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Blockchain in Protecting Intellectual Property

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Yuri Musienko
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Thanks to enhanced transparency, low-administrative pressure, resilience to fraud, and numerous solutions for business-processes automatization, blockchain is an appealing, promising technology for many economic sectors. Earlier, we have discussed blockchain employment in manufacturing, logistics, marketing, medicine, and cybersecurity. This article will explain how blockchain can help protect intellectual property (IP).

Proof of Creation

The truth of the problem. One of the most significant issues the intellectual property protection industry has is proving the copyright. According to the law, the creator owns the copyright after creating the intellectual property. However, in specific cases, the parties can not authenticate who was the first to create a logo, a beat, video, or another IP. 

A frequent and straightforward example is employing test assignments, for example, a design solution for a website or a verse from an uncompleted track. A more complex example is the copyright for complex scientific research or new technology; regardless of the intellectual property type, the author must prove to be the first creator, and those other individuals or companies use their idea for their projects. 

Typically, there are three solutions for this issue:

  • The author can pre-register their work with the corresponding government authority. It is time-consuming, hassle, and sometimes expensive; you will not want to do it each time you have to complete a test assignment.
  • The author can employ private services. This method is faster than registering at a government authority, yet more expensive. Furthermore, there might be legal problems; for example, depositing IP in German storage will prove copyright in Germany and the EU, yet it will not work in the USA or China.
  • The author can appeal to a court. The creator must have evidence and considerable resources since the author is usually an individual, and they will have to sue a big company.
The solution blockchain provides. Blockchain technology allows intellectual property creators to store their works in a highly-protected distributed ledger. Moreover, the technology is significantly more cost-effective and reliable than traditional services. 

Once added to the blockchain, the information cannot be edited or deleted (considering reasonable effort); hence, it is highly reliable. Blockchain provides a digital authenticity certificate with timestamps available for view to all parties interested. 

First success. Bernstein, a Munich startup, offers a solution on blockchain for depositing IP and getting an authentication certificate that proves any IP asset's copyright, existence, and integrity. Moreover, they can make private the intellectual property and related data (author, creation time, content, etc.) to protect confidential data with their unique methods and cryptography protocols. 

Not only that, but in April 2021, European Union Intellectual Property Office (EUIPO) launched the first blockchain platform in Europe for secure documenting of copyright and trademark registration in real-time. TMview and DesignView are two available services within this project for a hyper-fast, safe, and reliable information delivery about IP rights for assets stored in the blockchain.

China, the USA, Great Britain, and many other countries have similar projects or plan to implement them shortly.

Origin tracking

The truth of the problem. The second essential issue in the IP market is the complexity and lasting duration of tracking the origin: who created and owned the copyright for a particular asset. This issue concerns music, images, and photos but everyday products like shoes, T-shirts, bags, etc. Frauds often use logos and designer solutions by famous brands to make forfeits and copy ideas. The customers regularly find it hard to understand where is the original and the fake product, yet it is critical since the quality differs).

The solution blockchain provides. Blockchain allows recording details about product origin and the people who created it. Blockchain excels in structuring data; hence, they are easy to find and use for IP copyright confirmation and tracking the origin and authenticity of IP.

First success. Deadmau5, a Canadian musician, and the American rock band Kings of Leon were the first to release their albums as NFT (non-fungible token). NFTs are unique certificates created on blockchain that can be assigned to any digital or physical object, thus verifying its uniqueness and authenticity. 

NFT by Kings of Leon offers a limited cover issue

NFT by Kings of Leon offers a limited cover issue, concert tickets, a backstage pass, a meeting with the band, a package of digital products (stickers, GIFs, signs), etc. Source

The initial sale of this NFT practically doesn't matter. Yet, after resale (NFT allows the resale of the copyright), it will be a 100% guarantee of authenticity and legitimacy of musical albums. 

You can check the New Balance products service for authenticity confirmation to provide other examples. 

IP registration optimization

The truth of the problem. While copyright automatically is granted when creating an IP product, other rights like patents, trademarks, logos, and industry samples are protected only after registration at authority. It is a complicated and expensive process that requires involving lawyers. 

Furthermore, the registration grants the IP owner copyright only in the country of registration. Considering the global trend of the economy, it will limit market liquidity and confront owners’ needs, especially during the current digitalization of the economy. 

The solution blockchain provides. Blockchain makes the registration process of IP significantly more straightforward, fast, and reasonable by eliminating intermediaries and automatizing numerous business processes with smart contracts. Moreover, the platforms are much more secure compared to the present systems. Also, blockchain will provide data several-fold faster from databases; for instance, if it is necessary to find out the logo or song copyright owner.

Theoretically, the parties can employ blockchain to view the entire copyright chain, including any licenses and sublicenses; everything on a single platform is fast and easy.

First success. The platform we mentioned above (the one created by EUIPO) also facilitates IP product registration (TMview has registered about 100 million trademarks, while DesignView — has 20 million designs). Chinese Service Center (CSC) and other countries have launched a similar blockchain solution

EUIPO blockchain platform results while registering IP during the first months.

EUIPO blockchain platform results while registering IP during the first months.

Cost-effective licensing fees

The truth of the problem. The following IP market issue concerns the complexity and expensiveness of license fees. These payments require a complicated infrastructure that tracks IP employment, collects license fees, and distributes them to IP owners. Furthermore, banks process almost all costs; hence, they charge fees. Typically, these are international transactions, and the commission is significantly bigger. Therefore, the licensing fees involve increased transaction fees. 

The solution blockchain provides. Blockchain can considerably reduce the cost of licensing fees by lower transaction fees. Also, by employing a smart contract to automate all business processes for tracking IP employment and paying licensing and other fees.

