Posted on Categories blockchain, creative industry

Will the blockchain stir up intellectual property agreements?

Conversation with Monika A. Górska and Lena Marcinoska of the Intellectual Property Practice at Wardyński & Partners about whether the blockchain may be regarded as a new area of use. Blockchain based solutions are developing rapidly in various sectors of the economy. Have they also entered the creative sectors?

Monika A. Górska: Definitely. DLT technology may be used successfully to record intellectual property rights and to register transactions involving creative work. Moreover, most computer programs are written today with a blockchain project capability. Does the arrival of blockchain-based solutions give rise to any problems with copyright agreements?

Lena Marcinoska: Agreements for the transfer or use of copyright should specify how the works are to be used, in other words the areas of use. After all, in view of their nature, works may be simultaneously used in different ways by different entities, for example, one may market a piece of music on CDs, while another may upload it onto a digital platform, and yet another may broadcast it on radio, etc. The extent of the transfer of economic copyrights to a work or the authorisation to use it depends on the areas of use that have been stated in the agreement. In practice, the details of an agreement that define the areas of use are essential for the rights held with respect to the work and for transacting commerce.

MAG: The concept of area of use is not a Polish invention. It operates in different countries, because, as we have already established, the area of use constitutes how a work is to be used. Each country separately regulates the consequences of stating or failing to state the areas of use in an agreement, e.g. a licence or transfer of rights. Polish legislators have grouped areas of use into three categories that arise most commonly in commerce: (i) fixation and reproduction, (ii) distribution of the original or copies on which the work was fixed, and (iii) dissemination of the work in other ways. Each category is divided into the ways in which a work is used, such as producing copies by printing or digital means – within fixation and reproduction, marketing – within distribution of the original or copies on which the work was fixed, and providing public availability in such a way that everyone can access the work at a time and place of their choosing – within dissemination. The range of areas of use is not finite and areas may be further divided. The development of technology may bring completely new areas or sub-areas of use.

LM: In recent years, due to changes caused by technology to the forms in which works may be used, the question arises more frequently whether a particular way of using a work (e.g. on CD, DVD, Blu-Ray, online publishing or video on demand) is a new, separate area (sub-area) of use, or only a form of an already known area. Can the blockchain constitute, in your view, such a new area of use of works?

LM: In order to answer this, one must consider whether works are being used in any way on the blockchain. I very much doubt this. Currently, works, as such, are not placed on the blockchain. They are neither fixed on, nor reproduced on it, as is the case with CDs or computer memory. The block strings only serve to register encoded information about a work, such as its origin, rights holder, or transactions concerning the work. If that is so, then it is hard to believe that the blockchain is used also to disseminate the work in some way, such as by displaying or broadcasting. This is, of course, the status today. The future may be somewhat different.

MAG: It seems, though, possible now to try to argue that blockchain technology extends the ways in which, for example, rights to a work may be managed. Blockchain enables trading in tokens that reflect, for example, ownership rights or certain economic copyrights to works, so we can therefore say that this is a new technological way of trading of  rights.

LM: But the question arises, whether, as you point out, “trading on the blockchain” is a separate area of use, or rather an embodiment of an already known area. Trading a work on the blockchain does not ultimately change the way in which the subject of the copyright is used. For example, if one transacts on the blockchain a token that reflects the economic copyright and ownership rights to a poster, then the form in which the physical copy of the work is used does not change at all. Nor does it seem that it could change the economic value of the poster. So the blockchain only provides a certain technically new instrument for trading rights.

MAG: Yes, but it also needs to be considered whether such blockchain trading does not create a certain new type of market and a certain new base of customers. If the market sees blockchain as a new economic and technological way of trading rights to works, then maybe it constitutes a separate area of use. Also, I wonder to what extent blockchain should actually be included in any of the existing area of use categories, and to what extent it should be considered a completely new unnamed area of use. Perhaps it is still too early for a definitive answer to whether blockchain is a new area of use in relation to traditional works, such as the above poster example.

LM: Indeed, it seems quite controversial. Nevertheless, the situation is probably a bit clearer, if we consider software. Some programming codes, such as smart contracts, are actually written specifically to operate on the blockchain and are directly placed in it. The fact that computer programs can constitute works is obvious. If so, then such works will be replicated, say, many times in the blockchain. It is easier to argue in this case that the blockchain is a form of software use. The question remains, though, whether it is a separate form.

MAG: If one recognises that the blockchain is a completely separate way of using a work, it should be consistently and (to avoid any doubt) directly mentioned as an area of use in copyright agreements. It seems that this may have the greatest importance – at least for now – in software agreements. Otherwise, a problem may arise as to whether the buyer or the licensee have obtained rights to use the computer program on the blockchain.

LM: The consequences of this concept for future marketing are one issue, and the consequences for previously concluded agreements are another. If one accepts that the blockchain is a separate form of use of a work, it would require the renegotiation of certain previously concluded agreements. What about other agreements, such as for using trademarks? Do they also need to consider the blockchain?

LM: I can imagine that token names could incorporate word trademarks or other protected designations, for example CocaColaToken, etc. It is possible that token names will also be used on the blockchain. At the same time, such tokens could relate to goods or services (for example, CocaColaToken may entitle one to a can of beverage from a vending machine) offered by entrepreneurs. Therefore, one may speculate whether, say, licence agreements regarding trademarks should also state (if that is the wish of the parties) the possibility of using designations on the blockchain for token names, in smart contracts, etc. This is because the use of designations without authorisation could lead to breaches of trademark law or of fair competition rules.

MAG: Another blockchain issue that we face in practice is trademark registration. Increasingly, we are registering trademarks that directly refer to the blockchain in the classification of goods or services, both in the context of software and services, such as financial. For example, if we wanted to register a trademark for financial services in the blockchain, then we could specify Class 36 of the Nice Classification: Financial services, in particular the provision of a decentralised and open cryptocurrency in the worldwide computer network using the blockchain. The European Union’s Intellectual Property Office has already registered a number of such trademarks. Registrations started appearing in 2016 and we can see that there are more and more of them. In any case, firms that intend to have a presence in the blockchain area should take trademark issues into account – both in the use of third parties’ trademarks and in the registration of their own, or in extending their already registered trademarks to those classes of goods and services that relate to the blockchain. To summarise, today we will probably be unable to resolve whether the blockchain is a new area of use or a sub-area of an existing one in the meaning of copyright law. Everything we have mentioned reflects the status existing today. The future and blockchain’s development may well bring new capabilities. Maybe with time, the market itself will decide whether it regards blockchain as a new, distinct from hitherto, way of using a work, or for exercising control over rights to it.