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Blockchain for IP Management

Blockchain is a technology dating all the way back to a 1991 paper discussing the time-stamping of digital documents and is the driving force behind cryptocurrencies like Bitcoin and Ether. Lately, however, it’s being used in a variety of different industries. But what exactly is it and how can it be applied to the IP sector?

What is the blockchain?

Each blockchain varies depending on its implementation, but at its core, a blockchain is a distributed method of recording information (transaction data in the case of bitcoin) in blocks. These blocks are formed into chains, with every user on a peer-to-peer network having their own copy. Blockchains are also decentralised, meaning they have no central authority. A hashing function, an algorithm that takes some input (the stored data in this case) and gives you a string of text that is unique to that input, effectively a digital fingerprint, is used to provide security.

This is because each block contains, along with the information being stored, the hash of the previous block and the hash of the current block. As each block contains the previous block’s hash, it can point to the block that came before it to form a chain. The previous block’s hash can also be quickly recalculated and compared to the one stored to verify the contents haven’t changed. As each block contains the previous block’s hash, if someone modified a previous block and re-computed the hash, it wouldn’t match the one stored in the next block. This means to modify a block, you also have to modify every block after it, and so each block verifies the block before it.

blockchain_diagram

Example of a blockchain

Every user in the system stores their own copy of the blockchain that can be checked against to prevent fraudulent transactions, and new blocks are validated in a process called mining that requires some sort of proof (usually either proof of stake or proof of work) to deter against manipulating data and foul play. This makes it very difficult for someone to modify a record once it has been added to the chain. Each user also has their own wallet, a piece of software that allows them to prove any transactions made are actually from them using public-private key encryption.

How can it be applied to IP?

The blockchain can be used for more than just cryptocurrencies. One example of this is NFTs (Non-Fungible Tokens) where unique tokens are traded instead of currency. These differ from cryptocurrency in that each token is different and non-interchangeable. A similar system could be applied to IP, with a digital token being used to represent the rights to a piece of intellectual property. The owner of this token would then be publically stored in the blockchain, for all to see, and the rights could only be transferred by the token’s owner. Due to the immutability of the blockchain, the token is both protected from any modification and is able to be publicly displayed.

Already, there has been some discussion over the idea of representing IP using tokens. WIPO have considered the idea at length. In a recent webinar, ‘Blockchain Whitepaper for IP Ecosystems’, the use of tokens as a method of managing IP rights was discussed. This identified some major issues in IP-related business that could potentially be solved by blockchain, such as ‘managing IP is time-intensive and costly’ and the existence of ‘multiple and incomplete data sources’. It also discussed the advantages of such a system, like storing instructions on the blockchain to provide transparency to clients. This is far from the only time the potential of blockchain technology has been identified, with further articles discussing how the pace of prosecution struggles to keep up with the pace of innovation and with many articles discussing the potential impact it could have.

The use of blockchain technology can provide a number of advantages with the most obvious being that it is inherently both public and secure. Its speed would also help keep up with the pace of innovation, as all transactions would be effectively instant. The decentralization also prevents issues like server crashes and other forms of downtime from causing problems, preventing a central authority from acting as a bottleneck.

One particular benefit for the IP sector would be the potential for ‘smart contracts’. These are contracts that are implemented by a program without needing the oversight of a person. They are set up so that they run automatically whenever a certain condition is met. They are fast and encrypted to provide security, as well as removing the need for intermediaries. The Etherium website provides a good metaphor for this, describing a vending machine as being a physical smart contract, taking a request and payment, then providing a snack automatically. In the context of IP, this could include things like providing the owner easy licensing of IP works without the licensee having to contact them first and notifying the relevant authorities of any transactions (IBM describe some existing applications). Financial transactions related to intellectual property can have a lot of overhead, and the use of smart contracts could greatly reduce this for smaller cases or when the owner is happy to license to anyone at a set price.

An IP blockchain would make it much easier to understand who has what rights, since the system would be easily accessible and always up to date. When trying to locate, for example, who currently owns the rights to a specific patent, this could easily be looked up, even if it had changed hands multiple times. Equally, as the blockchain is immutable, all records of who had the rights and at what time are easily accessible as well. Finally it would make enforcing rights easier, as the blockchain would show who had purchased a license to use a specific IP.

On top of this, representing IP as tokens would make proving ownership of a particular IP very easy. As all transactions are verified and the records stored in a block are immutable, it is very easy to show that you currently own a piece of intellectual property, and for exactly how long. This could be very helpful for confirming someone does own the intellectual property they claim to, either when selling it or when enforcing it. Blockchain transactions are also effectively instant, meaning the system will be up to date from the moment the transaction completes.

One particular piece of IP where the blockchain could be especially useful is copyright. As copyright is an unregistered right, the creator has to prove that they have ownership. A blockchain based system could be useful in the case of two people each claiming to be the original author as the order of registering can easily be verified by looking at the blockchain, although this does not really prove who was actually the author. This is discussed in more detail here. There are already some examples of systems like this, such as Binded, which aims to use the blockchain to help manage copyright.

The system could also work towards providing a more global patent system. Although most countries have something that can be described as a patent system, in reality each system has a number of differences. As blockchain is decentralised and doesn’t have one central authority, it isn’t bound to the intellectual property office or legal system of one country. This is discussed in more detail here.

Disadvantages

For all the benefits of the blockchain, it isn’t without its problems. One potential issue is the loss of a wallet. As mentioned, wallets store the key used to verify transactions come from you. Should you lose access, either through data corruption or simply through forgetting your password, you lose proof of ownership (as these poor Bitcoin owners found out). One solution to this issue would be having an IP authority back up these keys themselves, but this would somewhat defeat the point of blockchain being decentralised.

It would have to be ensured that the token and IP are fundamentally linked, for a token based IP system to have any value. If this isn’t the case it would allow for someone to assign their patent conventionally and then also sell the token representing it to different people, who would then both claim to own the patent. A legislative change would be required to prevent this scenario, across multiple countries if the system was to work globally. Blockchain is also still an emerging technology. It is not universally accepted as evidence in courts and the laws regulating how it can be used are still new and in flux making it difficult for this legislative change to happen quickly.

Mining is used to verify transactions in the block chain, with some mechanism being used to prevent malicious users performing incorrect validations. One approach is proof of work, where some type of computationally intensive process is performed. This has the downside of using large amounts of energy to solve these problems. However a smaller blockchain with fewer peers on the network can have an easier proof of work and use less energy than something like Bitcoin. There would also likely be far fewer transactions per day and so fewer blocks added to the chain.

An alternative approach is the use of proof of stake. This system is much more environmentally friendly and requires anyone adding a new block to have some stake in the currency, often with a higher stake, meaning more trust. It’s hard to mount an attack without controlling the majority of tokens in this system, at which point the user would be incentivised not to devalue their own investment. This may not be appropriate for an IP blockchain, however, as defining the value of IP relative to each other is difficult. One option could be only allowing a network of trusted patent offices to validate new blocks.

Finally, one of the main strengths of the blockchain is that it’s decentralised, with no central authority. Instead, every user stores their own copy of the blockchain and transmits it to other users. In the case of IP, however, there will be far fewer users, meaning the system will be far less decentralised as the number of users storing a copy of the blockchain may be quite small.

In conclusion, the blockchain is a new and disruptive technology that has the potential to completely transform the way business is carried out in the IP sector. It would allow for a secure and easy way to see exactly who has what rights, while helping to speed up current systems and remove the need for intermediaries for simple transactions.

Article by: Isaac Harris | 3 February 2022

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