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Blockchain & IP – Fin Tech

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1. INTRODUCTION

what Is blockchain?

There is no denying the fact that Blockchain is ‘as
ingenious an invention’ as it is misunderstood.

People mostly associate Blockchain with online currencies or
“Cryptocurrencies” like “‘Bitcoins”.

While it’s true “Cryptocurrencies” are
predominantly based on the Blockchain technology but the technology
itself is much more than being part of Fin-Tech
ecosystem. 

The brainchild of a person or group of people known by the
pseudonym – “Satoshi Nakamoto”, Blockchain
technology works by allowing digital information to be distributed
but not copied.

Blockchain enables transactions to be recorded in what is
described as a “decentralized ledger”.

Working something like a shared Google document, the ledger is a
public database that records transactions between two or more
parties in a permanent way and distributes a copy to all relevant
parties, without the need for a third party to authorize the
transaction.

These records are kept across a multitude of computers (called
nodes), and each new block is built upon previous blocks and
contains the data stored on all previous blocks.

Its decentralized nature, coupled with military-grade
cryptography, contributes towards its security.

Since all blocks in the chain are interlinked and the earlier
blocks provide the basis for subsequent blocks, the Blockchain is
virtually unalterable.

Even theoretically, its alteration would require cracking the
cryptographic security employed, retroactively altering previous
blocks, and simultaneous tampering of the records held across all
computers connected to the distributed ledger. This makes it
highly-resistant to cyberattacks, as there is no central point of
vulnerability to target.

In simpler terms, Blockchain technology creates a trustworthy
and transparent record by allowing multiple parties to a
transaction to verify what will be entered onto a ledger in advance
without any single party having the ability to change any ledger
entries later on.

It would not be wrong to say that Blockchain Technology has
created the backbone of a new type of Internet.

2. nexus between blockchain & intellectual property

In order to understand the actual relationship between
Intellectual Property (IP) and Blockchain, it is necessary to first
understand the technology and flow of Blockchain and then about
advantages that Blockchain technology can actually provide.

A. TECHNOLOGY AND FLOW IN BLOCKCHAIN

Transactions: Each transaction transfers from
one subject to another and is represented as a transaction from A
to B, B to C or C to D.

Therefore, the blockchain keeps track of all the transactions
occurred from its inception till the last stage occurred at any
given point of time.

Blocks: All the transactions are grouped in
blocks. Each block collects all the transactions occurring in a
given timeframe and keeps a reference to the preceding block.
Hence, they are linked as a chain.

Nodes: The blockchain is spread over network
computers i.e. the “nodes”. Each node contains a replica
or local copy of the entire Blockchain.

Majority consensus: Decisions on the network
are made according to a majority consensus. Each node modifies its
local copy of the blockchain to make a mirror or replica status of
the majority of the network nodes. 

Mining: Nodes could either passively store a
copy of the blockchain, or actively take part to the maintenance of
the blockchain, in the so called “mining” process.

Wallet: A wallet only stores credentials (a
complex, unchangeable combination of automatically assigned numbers
and letters), which enable blockchain users to transfer
cryptocurrencies they own.

A unique addressee is always assigned with each and every
wallet. A person willing to send any amount of cryptocurrency to
another person, the recipient’s address will have to be
specified along with the desired amount and with his/her
credential, the transaction will be validated for its
completion.

This results into a complete flow of transaction under
blockchain.

B. ADVANTAGES OF BLOCKCHAIN

Blockchain will be an integral technology for growth of each and
every industry because of its potential uses.

Different types of data can be added to a Blockchain, from
cryptocurrency, transaction and contractual information
to data files, photos, videos and design
documents.

Blockchain is also extremely secure and reliable. Any
discrepancy in a record can be quickly identified and resolved.

Prime Objectives of Blockchain are: Accountability,
Security, Transparency, Identification and Chain linked
events.

Thus, Blockchain is an effective solution where a public record
of transactions is required to be kept up to date quickly and
effectively, while not necessarily needing any regulator or
third-party authenticator.

This is where IP and Blockchain have a common
platform.

C. LIMITATION OF IPR

IP rights (IPRs) are currently regulated by
third party authenticators.

These authenticators are the Governments or administrative
bodies of the geographical regions where the IP holder
wants to secure and enforce rights
.

The limiting factor of such a system is its inherent physical
limitations. This system is already starting to show cracks.

The issues of piracy of copyrighted Literary, Dramatic and
Musical works are a serious concern, which have been propelled
extensively by the advent of internet sharing techniques, and

as the market gets more globalized and digitized, it
will become more imperative to look for a more feasible and
reliable alternative.

Nonetheless, concerns regarding IPRs are not only limited to
enforcement issues. Proper management of IP assets is also proving
to be an equally challenging work. Thus IPRs, in tandem with larger
contractual obligations, need a fresh look in the current digital
landscape.

