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2 Digital content: blockchain and rights management
Art forgery and fraud are long-established disciplines but, in the internet age, it can be as easy as Ctrl+C. Media content has been widely copied and shared – often illegally – since domestic hi-fi systems made it easy to copy vinyl records and radio broadcasts onto cassette tape. The internet made piracy even easier. Early users organised global networks for sharing copied CDs by post.
As bandwidths increased and e-formats emerged, file sharing networks brought piracy to the mainstream. Currently, media piracy is most often organised via ‘torrents’ and, increasingly,streaming. While the distribution of media content in this way is often illegal, the practice is so widespread and enforcement so difficult that compliance is often treated as though it were voluntary. Recently, legitimate subscription services have displaced some piracy by providing access to media while paying royalties to rights holders using revenue from membership fees or advertisements. However, no distribution model, until perhaps blockchain, has managed to respond effectively to the realities of the illegal trade in digital content in the internet age, while balancing the interests of the original author, the customer and the various intermediaries.
When consumers purchase books and discs, they come to own physical artefacts that they can later sell, give away or leave as part of their inheritance. There are limitations to their rights, for example they should not distribute copies, and should pay royalties if they broadcast the content.
In buying the digital equivalent of this same media, consumers know they will not gain
ownership of a physical artefact, but many do not realise that they do not gain ownership of any content either. Rather, they enter into a licensing agreement which is valid for either a period of time or a fixed number of plays. These licences cannot be sold, given away or even left as part of an inheritance. Building a collection of legitimately-owned digital music, literature, games and films often comes at a cost similar to that of a collection of various discs and books with the same content. It is a substantial lifelong investment but one that cannot be transferred and that expires
on death. While older generations might take pleasure in reliving the tastes and experiences of loved ones via the boxes of vinyl, books and games they left behind, today’s children may not enjoy the same access to their parent’s digital content. Could blockchain technology help resolve these and other problems with digital media?
How digital rights could be managed on the blockchain Blockchain technology could be used to manage consumer rights associated with digital products.
In most cases, this will involve mass-reproduced works, the digital equivalent of CDs, DVDs and books, where the original artist sells many copies of the work. However, it is also relevant for the emerging field of unique digital artworks, which is the digital equivalent of, for instance, a painting. Here, the buyer is not purchasing a derived version, like an MP3 of a song, but exclusive rights over the original work itself. Blockchain could protect consumers and creators of digital works of all kinds by recording the ownership history of digital property and perhaps even by
enforcing digital rights.
The blockchain could be used to register all sales, loans, donations and other such transfers of individual digital artefacts. All transactions are witnessed and agreed by all users. Just like transactions in a bank account or land registry, artefacts cannot be transferred unless they are legitimately owned. Buyers can verify that they are purchasing legitimate copies of MP3s and video files. Indeed, the transaction history allows anyone to verify that the various transfers of ownership lead all the way back to the original owner, that is, the creator of the work. The concept could be combined with smart contracts so that access to content can be lent to others for fixed periods before being automatically returned, or so that inheritance wishes could be implemented
automatically upon registration of a death certificate. For any of this to work, it is crucial that when content ownership is transferred from one party to the next, the former owners lose their access, just as they would if they sold a vinyl record on the second hand market. Indeed,knowledge of when one user’s rights end is just as important as knowing when another user’s rights begin. Here, blockchain would make it possible to check who the owner of content was, as well as its ownership history. This would enable customers to ensure that they were buying legitimate goods rather than illegitimate copies, and could also enable rights holders to enforce their rights. Checks of legitimate ownership could even be enforced through technology, with devices checking ownership against the user’s profile before allowing playback. This would require the development of new codecs and industry standards, and file formats that bundle content with permissions.
