The Blockchain: a Revolution in the Protection of IP?

Recently we have talked a lot about cryptocurrencies, ICO, and problems of both regulating transactions with these assets and taxation issues. But let us go back to the start. What lies at the basis of this new financial and technical revolution?

What made it possible for cryptocurrencies and various token transactions to exist?

The emergence of Bitcoin became possible only thanks to the Blockchain, a new technology that lies in its basis. This technology was developed to make the existence of cryptocurrencies possible. If we are to give a brief description, then we are talking about a continuous, developed in a special way, coherent chain of blocks that contain information. In other words, it is a distributed database, the data storage devices of which are not connected to a common server. This base keeps record of a constantly growing list of ordered records that are called blocks. Each block has a timestamp and a reference to the previous block.

If I got it right, the blocks are data about transactions, deals, and contracts inside the system that are represented in an encrypted format. But they are made into a chain and that means they are linked to each other. To record the new block, is it necessary to consistently read information about the old blocks?

That’s absolutely right. All data in the Blockchain are accumulated and make up a constantly updated database. It is impossible to delete or replace or substitute a block in this database. And it is limitless – an infinite number of transactions can be recorded there. This is what makes the Blockchain so special.

How would you characterize the main advantages of this technology?

In the first place, it is decentralized since there is no server in the chain. Secondly, it is transparent since all the information about transactions is stored in an open access format without any possibility for change. And, finally, it is reliable. For the new data to be recorded, there needs to be a consensus of the Blockchain nodes. This allows to filter out transactions and record only legitimate transactions.

I cannot quite grasp the transparency of the Blockchain. For example, I make a transaction of purchasing real estate by means of this technology. Does that mean, that all the information about this transaction, about the price for this house and my personal details will be accessible to all? In this case criminals, having learned so much about me, will be able to use this information for their heinous purposes.

Transparency means that you can view the history of transactions and the path. The information about the size of the transaction is also open. But the identities of the addressor and the addressee are not disclosed. If we take your example, we will see that a house in this place was bought on this date and for this amount. But who bought it, will stay undisclosed.

As far as I know, the Blockchain has become very popular in the sphere of FinTech. Its promising character in the financial sphere was recognized by major world banks back in 2013. Where else can this technology be used?

For example, to identify people. Services in the sphere of identification and confirmation of access rights work on the basis of the Blockchain. They create a digital analogue of personal identity. And some countries, like Estonia, have already implemented such personal identity. Or for copyright, thanks to the use of this updated ledger, in which artists, musicians and inventors can store their copyrights by means of encrypted identifiers.

You have touched upon a very interesting topic of possible uses of the Blockchain technology for the protection of intellectual property. In your opinion, how promising is this trend?

In the context of industries with a big number of intellectual property, the Blockchain and the technologies of a distributed ledger management provide interesting and obvious possibilities to protect intellectual property and to register it, for the evidence base both at the registration level or in courts. It also allows to significantly decrease the cost of these processes and to accelerate them. Potential cases of use can be the following: verifying the creation and confirming the origin of IP rights, controlling and tracking distribution of registered and non-registered IP rights, licenses or exclusive distribution networks by means of smart contracts and transfer of payments to the holders of IP rights in real time, and many more.

And how can this technology be used by the registers for IP rights?

This technology will help to set up “smart IP registers” as centralized solutions which fix an unmodifiable record of registering all events in the life cycle of registered IP rights. This may include data about when, for example, the trade mark was submitted for the first time, when it was registered, when it was used in trading; when a particular design, trade mark or patent was licensed etc. The possibility to track the whole life cycle of the right can have many advantages, including more successful audits of IP rights, and also simplifying the due diligence procedures necessary for IP transactions, as, for example, in mergers and acquisitions of companies.

What does our future hold for us?

Various governmental agencies and IP registers, such as the EU Office for IP, are actively working on the issues of using the Blockchain technology. And it is rather a matter of time when the legislation is able to overcome the potential obstacles of large scale legal use of this technology, as to the applicable law and issues of jurisdiction, safety of data and problems of personal data, and also the rules that can be relied on in the issues of functioning and identifying smart contracts.

Summary: the main advantages of the blockchain technology – transparency, decentralization and reliability, in particular, can be used for the protection of IP by a “smart IP registry”, thanks to the use of distributed ledger technology, in which inventors can store their copyrights by means of encrypted identifiers. The possibility to track the whole life cycle of the right can have many advantages, including more successful audits of IP rights, and also simplification of Due Diligence procedures necessary for the IP transactions, as with mergers and acquisitions.