By now it is well recognized that blockchain technology or, more broadly, distributed ledger technology (DLT) has the potential to expand human interaction and revolutionize the way business is conducted across a number of industries. The effects of blockchain and DLT (collectively referenced herein as "Blockchain") are expected to rival the impact of the internet.
Just like the internet, Blockchain will have a significant impact on how companies manage intellectual property rights. While there are plenty of reasons to be excited about Blockchain, companies dealing with intellectual property portfolios should appreciate that Blockchain's impact may not provide direct or immediate relief from some of the most significant burdens of rights management.
Before discussing rights management issues, it is worth clarifying specific concepts and terms used in this article. "Blockchain" will refer to technology consisting of at least a decentralized ledger comprising transactions that is shared among multiple participants operating within a peer-to-peer network of exchanges. The term "Blockchain" is also meant to necessarily include a cryptographically secure verification mechanism and a separate protocol that orders (or "blocks") recorded transactions. A blockchain or blockchains refers to a particular use or uses of Blockchain.
As described below, Blockchain can be utilized in "public," "private," or part public-part private ("hybrid") forms. Transactions recorded on a blockchain are generally immutable, that is, they generally serve as unalterable proof that each transaction took place (barring certain rare exceptions that are beyond the scope of this article).
Some of the most exciting uses of Blockchain involve complex interactions between a blockchain itself and the users. For example, Smart Contracts allow users of a blockchain to set conditions within the blockchain that automatically trigger transactions upon the recording of a certain event on the blockchain. Smart Contracts enable companies and individuals to conduct seamless, automatic, and sometimes instant transactions with one another, all without the need to know, trust, or have any formal relationship with the other party or parties involved.
Managing intellectual property rights at a large scale using Blockchain will require that the digital property either reside on a blockchain(s), or at least that a record of the property's storage or transfer exist on a blockchain. Given the energy it takes to process complex transactions using Blockchain, data-heavy intellectual property is likely to be accessible by or through a blockchain sooner than it is to be stored on one.
Blockchain in the Entertainment Space
The music industry was one of the first sectors of entertainment to utilize Blockchain for rights management, and this makes perfect sense. Traditionally, music was not distributed directly by artists to consumers, but by artists to intermediaries and intermediaries to consumers. The intermediaries, in turn, captured most of the monetary value of the music. Blockchain allows artists not only to distribute their music directly to consumers, but to automate the instant execution of licensing agreements and royalty payments upon each sale.
Other players in the entertainment sector have adopted the music industry's model and adapted it to other forms of content. In the context of video content, for example, StreamSpace is a new company planning to launch a Blockchain-based platform that will allow independent filmmakers to distribute films directly to viewers in a peer-to-peer manner on a pay-per-view basis. As described by StreamSpace:
A film enthusiast logs into his account, adds US$5.00 in value to his digital wallet …, and then clicks to watch a film. That last click initiates an immediate token transfer from his digital wallet to a smart contract, in which a small portion of the fee is sent to StreamSpace and the balance is transferred to the copyright licensee or owner for the film.
Stream Space White Paper at p. 11.
But Blockchain's promise to improve the distribution of all sorts of digital content does not come without derivative consequences, both good and bad.
As to the good consequences, recording and distributing digital content on an accessible and immutable ledger will make finding the correct owners of a particular work, or part of a work, easier than in the current system. In turn, continued use of the same blockchain-based system might also enable downstream content owners who later acquire content by that blockchain to not only monetize the content but also to update the chain of ownership. Moreover, with the capacity to precisely track each "use" of specific property, digital content owners can also gain insight and develop data sets on who their consumers are and how those consumers came across their content.
Blockchain is therefore indisputably "good" for its capacity to ease the burdens associated with exchanging content, as well as for its solutions to tracking content distribution, viewership, and copying. But Blockchain cannot immediately improve all aspects of rights management. Blockchain obviously cannot prevent the unauthorized copying of works off the blockchain. Nor can Blockchain realistically alleviate many of the burdens imposed by actions necessary to enforce IP rights against infringers.
The Enforcement Problem
Enforcement primarily involves efforts to safeguard against two types of unauthorized uses of digital works: (1) the direct copying and reproduction of an existing work, and (2) the creation of new content that is substantially similar to an existing work. Blockchain will uniquely affect how enforcement efforts are carried out against these kinds of unauthorized uses.
Consider a situation involving a company that uses a private blockchain to facilitate the distribution of streaming content. The company makes its content accessible only to those who have been given access to its blockchain. (Think Netflix, but on a blockchain.) The company's use of Blockchain provides it with the inherent capacity to control unauthorized copying and reproduction of content native to its blockchain. The company could also use identity searches to easily determine who might have leaked private content by determining who accessed the content.
Nonetheless, a content owner's enforcement rights against infringers are unlikely to change any time soon. To get content removed from a private blockchain, a rights holder would still need to apply to the content host's owner/operator/controller/manager to disable or obtain information about infringing content, irrespective of the company's use of Blockchain. And of special note, it may not always be possible to "take down" the content, since a fundamental feature of Blockchain is the immutability of the ledger. In some cases, it may be possible only to hide infringing content from view, but not to remove it from the platform.
In contrast, rights management on a public blockchain is very different from rights management on private blockchains. In a public blockchain, anyone can post content. Consider the public blockchain Steem, which in simple terms is a blog on a blockchain. It pays content creators and curators in its own native cryptocurrency. According to its "Blue Paper," Steem is "the first publicly accessible database for immutably stored content in the form of plain text, along with an in-built incentivization mechanism" (Steem Blue Paper, p. 1). Internet-based applications and Steem users alike can also pull and share data from Steem's blockchain, and by so doing can reward those who contribute the content.
The immutability of the content and information on a public blockchain can be problematic for rights management. The threshold number of the participants required to make changes to a public blockchain, such as removing previously posted content, is difficult if not completely unrealistic. This means that someone who posts infringing content to a public blockchain cannot simply contact a company to remove the content. As Steem's website warns, "The blockchain will always contain the full edit history of posts and comments, so [a user's post] can never be completely deleted." Right management, therefore, may become more about monetizing infringing uses on a blockchain and correcting information on a blockchain than about takedowns.
For better or worse, the widespread use of Blockchain for maintaining and managing IP is surprisingly close, and attention must be paid to the obvious and non-obvious consequences, whether good, bad, or neither. As artists and content creators use Blockchain to reassert control over their works and ease difficult recordkeeping processes, they'll also have to grapple with the level of privacy and, appreciably, the non-permanence that they will cede to either companies or users of their preferred blockchains. Companies and blockchain users will face interrelated quandaries. For now, one thing is clear: Blockchain is a welcome addition to the arsenal of tools to be used for rights management and against IP infringement—even if Blockchain fundamentally changes the way we think about the problems we are still hopeful it will solve.