How blockchain will change intellectual property – copyright

This is the third in a series of articles looking at how blockchain technology is changing the landscape of IP. 

• The first article analysed the implications for trade marks including improving supply chains, being an alternative source of registration and helping IP offices become more efficient. You can view that here.

• The second article analysed the implications for patents such as a boom in filing and potential for a litigation war, and included an interview with Erich Spangenberg about how he plans to profit from the technology. You can view that here.

The ownership of created works will likely always be disputed on some level, but similar to its trade mark application, blockchain technology can be used to establish creators’ rights in an immutable ledger. (See the box at the end of this article for a primer on blockchain.)

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Predictions vary, but many are optimistic that blockchain’s advantages will tempt market-movers in its direction.

Several blockchain-powered platforms to alternatively register creative works or handle transactions between artists and media consumers are already springing up, and will shortly have an answer. PeerTracks, to launch in March, will pay royalties to music artists directly. Imogen Heap’s Mycelia will do the same, but serves the dual purpose of allowing artists to collect data on their fans’ locations and interests, enabling a direct and mutual relationship.

Ironically, Kodak – known for missing the boat on the digital age – is on the leading edge of using this new technology to protect photographers’ rights. The photography company in January launched KodakOne, a blockchain-based platform that promises to facilitate licensing, payment, and even enforcement of photographers’ works in its system. The will use the Ethereum blockchain to create an encrypted, digital ledger of rights ownership for photographers to register both new and archive work that they can then license within the platform.

“For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem,” said Kodak CEO Jeff Clarke in a statement. “Kodak has always sought to democratize photography and make licensing fair to artists. These technologies give the photography community an innovative and easy way to do just that.” 

The platform will use the newly-created KODAKCoin, a photo-centric cryptocurrency to empower photographers and agencies to take greater control in image rights management.

The New York Times ran an article quoting some blockchain specialists expressing scepticism about the initiative, viewing it as a ploy to raise its stock price. “I would not be sleeping very well if I was involved in this,” the New York Times quoted blockchain consultant Jill Carlson as saying.

Jack Tatar, blockchain specialist and author, stores his books on the blockchain platform Factom, in addition to registering them with the Copyright Office. He admits the double-registration is sensible at the moment, but hopes the laws will soon change. He calls registration with the Copyright Office “unnecessary, and an example of bureaucratic bloat.”

Although registering a copyright through blockchain may not promise the same benefits as registering via the Copyright Office – namely the rights to sue for infringement and to collect statutory damages and attorneys fees if filed within three months of creation – evidence of ownership is still an essential piece of holding a copyright. In the event of a dispute, producing proof of ownership via a secure technology like blockchain may tip the scales.

However, registering for the sake of being able to collect statutory damages may not be such a motivation soon, in the music industry at least. As Managing IP previously reported, if the Music Modernisation Act passes, it would make victims of copyright infringement ineligible for statutory damages for all complaints brought since January 2018.

“There is certainly the potential for blockchain to be a must-have for IP rights registration. If Apple, Amazon, or Spotify – one of the bigger players – were to embrace the technology, they could definitely move the market” – Amir Azaran, partner at Loeb & Loeb

Another advantage of the technology is time; artists can upload their works to many of these blockchain platforms nearly instantaneously, whereas registration with the Copyright Office can take weeks or months.

Blockchain could also give copyright holders more control over their works, providing a solution to the first sale doctrine as it applies to digital works. Artists can now track digital use, essentially lending out their works rather than selling them altogether. 

Amir Azaran, partner at Loeb & Loeb, affirms blockchain’s value as it relates to copyright issues. “There is certainly the potential for blockchain to be a must-have for IP rights registration,” he says. “If Apple, Amazon, or Spotify – one of the bigger players – were to embrace the technology, they could definitely move the market.”

Getting “one of the bigger players” on board is a big question, and a challenge. Too often, blockchain is unfairly stigmatised in association with bitcoin and other cryptocurrencies’ volatility.

Consumers are simply familiar with traditional, non-blockchain music and photo platforms, and it’s easy to opt out of futuristic, something-to-do-with-bitcoin options. Unless a significant number of artists make their works available exclusively via blockchain platforms, it may be difficult to overcome consumers’ comfort zone.

