Could Blockchain Disrupt How We Protect Our Intellectual Property?

Everybody is talking about blockchain as a disrupter in the banking and finance industries, but this emerging technology also has potential application for intellectual property (IP) protection. Blockchain creates the potential for an “open, distributed ledger” that permits the secure transfer and recordation of information and data, including digital assets, without the need for middlemen. Once recorded, the data in any given “block” cannot be changed retroactively, except in certain circumstances involving the modification of all subsequent blocks and the consent of a network majority. These features make blockchain interesting for digital currencies. Additionally, blockchain presents other benefits for trademark, copyright and patent protection, as well as IP licensing. Below are a few uses that are currently being explored.

Proof of Creation, Ownership and First Use

Blockchains may offer a new model for registering copyrights or trademarks. Since blockchains don’t require an intermediary (such as the United States Patent and Trademark Office) and can create an immutable, digital record of proof of ownership, they can be used to prove chain of ownership and record transactions on their own. While theoretically blockchain could someday eliminate or reduce the need for centralized IP registries, the benefits of such a central record repository remain.

Blockchain-based records of copyright ownership may be particularly valuable for protecting digital works of art, such as image, music and software files. We are already seeing proposed uses of the technology to allow authors, artists and similar IP owners to track who is using their work, which could help them identify licensing opportunities to optimize the commercial value of their work. IP owners could use blockchain to see the complete chain of ownership of any piece of work, including any licenses, sub-licenses and assignments.  Conceivably, access to discrete information and data that comprises a trade secret could be monitored and tracked in this manner. Recording a work so that it can be tracked through a blockchain gives the author a digital certificate of authenticity which can help third parties identify the author of a work, and help authors or content owners to prevent infringement. Blockchain may also reduce the cost of licensing transactions by creating a direct link between authors and users.

Blockchain may even be beneficial for patent filing and to record patent ownership. The U.S., as well as many other countries, has a “first-to-file” patent system, whereby the rights to an invention belong to the first person to file a patent application. Using blockchain, one can envision a patent application being time-stamped to prove that the inventor/applicant was the first to file. To the extent that the invention has been disclosed publicly before any patent application has been filed, the blockchain time-stamp can be used, at least in the United States, as confirmation of the start of a one-year grace period on the anniversary of which a U.S. patent application must be filed.  As a note, any public disclosure of the invention prior to filing a patent application will likely foreclose an applicant’s ability to pursue patent protection internationally. Additionally, once the patent is granted and ownership changes hand, blockchain can provide a record of the transaction and an efficient way of recording ownership.

Smart Contracts and Licensing

Blockchain offers the ability to add functionality through the addition of a “smart contract,” comprised of computer coding added to the blockchain that facilitates the automatic execution and enforcement of contract terms. The terms of the contract are pre-programmed so that the burden of administering contract terms are reduced. The smart contract provides an interface for external data and processes this data in order to facilitate a transaction involving a record on the blockchain. For instance, smart contracts can be programmed to include data from content users, including payment features, and payment processing functionality so that the IP owner can be compensated based upon usage of its content. A smart contract might require royalty payments based upon data relating product sales. Smart contract features have the potential to automate IP licensing in the future.

While blockchain offers new platforms for registering patents and protecting IP assets, it is unlikely that this emerging technology will fully replace the need for legal analysis and counsel. Digital records and smart contracts offer the potential for static, preprogrammed functionality. IP owners are not yet in position to rely upon automation or artificial intelligence to address issues such as prior art. Additionally, government agencies responsible for maintaining IP records, such as the USPTO, may play a significant role in determining the scope and timing of technological adoption.  Despite these limitations, it is possible that the processes involving IP protection will soon be vastly different than today’s processes and practices. There is no question that the industry will be disrupted; and the full extent of that disruption will create challenges and opportunities for holders and users of IP rights.