Intro to IP and Blockchain: A Primer
2017 was a phenomenal year for Blockchain. This emerging technology moved from early-stage research and development in small, leading-edge, early adopter circles to mainstream, ubiquitous chatter. It seems everyone has heard of Blockchain and its cryptocurrency progeny, Bitcoin. So, naturally, the mainstream began asking, what IS it?
The reason for the fervor was likely the meteoric price rise of Bitcoin in 2017 from $967.67 USD in January 17, 2017 to 13,860.14 USD on December 17th. The year-end price pump was particularly impressive. We also saw an uptick in the number of initial coin offerings for fintech and other startups with unheard of capital raises that surely disrupted the venture capital ecosystem. Astronomical raises include (in USD) $232M for Tezos, $257M for Filecoin, $153M for Bancor, and $145M for Polkadot. And recently, the popular encrypted messaging service company, Telegram, raised $850M in its pre-ICO with a goal in 2018 of $1B.
Blockchain is big business; and not just because of cryptocurrency. Forward-thinking lawyers and law firms are already capitalizing by developing Blockchain and cryptocurrency expertise. To remain competitive, lawyers and law-adjacent stakeholders must have a solid foundational understanding of the technology and its varied and various applications in—and well beyond— the financial industry to remain competitive in this global economy.
But back to the original question. What is blockchain?
What is Blockchain?
A blockchain (yes, there is more than one) is a decentralized database, referred to as distributed ledger technology (or DLT). Blockchain is software. But it offers a new data structure, a new way of storing encrypted information on a computer and synchronizing that data across multiple computers. It is immutable like read-only memory.
The data stored on a blockchain can relate to assets, transactions, contracts, and agreements entered into by users of the same blockchain. The ledger is relayed across hundreds, perhaps thousands of member computers (aka nodes) within an organization, a country, multiple countries or the entire world; each transaction is replicated in full on each member’s computer. Those member-computers confirm that transactions have taken place by consensus.
A blockchain is not located in one central place or controlled by one central entity or person. It can be public (open for all to view) or private (viewable only by a closed community).
Finally, blockchain is not a single technological solution and that’s part of its brilliance. The technology is highly versatile and can be customized to meet the needs of its adopters in most cases, assuming the user or industry can benefit from a decentralized, transparent ledger of transactions. But blockchain isn’t appropriate for every use, as Professors James Grimmelmann and Arvind Narayanan explain.
The first use case for blockchain technology was for cryptocurrency; Bitcoin, specifically. But there are a wealth of possible uses for blockchain technology, some with obvious applications like to store public records that everyone can access and no one can change or destroy (for land records, for example). In fact, blockchain tech will disrupt dozens of industries beyond banking and payments, including supply chain management, insurance, philanthropy, voting, government, healthcare, and energy to name just a few.
The IP Implications of Blockchain
So now that you have a better understanding of blockchain, the next question for IP attorneys is what the technology means for clients and practice. The greatest impact to IP-intensive industries may be removing middlemen like banks, registries, agencies, escrow agents and notaries, because public and private intermediaries abound. Dr. Richard Brunner, Global Head of Legal of the Dennemeyer Group, explains in Lawyer Monthly (July 2017), “[Blockchains] can be used to prove ownership and priority without trusting in institutions that set the terms on their own.” Blockchain technology offers new means to register works, secure order of priority for inventions and logos, and authenticate personal identity or property information in an immutable way. These impacts have clear import for intellectual property regimes.
With all the R&D in the ecosystem, especially in the financial and tech industries, it is no surprise that companies are filing patent apps to protect their innovation. In 2016, the World Economic Forum reported that more than 2,500 such patents had been filed in the prior three years. But many companies are using open-source code with the attendant licensing requirements. Those requirements may impede the ability of a company to actually enforce its patent based on the used or modified code. As Norton Rose Fulbright attorneys Paul Kelly and Susan Linda Ross explain in greater detail, there are several important issues to consider and resolve before filing a blockchain-related patent application.
Even with this word of caution, experts anticipate that blockchain-related patent application filings, currently in the early stages by patent filing standards, will rise at a rapid clip as the technology continues to spread across multiple industries and becomes more mainstream.
As mentioned above, the code of public blockchains is open source and subject to open-source licenses. Even the code of private blockchains is generally based on at least some existing code. So it is difficult to parse out copyrightability and ownership.
Companies intending to maintain proprietary rights in software to protect its value will likely experience challenges. Open-source licenses usually include “viral effect” language. This means the user agrees to offer open-source licenses in any derivatives of the software. Common licenses that implicate this concern are the General Public License (GPL) and the creative commons attribution-share alike license (CC-BY-SA).
Like patent applications, US trademark applications have increased as well. Beginning around 2009, there was a modest increase, at best, in applications. But in 2017, consistent with the media craze surrounding blockchain and cryptocurrencies, a dramatic increase in applications naturally followed suit. Many are intent-to-use filings. Only a handful have been granted registration and a number are dead for various reasons, including express abandonment.
Although an ever-increasing number of lawyers are advising on blockchain and cryptocurrency issues, it is still very early. But remember: the early lawyer, gets the client. Those who position themselves to keep pace with developing innovations will be the go-to attorneys ready to advise clients about how their businesses are going to be impacted and how their company can leverage the technology, if appropriate.
Clients are either poised to disrupt, in an industry that will be disrupted, or wish to invest in blockchain technology. At a minimum, clients will have to deal with their own customers’ questions about Blockchain and cryptocurrency. There is a hunger for information. That hunger presents substantial opportunity for the lawyer prepared to dive in and navigate the proverbial sea of uncharted waters of blockchain.
About the Author: Tonya M. Evans, Esq., is a Professor of Law at the University of New Hampshire School of Law and member of its Franklin Pierce Center of Intellectual Property. She speaks, writes, and teaches primarily in the areas in intellectual property and new technologies, including the global intellectual property implications of Blockchain technology. Recently, she presented at the Licensing Executives Society-Thailand Conference and the law offices of Tilleke & Gibbins in Bangkok.