Smart contracts are self-executing algorithms that track the assigned contract data from the blockchain and other sources and automatically perform the actions. All contract conditions are pre-programmed and available for verification since these are usually open source code software; hence, all interested parties can independently verify the contract conditions and specifications. 

The smart contract functioning scheme.

The smart contract functioning scheme.Source.

First success. Almost all cryptocurrencies are an example of cheap transactions. Moreover, concerning automatic licensing fees, we can mention the solution by IBM and Tech Mahindra known as a system of contract and copyright management on the blockchain. This service tracks content usage and facilitates honorarium pays to prevent piracy.

Managing copyright

The truth of the problem. Users constantly upload their text, music, video, images, and photographs to the network; anyone can use them without notifying the owner, even for commercial purposes. The copyright owners find it harder to claim their copyright to prove its authenticity. Only wealthy individuals or companies can hire a third party to protect and manage their copyright.

The solution blockchain provides. Blockchain technology is beneficial since it requires no third parties and reduces the costs of managing IP. Users can outsource it to smart contracts that automatically track the employment of IP products and fulfill the pre-assigned actions:

  • Registers intellectual property;
  • Signs a contract on using IP;
  • Tracks the usage of IP;
  • Pay royalty to all IP owners;
  • Etc. 
First success. Kodak has launched a blockchain solution. They have developed a platform for managing documents, automatizing workflow, and protecting IP. The platform provides access to documents in real-time, allows managing content distribution channels, and prevents intellectual property violations.

New IP monetization model

The truth of the problem. There are only several means of earning in the traditional intellectual property market: royalty, subscriptions, and paid demonstration of the IP. It sufficed ten years ago, yet the market now requires new monetization models and IP protection solutions.

The solution blockchain provides. Smart contracts offer an efficient solution for this issue through business process automatization and employing data from reliable sources (blockchains). For instance, artists receive a royalty from the resale of their art with smart contracts that automatically create NFTs and distribute payments to the artist.

Functioning of the EIP-2981 royalty standard

Functioning of the EIP-2981 royalty standard. Source

Among other monetization models that blockchain offers, we shall mention selling digital land in video games that bring profits from taxes that users pay for playing on that land; likewise, residents pay fees to their countries. Furthermore, these games allow creating items, selling, and lending them. Some games offer winning unique things that you can lend for in-game or fiat currencies. 

First success. Rarible, Nifty Gateway, etc., are examples of trading platforms that provide royalty for NFTs resale. Also, there is a blockchain platform for protecting photographers' intellectual property and generating new income streams.

Privacy protection

The truth of the problem. There are numerous cases on the IP market where an individual or a company wants to hide some information about them or their work. Yet, they want to ensure its verification without violating anonymity if necessary. In most cases, third parties help to solve the issue; they get access to private information and grant to all interested that it is authentic and present. 

Still, suppose the information is on the internet sooner or later. In that case, even the most prominent companies have no 100% protection from hacks and data leaks despite spending hundreds of millions on cybersecurity yearly.

The solution blockchain provides. Blockchain can solve this issue since it protects the anonymity of parties in transactions and the identity of users during authentication. Furthermore, blockchain can hide your IP if you signed the NDA before completing the test assignments and want to protect your copyright without disclosing the content. 

First success. Filecoin and NiceHash blockchain platforms can help you with your IP privacy. If you want to maintain the confidentiality of your transactions, Monero, Zcash, Dash, Mina, and Verge can help you. If you require a reliable platform for personal authentication, use Blockstack, BlockAuth, BlockVerify, Bitnation, and other blockchain solutions.

Creating IP marketplaces

The truth of the problem. The last problem we will talk about is the sale of intellectual property. Now, this process is too complicated and expensive. At the same time, it has a relatively high entry threshold - not everybody can buy the right to use the Ferrari logo when creating his products, even if he has the right amount and the quality of his products is high enough for Ferrari.

In addition, the rights to use the intellectual property are usually sold in one package. That is, you generally cannot buy the right to manufacture only hats with the logo of Ferrari. You have to buy the right to use the logo on all categories of hats or clothing. And such a license is much more expensive, so it becomes unprofitable for many entrepreneurs.

The solution blockchain provides.  Blockchain can solve this problem by creating licenses in the form of NFT. The IP owner can divide such rights into dozens or hundreds of categories - a separate NFT license for each type of product (hats, caps, panama hats, bandanas, sneakers, sneakers, shoes, sandals, etc.). Moreover, it is possible to make the buyers of NFT licenses have the right to resell them (it's not available now) if they change their mind about using them. 

Selling licenses for the right to use IP objects would make this process incredibly fast, cheap and easy (just like buying a movie on YouTube). At the same time, this approach increases market liquidity by several orders of magnitude by lowering the entry threshold, increasing audience coverage, and the ability to buy an NFT license to use, for example, a logo on only one type of product.

First success. The first to sell IP in the form of NFT were such trading platforms as OpenSea, SuperRare, and NBATopShot. As for the sale of NFT licenses to use trademarks, the Ukrainian project Kyivbrand was one of the first to implement such an opportunity. With his help, you can easily and quickly buy the right to use the KYIV logo in producing and selling their goods.

Final thoughts

Blockchain technology can significantly enhance the current situation with intellectual property protection. Businesses can benefit from low transaction fees, decentralization, transparency, and permanence and solve the problems of the traditional intellectual property market. It allows the authors to control intellectual property and track their employment. The entire industry requires these changes.

Merehead does professional development of blockchain in protecting intellectual property. If you have questions, contact us for a free consultation.

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