The intersection of IP and blockchain – Fin Tech
Blockchain and other technologies related to distributed databases have been a topic that has been the subject of considerable discussion. Today, there are several industries looking at the related opportunities, and new uses for blockchain are being discovered every day. However, a question remains: how can these technologies be used in the context of current intellectual property law and practice?
- What is blockchain?
A blockchain is similar to a digital version of a general ledger. This chain consists of several “blocks” with information linked together through cryptography, which means that it is protected against any intrusion or modification. One of the main features is decentralization, since it is not located on a single computer nor is it managed by a particular organization. Rather, the system consists of several computers around the world that verify the data entered and look for inconsistencies so that the system works optimally and independently.
One of the main functions of a blockchain is to provide traceability for a particular product. Traceability refers to the ability to monitor the development of a product in its various stages. This capability is of great interest to industries that require strong protection of intellectual property, including the pharmaceutical, automotive and luxury goods sectors. In addition, this technology allows you to create what are known as non-fungible tokens (NFTs), which can be defined as a digital version of a certificate of authenticity embedded in the blockchain that can represent almost any real or intangible property, including works of art, music, videos, etc.
Initially, blockchain technology was created for the financial sector to track huge amounts of transactions. However, the application has spread to many areas, including copyright. Here we can imagine a cinematographic work that has several elements that are also essential parts of a particular chain (script, production, credits, distribution, etc.). Usually this information will be stored in shelves, but through blockchain it can be immediately and securely registered in your system. This makes it possible to verify exploitation rights in real time through an unchanging and unchanging seal. In the case of a song, for example, with music and lyrics, the authorship of its components would not be lost despite a possible merger.
For all these reasons, blockchain has become a tool with great potential for protecting works and proving their authorship. National legislation neither recognizes nor regulates this technology, which is why any certificate generated through it is invalid in any public procedure, especially considering that digital certificates in Ecuador must be issued by an “Information Certification Unit” controlled by the National Telecommunications Council. This fact is contrary to the nature of blockchains, given that the main characteristic is decentralization, which means that its own users administer it and there is no state control (with the exception of what is known as “institutional blockchains”, which have not been addressed in this article. ).
Given the above, blockchain cannot be used in procedures with Ecuadorian government agencies where on-site interactions and lack of standardization make procedures slow and often prone to corruption. For blockchain to be used, laws need to be updated in a way that recognizes new technologies, especially those that provide security and speed in managing data and certificates.
2. Intellectual property rights and blockchain
According to generally accepted legal principles, a blockchain-based product can be classified as intangible or incorporeal property, which means that although this asset is indistinguishable from the senses, it has, in any case, a certain value. A purchaser may acquire intellectual property rights that are separate from those of the creator of the underlying work. This is exactly what happens when you buy a painting, a book or a music CD: the buyer becomes the owner of a particular version without exercising any copyright.
This raises the question of who owns the copyright to the underlying work of the blockchain. The short answer is that the creator owns the rights to his work, unless otherwise agreed. For example, when someone buys a painting from an art gallery for their home, they are buying the physical painting itself. Although they may display this work, they do not have the underlying rights to reproduce, make derivative works of, or distribute copies of that painting.
In the United States, for example, the parties are free to agree on the terms and conditions governing the transfer of rights to a product linked to the blockchain. However, it is common practice to find adhesion contracts that usually limit the annual income that the buyer can obtain from said asset (for example, the NBA’s “Top Shot” platform). In other cases, some companies will tend to accept restrictive terms and conditions that prohibit any form of exploitation of the asset associated with the blockchain.
This brings us to the question of whether we can get patent protection when it comes to blockchain-supported products.
Regardless of the legal system, “machines” are usually patentable, while “abstract theorems” are not (understand this as mathematical principles that do not make a technical contribution). This is because machines are usually specific products that improve our quality of life, while theorems tend to be scientific principles that belong to the collective. As such, it is understood that they may not be subject to control or monopolization.
Under our system (Ecuador), any blockchain-supported product is considered a non-patentable idea provided it is controlled by code and software. This is the usual form of operation, because in order for an idea to be patentable, there must be material elements involved. In this way, Article 15.e of Andean Community Decision 486 expressly states that computer programs or software are not considered to be inventions. However, Article 4 of Decision 351, also of the Andean Community, provides that computer programs may be protected under copyright law, covering both the source code (human readable instructions) and the object code (binary files) of programs. Consequently, in Ecuador, a blockchain-supported product may be protected under copyright; however, it would not be patentable.
In contrast, the Anglo-Saxon legal system brings together both copyright and industrial property under the concept of intellectual property, which means greater flexibility in negotiating rights. As a result, the owner of a work may lose control of it by relinquishing copyright, since moral rights are not exercised in conjunction with economic rights. In other words, there are no limits to the exploitation of a work, unlike the copyright system (applicable in Ecuador), which is based on protecting the moral right of the work.
For example, Walmart filed a U.S. patent on a blockchain-based online shopping optimization algorithm. This is an integrated payment system that helps the buyer to choose their products in more detail. It also automatically distributes blockchain payments among Walmart employees or vendors who worked on a specific process. In this example, a computer program can be protected as it has been shown to add value to a specific process whose results are noticeable to the outside world.
Another example of program protection that provides a noticeable technical effect is Bank of America Patent No. 10,643,202, which involves a real-time transaction processing system based on blockchain. This system reduces the previously known time per transaction, and its use can significantly improve online commerce, especially for tools such as Apple Pay or Google Pay.
Consequently, most applications for blockchain patents come from the Anglo-Saxon system, especially from countries such as the United States, Canada and England. In any case, it is not easy to prove that a blockchain system is not part of common scientific knowledge, as there are several research articles and countless articles that explain the basis of the algorithm, including a publication by Satoshi Nakamoto, the presumed pseudonymous person or persons. who are (are) recognized for having developed Bitcoin. Nevertheless, a number of patents have been accepted in cases where the filed application links the code directly to the operation of a machine, and presents this set as an invention that improves existing technical qualities and solves a specific problem in an innovative way. This makes it possible to achieve a greater likelihood of patenting a technological invention, in contrast to what is happening in Ecuador, where software is explicitly excluded from patentability.
Conclusion
Finally, the task is to review an outdated Andean standard that does not recognize new fields and opportunities that arise from the digital environment. It would also be advisable to replace references to “computer applications” with “information technology applications” to clearly include mobile applications (apps) or Dapps (applications running within a blockchain) within the framework of said standard.
Furthermore, it seems that the absolute impossibility of patenting computer programs is inappropriate in certain circumstances. Although such programs are automatically copyrighted from the moment they are created, certain programs require patenting since an innovative solution has been brought to the table.
The content of this article is intended to provide a general guide to the topic. You should seek specialist advice on your specific issues.
