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Author
Danil Lugovoy

Lawyer

08 June 2022

Blockchain technology as a mechanism for ensuring the information reliability about intellectual property rights’ objects

The process of widespread digitalization has become one of the main trends. Every day, new intellectual property objects and technologies appear in the world, and society is actively adopting them to simplify its life. In such circumstances, properly secured protection of intellectual property directly affects the economic development of private entities, the state, and its position in the international arena.


Nevertheless, a huge number of violations of intellectual property are committed daily, the lion's share of which is determined primarily by its specificity (intangible form).


In the context of the development of private law relations in the field of intellectual property, special attention is paid to the possibility of using new technologies in this area, especially successfully used in other areas of society. One such technology is the so-called blockchain.


This technology originated in 2008 and was first used in the Bitcoin cryptocurrency system (currently the most famous and expensive cryptocurrency in the world: the cost of one bitcoin is about 30,000 US dollars).


In recent years, technology has gone from being “used by a narrow circle of people” to “introduced at the state level”. So, in 2016 in Georgia, the land property registry was transferred to the blockchain: such actions practically leveled the possibility of forging the official paper on the rights to real estate, which increased the level of attractiveness of the state for business and investment. As a result of the application of this technology, Georgia is considering the possibility of transferring all state registries in the country to the blockchain.


It seems that the blockchain use in the intellectual property circulation will increase the level of its protection by transferring and giving legal force to some existing mechanisms for ensuring the reliability of the information in blockchain registries.


Thus, the Chairman of the Intellectual Property Court Ludmila A. Novoselova at the intellectual property forum IPQuorum in Svetlogorsk expressed the following opinion: “The question of the fate of the evidence that appears in the blockchain system is being widely discussed today. Today there is no indication that this information has any priority in terms of evidence for the courts. <...> If presumptions are introduced, for example, that the information in the blockchain is correct unless proven otherwise, then this would be very useful for resolving conflicts in court, as it would facilitate the resolution of disputes.


The advantage of the technology is its applicability to the entire classification of intellectual property objects - both objects of copyright and related rights (in particular), and objects of patent law, means of individualization. Blockchain can help ensure the reliability of information about certain properties of objects of intellectual property rights (for example, novelty and originality for objects of patent law), as well as fix the date of entering information (which is especially important for objects of copyright due to the lack of requirements for their state registration), which in the future will help to establish the original copyright holder in the event of a dispute or other conflict situation.


On October 31, 2008, a person (or a group of people who signed the name Satoshi Nakamoto ) published an article on the Internet: "Bitcoin: a peer-to-peer electronic monetary system." The authors raised the question of why payments made electronically should include intermediaries such as banks? Why should the persons making such payments pay a commission to the banks? To date, the technology is still in its early stages of development. In scientific circles, there is still debate about who Satoshi is. Nakamoto and whether he really was the first person who managed to identify the basic principles of the blockchain and launch its protocol. Nevertheless, Nakamoto outlined the basic rules for the operation of this system:


  • Information about each transaction is transmitted through the system and is available to all its participants;
  • The currency is decentralized ( i.e. not managed by central banks like fiat money);
  • Transactions are irreversible;
  • Ability to make transactions anonymously;
  • The decentralized registry is controlled by specialized computers called nodes (or nodes ).


However, over time, people began to become skeptical about bitcoin, because, due to its volatility, it did not correspond to the main functions of money - a store of value and a medium of exchange. Blockchain is seen as the basis for any cryptocurrency that helps them function by bypassing banks.


Using the same logic, society sensed the potential in the very ledger on which bitcoin operates – the blockchain has been running smoothly for years according to the rules on which it was based – as a decentralized record of the transactions carried out: each participant in the system interacts with other participants in the exchange of information.


There is no centralized data storage in the blockchain, and all transactions are processed and verified by the registry users themselves. Thanks to the popularity of cryptocurrencies, the blockchain has proved its reliability to the whole world and has shown the possibility of mass use at all levels. In studying the practical applicability of the technology, society has come to the conclusion that the technology could significantly simplify social relations where interaction is due to the presence of grounds for mistrusting each other in matters of the authenticity of shared data.


