Analysing the Intersection of Blockchain, Cryptocurrencies and Intellectual Property Rights
The recent years have observed an upswing in the trade of cryptocurrencies. According to a report by Markets and Markets, the cryptocurrency market is expected to grow from USD 1.6 billion in 2021 to USD 2.2 billion by 2026 at a Compound Annual Growth Rate of 7.1 percent. With the onset of the COVID 19 pandemic, several businesses and industrial sectors were negatively affected. With uncertainty looming over several corporate and non-corporate entities, digital currencies have managed to garner attention. In the last year, the cryptocurrency revolution has impacted several industries, including gaming, music, casino, and surprisingly, the banking sector. According to a report by Business Insider, more than half of the 100 largest banks in the world have already invested in crypto and blockchain-based companies. Banks such as the National Bank of Canada and Barclays are currently using cryptocurrencies and have opened their doors to customers who own cryptocurrencies. Bitcoin, Litecoin, Ethereum, and Dogecoins are some of the most popular cryptocurrencies today. Apart from this, Non-Fungible Tokens, the brainchild of Kevin McCoy and Anil Dash, is a unit of data stored in a digital ledger that certifies that the digital asset is unique and is hence non-interchangeable. NFTs may be represented in the form of memes, artworks, or videos. The sole technology behind cryptocurrencies is called blockchain technology. In a broad sense, blockchain technology can be defined as an open ledger of information that is used to keep a digital record of the transactions that occur in the crypto market. Moreover, it is exchanged and is verified with the help of a peer-to-peer network. This means that the blockchain creates a reliable and transparent record since multiple parties are involved in verifying the transactions. A single party cannot change any entries in blockchain systems since numerous individuals regulate them. Each transaction is considered a “block”, and once it is verified, it is added to the ledger or the “chain”.
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Cryptocurrencies are significantly relevant in several IP-intensive industries such as music, pharmaceutical, automotive, and luxury goods. Since blockchain plays a pivotal role in the crypto market, several inventors have attempted to legally protect the various components of blockchain technology using patents. In recent years, applications for blockchain patents have increased at a rapid rate. The Industrial and Commercial Bank of China’s blockchain patent application, which included a system used to improve the efficiency of certificate issuance and save users from repetitively filing the same document on multiple platforms, was one of the first known blockchain patent applications. ICBC’s blockchain system touts a system where an issuer would digitally match a user’s credential with a specific certificate. Once approved, the data will be encrypted, which is then moved to a blockchain that will update the distributed ledger. Moreover, in 2012, the USPTO received several patent applications that contained the terms “cryptocurrency” and “blockchain”. Several reports have suggested that there exist over 500 blockchain patents worldwide. Most prominently, through its 2020 report, IBM stated that several patents granted to them in 2017 also comprised of blockchain patents. Another example includes Alibaba, a Chinese e-commerce company, which has acquired over 90 patent applications for blockchain-related technologies.
Trademarking of cryptocurrencies is yet another aspect that links IP to the crypto market. Like any other trademark, the cryptocurrency mark must be distinctive. Recently, trademark offices around the world have seen an influx of applications for trademarking cryptocurrency-related marks. Some examples include Nike’s application for trademarking their cryptocurrency called as ‘Crypto Kicks’ and the ‘Omnicoin’ cryptocurrency, which was registered under class 36 which included “cryptocurrency, namely, providing a virtual currency for use by members of an online community via a global computer network; cryptocurrency, namely, a peer-to-peer digital currency, incorporating cryptographic protocols, operating through the internet, and used as a method of payment for goods and services.”In 2016, the USPTO rejected Bitcoin’s trademark application. The application was filed under the category of “computer programs used in the field of electronic commerce transactions; computer programs; electronic machines and apparatus; telecommunication machines and apparatus,” by BitFlyer Inc. USPTO’s rejection was due to the fact that the term ‘Bitcoin’ was merely descriptive and that it was a generic term. USPTO elucidated that the mark would not function as a “single source identifier for the applicant’s services”. However, the UK and Spain Patents and Trademark office granted trademark protection to the ‘Bitcoin’ mark and its logo (Registration number: M4046141). The trademark laws used to regulate cryptocurrency-related marks are in their nascent stage. This is mainly because cryptocurrencies cannot strictly be classified as ‘goods or services. Instead, it is classified as a medium of exchange.
Non-Fungible Tokens (NFTs) have garnered attention and popularity in 2021. NFTs are digital assets that are represented by art, memes, collectible videos, and music pieces. Interestingly enough, copyrights play a pivotal role in the NFT market. ‘Smart contracts are contracts that are used to regulate NFT transactions. The copyrights that subsist on an NFT are also governed with the help of a smart contract. In the NFT space, a buyer is granted ownership over a copy of a digital artifact. However, the buyer will not have a proprietary right over every single reproduction of that existing digital artifact. Copyright that subsists on a digital artifact is not transferred to the buyer upon purchase unless a specific clause that states otherwise is inserted. A smart contract may be used to transfer the copyrights that subsist on a digital artifact to the buyer. The NFT space also serves as a breeding ground for copyfraud and copyright infringement. Several individuals have been held for falsifying copyright ownership over a work that exists in the public domain. However, this can be prevented with stringent IP laws in place. The Berne Convention and the WIPO Copyright treaty may be used as the basis for creating laws to protect the creators behind digital artifacts that exist in the NFT space. The crypto market is one of the most popular economic trends today. Several argue that the crypto market is a bubble and an extremely volatile investment to make. On the other hand, many believe that the crypto market would pave the way for unimaginable possibilities in the economic sector. With the crypto market gaining attention and popularity, IP laws to specifically govern crypto spaces will most likely be created in the near future.
Author: Sanjana, a BBA LLB student of Symbiosis Law School (Hyderabad), in case of any queries please contact/write back to us at support@ipandlegalfilings.com.
