Blockchain and Intellectual Property Rights – A two-way street?

With great advancements and massive strides forward in technology, blockchain has become the latest beast that has been introduced to completely transform the nature and working of digital transactions and Decentralized Apps (“dapps”). The path of digitalization of the world has offered many rewards to people worldwide but, contrarily, it also has led to impediments to fair and safe transactions on digital platforms. One of these impediments being Cyber credit card crimes in the early 2010s as major frauds that took over many economies such as the US involving Visa, Citibank, JetBlue Airways and Nasdaq[1].

Blockchain, one such technology with its immutable nature and distributed ledger functioning, has proven to remove the hinderances and provide the consumers a safe digital platform. The entire process is digitalized with no one-on-one interaction between the users. The recent advancements in smart contracts and legal tenders of blockchain have eased out the problems that come in handy with the blockchain technology. Smart contracts are digital contracts or codes encrypted within the block that lays out a set of pre-defined rules or conditions on which the transaction will take place. Since transactional terms are spelled out in the digital contract in a codified form, a trust between senders and recipients is upheld and it assists in removing the need for intermediaries to carry out transactions. Furthermore, legal tenders are specific to the utilisation of blockchain in cryptocurrencies as it gives a payment instrument legal recognition to carry out any financial commitment.

With such a monumental shift in technology, it becomes imperative that such intellect and wisdom stands protected in the favour of those that put forth such innovations for the consolidated benefit of everyone in the longer run. Intellectual Property Rights run on the basic principle of preservation of priority and have been known to protect the intellect of individuals.

Safeguarding the intellect of Blockchain

Blockchain’s full potential is yet to be discovered as it has tremendously fallen short of its true expectations, reason being the unregulated nature of the technology that impedes the common man to place trust on such a system. Nonetheless, given the technical nature of blockchain and the immense potential it has showcased over the years, one field where blockchain’s budding future is promised to boon is intellectual property rights. As far as securing intellectual property for use of blockchains is concerned, the assurance provided by the technology will prove to be true by protecting intellectual property. The basic working of a Blockchain is based on recording of data in particular nodes and hash. Therefore, safeguarding blockchain systems by way of intellectual property mechanisms or otherwise are fundamentally important as each of the block contains a timestamp as to when the data was recorded. The unique fingerprint called hash in each block makes it difficult to tamper with the data and thus assures the uniqueness of the system with every new piece of data added vide a hash. To change or to tamper with data of one block, one must change all the blocks to maintain the validity of the chain as each block also contains the hash of previous block. This ensures that data on a blockchain system remains exclusive to that system only and cannot be tampered with unless changing the entire trail of hash that the blockchain is built on.

The need for protection

Now the bigger question is why blockchain needs protection and how do Intellectual property rights come into play. Blockchain so far has been prominent in cryptocurrencies from where it became public knowledge. One of the important features of blockchain is that it is decentralised which in simple terms means that there is no centralised body regulating it. It is imperative to understand that since there is no central authority for regulating blockchain backed applications such as cryptocurrencies, it becomes all the more difficult to ascertain the application of intellectual property rights in this field.

An obvious application of Blockchain i.e. Cryptocurrency, allows people to deal in currency on a decentralised platform but it is a matter of serious concern for the national economies. Each and every country has their own regulating bodies for their financial matters that help in controlling complications of inflation and deflation. Financial transaction dealing with currency without regulation imposes that there will be an uncontrolled currency floating in the economy with no supervision by a single centralised entity. For a personal motive, cryptocurrencies like bitcoin and Ethereum have proved to be advantageous but on a national level it is a threat to the country’s overall Gross Domestic Product and on a larger scale it creates threats like inflation or maybe economic depression in the longer run.

Legal Lacunae in traditional laws

There are several legal issues that come as an added difficulty with this technology. For example, lets discuss a fair event where one blockchain is attributed to one specific country. If each country is said to have one blockchain that then eventually forms a worldwide chain, then transactions would be happening all over other countries based on one such initial blockchain from one country. Since all the countries have their own laws pertaining to data privacy and Intellectual property, it is a matter of jurisdiction as to which country’s law would be considered to have control over regulating such transactions. Secondly, if all the countries claim that their part of work in the chain is completed and checked, then who is liable for the non-performance if and when an issue arises in the blockchain? The one where it was initially built or the one wherein such non-performance occurred? Thirdly, although, the chances of any fraud happening are negligible but in the rarest of the rare cases if any fraud or tampering of data was to occur, who shall be held liable for the wrongdoings? Fourthly, if a person who has been deceived on such a platform goes to the court of their respective countries, they can only hold liable the vendor and/or miner from their own country but they would have no jurisdiction over anyone sitting beyond the national territories.

These issues would give rise to a situation of blame game and in turn no one taking responsibility of such actions. Henceforth, blockchains have developed smart contracts that is a code in the blocks that have a pre-defined set of rules and commands on which the transaction takes place. These Smart contracts cannot be changed as it is a codified contract which once put in the block cannot be negotiated upon or altered for the very same reason that these are written on each and every block and/or node of a chain and hence alteration of deletion of anything would require the entire chain to be disrupted.