Furthermore, many big companies today have a substantial portion
of their industrial framework over internet, and thus physical and
geographical limitations are diminishing for such companies.
Accordingly, Blockchain is being seriously considered as a possible
successor to this ‘Physical System’.

The ‘classic-physical’ model of IP rights
enforcements is proving to be inadequate in this new Digital
Age.’

3. BLOCKCHAIN & IP – POTENTIAL APPLICATIONS

Advent of Internet has provided a great encouragement to the IP
industry to think outside the box and look for new and novel ways
to protect IPRs.

In the context of IP-heavy industries, Blockchain technology
offers various obvious possibilities:

  1. IP Registries

The most natural and obvious application for Blockchain within
the realm of IP is their registration. Instead of opting for
registering in a traditional centralized database, a
decentralized Blockchain can be employed instead.

IP offices could also make use of a centralized,
Blockchain-technology-based, repository to record the full
life-cycle of IP rights.

This will help in developing an indisputable register to list
out an all-inclusive timeline of an IP, right from the date of its
application.

This will really be extremely useful when dealing with claims
for ‘non-use revocation’. This would also be useful
for audits, assignments, mergers and acquisitions.

Even unregistered IP rights (copyrights, etc.) can benefit
greatly from a Blockchain based system as it could greatly aid in
the issues relating to evidence of their conception and original
authorship.

  1. Smart Contracts & Digital rights management
    (DRM) 

With an advancement of technology, smart contracts can be
programmed to perform simple functions.

Smart Contracts have to be evolved gradually with constant
review and updation since the specified conditions will also change
with time. Smart Contracts can execute themselves, when specified
conditions are met, without any manual intervention.

Smart Contracts work on automatic mode with suo motu
authority till the specified conditions are met.

For example, coupled with the concept of ‘Smart
Contracts’, one could license a copyright-protected work and
the relative royalty payments could be executed to the licensor in
real-time once the work is used by the licensee.

Blockchain or Distributed Ledger (DLT-based) archives could aid
and facilitate the licensing of copyrighted works or other IP
rights via use of such ‘Smart Contracts’.

  1. Anti-Counterfeiting & Supply Chain Management

Blockchain also offers many untouched opportunities in the
sphere of off-line ecosystems regarding IP Rights.

Coupled with scan-able Blockchain-connected tags or
imprints to goods,
providing the ability to trace goods on
an immutable Blockchain, Ledgers showing the relative ownership or
authorized licensees would enable all persons in the supply chain,
including consumers and authorities, to distinguish genuine
products from counterfeit goods.

This would also enable producers of goods to enforce their
contracts and could also be used to satisfy regulatory
requirements.

4. BLOCKCHAIN & IP – CHALLENGES

Although Blockchain has the potential to revolutionize the
current IP ecosystem, yet as of now, there are many drawbacks and
side-effects of an entirely Blockchain based ecosystem.

Though some jurisdictional Courts have taken cognizance
of Blockchain as admissible evidence, it will take a long time for
its full fledged adoption in law.

Further, due to slow ticking transaction processes in
Blockchain, IP experts will still be required for legal matters and
examinations.

The second major obstacle for widespread use of
Blockchains is its incredibly high energy consumption.

Powering all “nodes”, and simultaneously providing for
adequate cooling facilities for a continuous operation becomes
extensively high energy consuming process.

These two downsides alone make Blockchains one of the most
expensive databases one could imagine.

5. CONCLUSION

While the technology is still relatively in its early stages,
its growth and propagation can help solve many of the problems that
IPR-holders have been facing ever since the advent of the
internet.

As observed above, there are deficiencies in the Blockchain
technology, including the fact that it relies on huge processing
power and can only cope with a limited number of transactions per
hour.

The biggest strength of the Blockchain ecosystem is that it
is immutable
.

Once an entry is made in the Blockchain, it is impossible to
corrupt it, and this makes it apt for a world that demands greater
transparency and accountability.

Common use of Blockchain is probably still some way off, and
many people will have to be convinced as to its practicality.

However, where there are old-fashioned and ineffective systems
(or none at all) in place, we may see Blockchain being introduced
to streamline and simplify the management of Intellectual
Property.

We at AMLEGALS foresee that, through a wide scale adoption of
Blockchains in IP sector, especially for digital and internet based
businesses, IP infringements- including copyright, can be contained
in coming years.

This content is purely an academic analysis under
“Legal intelligence series”.

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is
intended for informational purposes only and does not constitute
legal opinion, advice or any advertisement. This document is not
intended to address the circumstances of any particular individual
or corporate body. Reade should not act on the information provided
herein without appropriate professional advice after a thorough
examination of the facts and circumstances of a particular
situation. There can be no assurance that the
judicial/quasi-judicial authorities may not take a position
contrary to the views mentioned herein.

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