There are many similar situations in civil relations: laws in the field of private law are created, among other things, because people do not trust each other.


Thus, the blockchain is understood as a distributed database consisting of a continuous chain of interconnected blocks. Decentralization of technology is due to the fact that the said database is stored simultaneously by all participants in the system. Anyone can access information about any transaction in this ledger. Users act as a collective notary who confirms the truth of the information in the database.


The applicability of blockchain technology in the intellectual property rights is due to the following:


  • First, the blockchain can help with user identification (instead of a password and other identification technologies). In addition to the standard ways of using technology in this way (gaining access to accounts in mobile applications and websites), I would like to pay special attention to the possibility of identifying a specific person for signing smart contracts (in the field of intellectual property rights circulation).
  • Secondly, the technology can be used to record and record data. For example, the creation of a register containing information about the owners of exclusive rights to intellectual property objects, about the authors of these objects.
  • Thirdly, the possibility of using technology to improve the efficiency and security of the circulation of intellectual rights.


With the understanding of the value of blockchain technology precisely as an efficient ledger in which all types of transactions can be recorded (not just transactions with bitcoin), some have come to realize that a distributed ledger is an ideal platform for digital smart contracts.


Ludmila A. Novoselova points out that “the technical side of a smart contract in the context of the blockchain is reflected in its definitions as a kind of encoding, a way of functioning of the blockchain; as a piece of code that is implemented on the blockchain platform and is initiated by blockchain transactions, and also organizes the entry of records into the database."


In fact, a smart contract is expressed in the form of a program code that stores the terms of the contract and is self-executing, provided that the parties comply with the named conditions. The smart contract algorithm eliminates mediation, which includes unnecessary costs, bureaucratic procedures, and the intervention of other persons.


An agreement executed in the form of a program code ensures automatic execution upon the occurrence of the conditions prescribed in such a code (the conditions of the agreement itself). Reducing the number of actions when interacting with counterparties simplifies the conduct of any business. In addition to the most popular platform for creating smart contacts Ethereum, created by Vitalik Buterin (on the basis of which more than 80% of all ICOs are carried out ), platforms such as NEO (Ethereum's Asian analog), EOS, Stellar have also proven themselves in terms of efficiency.


The popularity of this technology in Russia is growing every year, it is already used to transfer rights to intellectual property. In the fall of 2020, news outlets reported on the first digital deal to transfer the rights to musical works in Russia. The transaction took place through the IPEX platform, which is part of the IPChain blockchain infrastructure. “In ten minutes, the general director of the Soyuz studio, Alexander Bochkov, agreed on the terms and signed a license agreement with Fonmix to use the track for marketing purposes, immediately receiving payment under the agreement.


The rapid growth in the development of technology has led to the emergence of companies that are engaged in the protection and protection of intellectual property using blockchain technology.


One of the most promising in this area is the Bernstein platform - it provides the opportunity to register a software product in the blockchain system. The company issues a certificate of registration, and the registration procedure takes place in the presence of a notary. At the same time, the blockchain itself cannot be called public - the information in it is hidden from third parties, but only until the person who has registered his right has a legal dispute with third parties.


Company platform Image Protect allows not only to protect but also to monetize visual objects of intellectual property (images, photos). It uses blockchain technology, as well as the development of artificial intelligence and neural networks. Its essence lies in the inclusion in the register of visual objects of intellectual property for a fee. Own systems monitor the Internet around the clock and allow you to identify all cases of using such images on the Internet. In addition, the platform offers mechanisms for using such images in advertising integrations, which allows the copyright holder to earn money on it.


Thus, it can be concluded that blockchain technology has mechanisms that can ensure the information public reliability about intellectual property rights objects. The algorithms on which this technology is based allow us to say that the information entering the register has the property of public reliability due to the impossibility of changing this information, including by hacking the system.


Despite the fact that the use of blockchain technology solves such problems as ensuring the reliability of the information contained in a distributed ledger, it has not received wide distribution in intellectual property. This may be due to the lack of legislative consolidation of the information reliability stored in such registers.

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