark register. The law of copyright too, which in most territories around the world remains an unregistered system, could utilize Blockchain technology as a means of proving that a novel, for example, or a photograph or a piece of music was created by the copyright holder on a specific date. This would drastically reduce the amount of time and effort needed to prove ownership of copyright and would streamline the litigation process behind all three of these systems of Intellectual Property.

Blockchain authentication could reduce the time spent determining when a Patent was filed and would be an excellent first step in the process, minimizing an unnecessary administrative burden and reducing the risk of corruption. However, it would not be suitable as a replacement for the existing Patent model altogether, which requires input from humans in the examination of the patents filed for procedural and fundamental compliance. The same would apply to trade marks. Additionally, the publication of the Patent to the public is a very important part of the goal behind Patent protection – encouraging competition and developmental disclosure. However, the proof of existence offered by Blockchain technology is something that can aid in the protection of Patents and other Intellectual Property around the world and could supplement the existing technologies associated with intellectual property record keeping in the not too distant future.

Neale Christy
Associate | Attorney