Thus, a chicken-and-egg dilemma has arisen in terms of artists and fans’ engagement with the platform. Transactions can only occur when both parties find value in it, and at this point, Azaran says, “we’re not seeing artists flock to this technology”. But he adds: “This will certainly pick up momentum once there’s a track record of services.” Whether the blockchain-powered startups can survive long enough to establish such a record remains to be seen.

A blockchain challenge unique to copyright issues is transaction times. While patents and trade marks’ uses of the technology are generally not incredibly timely, copyright uses can be. In a digital ad real-time bidding scenario, for example, the winning material will appear on the selected space in a web browser in milliseconds once it has been selected. In this context, there’s no time for material to bounce through computers around the world for 10 minutes or more for its rights to be validated.

Azaran explains: “How the consensus works is really the limiting factor. If blockchain could be architected differently and the consensus model could be computationally less intensive, it could be more useful in this context.” At the moment, transactions typically take from 10 minutes up to several hours to be verified.

While blockchain’s inherent immutability can be an advantage because it creates trust, Azaran identifies a downside: “Sometimes you want something to be changeable, and things need to be modified. If you accidentally post someone’s personal information, for example, or if you don’t get the right consents from people appearing in your image.”

Although blockchain has a reputation for disrupting industries by cutting out intermediaries and making them maximally efficient, Azaran reassures intermediaries in the music industry. “They serve an important function in terms of curation and disseminating works”, he says. “We see this now with streaming services – intermediaries are cut out in a way, but they’re still part of the process.”

However, distribution is a different matter. “This is where blockchain can render a lot of efficiency, and where consolidation will happen,” Azaran asserts. “If you’re on the distribution side, you need to be looking at how you can leverage blockchain and adapt.”

A BLOCKCHAIN PRIMER

In a sentence, blockchain is essentially an encrypted, distributed ledger of data that can be used to record information and trade securely without intermediaries.  It functions through a global network of computers: each piece of data (block) is recorded, then verified by multiple participating computers around the world before being timestamped as it is added to an immutable list of previous data (chain).  Blockchain’s decentralised, peer-to-peer (P2P) and trustworthy properties position the technology perfectly to disrupt every industry that uses intermediaries to handle transactions. That is, most industries. It also provides a clear record of ownership, which is of particular importance to IP.  Although it emerged in 2008 as a platform for the popular cryptocurrency bitcoin, blockchain technology has only gained widespread recognition for its utility beyond currency exchange in the past two years.  Because it is so new, there haven’t been any IP-related blockchain cases in court yet, and blockchain has only been mentioned once in a non-IP decision – In re Dole Food – so far. That was a finance-related case in Delaware, which states (in a footnote, no less): "Distributed ledger technology offers a potential technological solution" to determine the ownership of the stocks in question. As such, little precedent exists that indicates how courts will treat the technology when it lands at the center of a dispute.  For now, some states are readying themselves more overtly than others. Delaware was the first US state to embrace the technology back in May 2016, when it launched the Delaware Blockchain Initiative. Arizona moved to legitimise blockchain in March 2017, making a law that renders blockchain transactions legally enforceable by equating smart contracts to electronic signatures.  Take care to separate smart contracts from any lawyerly definition of contracts, because they are not necessarily legally binding – some expect Arizona’s law to be challenged on that front. Instead, smart contracts are simply lines of code that automatically carry out certain actions given certain predetermined criteria. For example, ownership of a patent can be automatically transferred once the correct payment has been received by the correct party. Once these criteria are fulfilled, a smart contract is responsible for carrying out that transaction.  One problem affecting blockchain is that as transactions occur, the data or funds in transit can be vulnerable to hacking. Medium summarises some recent smart contract hacking incidents here.  On the other hand, an advantage of the decentralised ledger technology is that records can never be lost. When a centralised system goes down, data is either lost forever, or trust in recovered data is eroded. With blockchain, however, each computer on the network has a verifiable copy of the record. Thus, a high degree of trust is maintained.