Aside from buying licenced copies of digital works such as MP3 songs, it is also possible to buy and sell original works, i.e. the song itself. Just as buying a painting affords more rights than buying a copy of a painting, the buyer of original digital works also purchases the exclusive right to broadcast the content, to sell copies of it, and to take action against others that use the content unlawfully. For the buyers, it is crucial that they know whether they are buying ownership of the work itself with the associated value and rights, or merely a reproduction that was licenced for personal use. In this case, the blockchain could be used to verify the real owner of the content,whether it is the original version or a legitimate copy of it, and the set of rights that are bundled
with this content.
Aside from the rights of sellers and purchasers, the blockchain could be used to protect the rights of the original creators of works, who may retain some rights after the sale of their content. These original creators may comprise a complex network of actors claiming partial ownership and entitlement to royalty payments when the content is used for commercial purposes. For music tracks, for example, this might include writers, musicians and other artists as well as recording engineers, managers and a range of specialist intermediaries. The entitlements of each of these actors, as well as the terms and means of their reimbursement can be digitally encoded, enabling more reliable and efficient payment. Royalty payments could even be executed automatically via smart contracts.
Potential impacts and developments
Using blockchain technology in this way could for the first time enable consumers to buy and sell digital copies second hand, give them away or donate them to charity shops, lend them to friends temporarily or leave them as part of an inheritance – just as they used to with vinyl and books –while ensuring that they are not propagating multiple unlicensed copies. For blockchain to succeed in underpinning a method of managing digital rights where so many others have failed,it would have to balance the rights of sellers, buyers, network of actors that comprise the original owner of the content and a huge range of other intermediaries, including those that develop and maintain the blockchain itself. With such complex networks of interests at stake, it would be
idealistic to expect a quick and uncontroversial solution to emerge, although some suggest that within a timescale of 10 to 15 years blockchain technology can be expected to have had a real impact on the music industry, with more immediate opportunities for early movers.
Law will continue to have an important role in identifying copyrighted works and settling disputes. Blockchain development in this area could lead to multi-territorial licensing policies and enhanced legal certainty for creators and purchasers while providing effective dispute resolution mechanisms, particularly in relation to tariffs, licensing conditions, entrustment of online rights for management and withdrawal of online rights.
3 Patents: protecting innovators while incentivising innovation
Patents give their owners the exclusive right to exploit innovations for a specific period. The patent system was designed to incentivise innovation by giving innovators a head start over their competitors to profit from their ideas. After all, why would inventors invest the time and money required to develop an idea if others could copy it and profit immediately, without contributing to the costs of development? However, protecting innovators is not the same as incentivising innovation. The patent system must balance protection of innovators against the protection of competitors. If innovators are not protected, then exposure to freeriding competition will deter investment in new innovations. On the other hand, if competitors are not protected, they would
be deterred from investing in improvements and cost savings, and would maybe even be blocked from joining the market and breaking the original innovator’s monopoly. At its most basic, the patent system can be seen as an exchange in which the government grants the innovators a monopoly (limited in time and scope) to exploit their innovation, and in exchange the patent holders publish details of how their innovation works, which helps others to develop improvements and alternatives.
There are several well-known problems with the patent system. For example, competitors can sometimes exploit the patent before the innovator, either because the patent was not strong enough or because the holders were incapable of defending themselves against unlawful infringements. This, combined with the expense of gaining patent protection in several regions,means that some firms prefer to take the risk of bringing their innovations to market without any patent protection at all. Another problem is identified in the complexity of the patent system.
There are different policies and systems in place in different countries. Despite recent
developments, there is still no unified EU patent system. Nonetheless, the European Patent Office offers a ‘one stop shop’ for registering patents in each Member State’s system, although the cost of translations, validations and renewals in several systems makes patenting relatively expensive in Europe.
A further problem for the patent system is identified in the emergence of ‘patent trolls’, which do not innovate as such but acquire patents and seek damages for their infringements. While their claims do not always hold a strong legal basis, firms are often unable or unwilling to cover the legal expenses required to defend themselves, preferring to settle out of court. European competition authorities are increasingly investigating such abuse of patents, particularly in the high-tech sector.