The ongoing acceptance and applications of blockchain

To summarise, it is necessary to develop a law or set of laws to protect the parties involved or investing in the technology. El Salvador[2], a small nation in geographical and economical terms, became the first country to give Bitcoin a legal tender but nations which are geographically and economically bigger are still resistant to blockchains. China for example has completely banned all the cryptocurrency exchanges and Initial Coin Offerings in their country[3]. However, recently they gave a statement that any affairs that relate to blockchain except for cryptocurrencies would be enforceable in the country as a court of law would admit all the evidence of any such transactions[4]. This statement shows a significant difference between blockchain and cryptocurrencies which are mostly used by people synonymously. Many nations are seeing through the potential of this mechanism but are resilient, they are planning to bring this technology under their own name and make it centralised under regulatory authorities.

In India, NITI Aayog proposed the idea of “IndiaChain”, a major blockchain based project so that it can become the heart of the governance system of India[5]. The government wants to use IndiaChain to enforce contracts more quickly, stop fraudulent transactions, and assist farmers by efficiently disbursing subsidies. Additionally, it will connect the Aadhar initiative’s unique identifying database, IndiaStack, to the IndiaChain project. Through a single and secure system network, the new system design might also assist the government in tracking taxes that are received from all throughout India (i.e., no more tax evasions).

States like Telangana and Maharashtra have already introduced blockchain backed structures into their systems. Following numerous rounds of discussions with business and academic leaders, the government conceptualised the Blockchain District[6], which aims to become one of the top 10 Blockchain Technology ecosystems in the world by proactively promoting key initiatives for talent development, infrastructure improvement, research & innovation, and community development. According to Mr. Jayesh Ranjan, Principal Secretary, ITE&C Department, Government of Telangana, “Blockchain District provides a platform which enables the stakeholders to collaborate co-create and build solutions in blockchain technology, which is today at a nascent stage but has enormous potential in the coming years.Telangana would always aim to be the first mover in tech-domains, being the centre of innovation and technology.”

In Maharashtra too, four pilot projects have been launched based on blockchain that are running departments of health, transport, agriculture and finance. since many nations are planning to adopt the technology under their own name it is important to know who actually is the inventor[7].

Business Source License/Open-Source License as an alternative to Patents

In order for Intellectual Property Rights to be claimed, as mentioned above, it is extremely important to know as to who is entitled to Patent. Craig Wright, the infamous face behind the pseudo name Satoshi Nakamoto, had filed for 666 patents and it raised other questions as to whether it is actually to protect the technology from other people claiming for the patent over it or not[8]. Also, many companies making applications based on the blockchain technology are filing for patents based on the improvements made in the technology. It is a matter of fact that if a software is a part of an invention that is both inventive and capable of industrial use then the same can be patented. Another application of Blockchain, NFT falls under the above category. However, as on date only the utility aspect of an NFT can be patented as has been done in the case of ‘Nike’ that has received a patent to create cryptographic digital assets for footwear.

Hence, introduction of blockchain is a legal test for the intellectual property sector to consider what is patentable and what is not. Apart from the intellectual property rights, open-source licensing is also one way to legalise the blockchain. Open-source license is a contract between the creator and the software user which declares when can the software be used and under what specific conditions. Blockchain was released to be used freely but an open or business source license can help create a contract between the inventor of the technology and its user so that the possibility of fraud vanishes altogether and if certain conditions still allow illegal transactions, the inventor could be held accountable for it.

To summarise, digital advancement has always been a grey area because with its pros, there is also an added baggage of cons that create a place of no trust. Blockchain is a platform that has a trustworthy atmosphere but has no capability for governance. However, the technology itself needs to be protected and this protection is ensured by the two-way street between blockchain and Intellectual property rights being enforced upon it.


[1] 7 Biggest Internet Frauds of All Time, Jacob Maslow, LegalScoops, 27th September,2021

[2] In which countries is Bitcoin legal tender, Marco Cavicchioli, The Cryptonomist, 16th September, 2021.

[3] China bans financial, payments firms from cryptocurrency business, Samuel Shen & Twinnie Siu, Telecom.com, 19th May, 2021.

[4] Blockchain Records Will now be Accepted as Legal Evidence, China’s Supreme Court Rules, CCN.Com, 4th March, 2021.

[5] What is IndiaChain: a blockchain system that could soon be the heart of governance in India, BI INDIA BUREAU, JUN 21, 2018

[6] Telangana’s blockchain district forges new partnership with Bitfury and ISB, it.telangana.gov.in, 13th October. 2019.

[7] Maharashtra to come out with ‘State Blockchain Policy’ soon, T Radhakrishna & Rakesh Roy, government.economictimes.indiatimes.com, 1st May, 2022.

[8] Craig ‘Satoshi’ Wright Claims to Have Filed 666 Blockchain Patents, Jamie Redman, Bitcoin.com, 21st March, 2019.

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