While many aspects of the patent system are now digitised, there have been no major changes to its structure since the information revolution. It has been suggested that using blockchain instead of traditional patents could enable more fluid innovation by reducing contract disputes, and that blockchain could offer an opportunity to repair some aspects of the patent system. Here an attempt is made to explain how blockchain could intervene in the patent system and what benefits this could bring, before consideration is given to some of the more radical claims that it could substitute or even ‘end’ the patent system.
How blockchain could help the patent system
Two features of blockchain technology make it particularly relevant to the patent system: ‘hashing’ and ‘proof of existence’. The first, hashing, is a process through which a document is transformed into a fixed length code which is described as a digital fingerprint or, more often, a ‘hash’. All hashes are unique, and even very minor differences, such as a missing accent on one letter of a long document, would lead to a radically different hash. Only repeating the hashing process on an identical copy of the original document will produce the same hash. Crucially, it is impossible to regenerate a document from its hash. The second feature, proof of existence, involves recording these hashes on the blockchain. In doing so, a record is created that this hash existed at a given
time. The record can be verified by anybody, but nobody can interpret the content of the hash.
However, holders of the original document can prove that the document existed at the time the transaction was made by repeating the hashing process on an identical copy of their original document (by using the same hashing algorithm to produce the same hash, it follows that they have the same original document). This presents the interesting possibility of publically recording the fact that a document existed without revealing any of its content. It has been suggested that innovators could use this process to protect their work by recording a hash of their patent description (or, perhaps, a piece of literature or extract of computer code) on the blockchain.
Indeed, ‘proof of existence’ services are already available in the context of patent protection. In this case, they ‘piggyback’ the capabilities of larger existing blockchains, specifically the Bitcoin implementation, although a bespoke system for recording hashes could also be designed and implemented specifically for ‘proof of evidence’ purposes.
Potential impacts and developments Deploying blockchain technology within the patent system could reduce inefficiencies in recoding and agreeing the time of registrations in an efficient way, perhaps across several national patent system. Blockchain-based proof of existence services could be offered as the first step in the process of applying for a patent. From here, the process could be streamlined and secured, making
the steps more transparent to the applicant, while simultaneously reducing the potential for corruption. However, while improvements in the ways in which innovations are registered and time-stamped would bring tangible benefits to the patent system, the more serious problems –such as patent trolls and the cost associated with translation – may require a different kind of response.
There have been some (mistaken) claims that a patent is nothing more than ‘a concept stamped and kept in a place where it is unfalsifiable’. Indeed, it has been suggested that blockchain could replace the patent system while allowing innovators to keep their details private. However, the publication of patents is a key part of their function: the promotion of innovation. By publishing patents, competitors are encouraged to develop alternatives and improvements, which could break monopolies after the expiry of the patent, while inspiring innovations in other areas not covered by the patent. Recording who registered an idea and when is only a very small fraction of the work done by patent office intermediaries. Patent officers also assess the novelty of proposed patents, check whether they are aligned with regulations and policies in that region and
publish searchable archives of accepted patents, all of this being important work that cannot be replaced by blockchain technology.
Current patent systems could be made more efficient through the use of blockchain technology and patent offices could offer low-cost ‘proof of existence’ services. However, it must be made clear that proof of existence via a blockchain (or, indeed, any other means) cannot be interpreted as equivalent to patent protection. For proof of existence provided by third parties, such as those that make use of the existing Bitcoin blockchain, to be accepted as a legitimate means for keeping records, they would have to be recognised as such by the appropriate enforcement bodies.
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AUTHORS Philip Boucher, Scientific Foresight Unit (STOA), DG EPRS, European Parliament Susana Nascimento, Foresight, Behavioural Insights and Design for Policy Unit, DG JRC, European Commission (Chapters 6-8) Mihalis Kritikos, Scientific Foresight Unit (STOA), DG EPRS, European Parliament (Anticipatory Policy-Making sections)