Smart Contracts and Blockchain – Streamlining Copyrights

There are plenty of things that crypto enthusiasts and blockchain believers alike would tokenize if they had the chance. The more common offerings are digital representations of money, ownership shares in a company, and in-game paraphernalia. The token ideas shouldn’t stop there, though, since fundamentally a blockchain has the ability to collect and archive registries of any work done, especially intellectual property.

Now the copyright domain is utilizing blockchain technology to tokenize or streamline its different elements of works, ownership metadata, licensing terms, and remuneration. The use-case in copyright has not been explored deeply yet, but a paper published by the International Journal of Law and Information Technology sought to explain how smart contracts could be used to enforce international copyright law. The particular focus of the paper includes “legal protections afforded to technological protection measures (TPMs) and Rights Management Information (otherwise known as Information Rights Management (IRM)), jointly referred to as Digital Rights Management (DRM).”

The first example of a useful token for the copyright domain would be one that represents a copy of a protected work, such as a photograph, piece of music, or a written work. The paper states that a digital camera or a word processor can generate a token at the time the work is expressed, or [the coin can subsequently be created] by the rights holder or an authorized third party. This means that as soon as you finish mastering your band’s newest track, you can tokenize the ownership of it to show evidence via blockchain that the piece solely belongs to you.

Secondly, tokens can be a representation of RMI. In this example, you would be able to control how and when someone may access your work. You, as the issuer of the token representing your work, would have the power to dictate the rights under which a third party may use or access your work in any way. This would be a major step forward for the artists out there trying to monetize their superior work without having to pay the steep fees charged by third parties for distribution.

The third example would be a token that uses the terms of use of protected content under the standard licensing terms of Creative Commons. However, terms of use may change over time or remain static. In the instance of dynamic terms of use, the token would have to be able to evolve. This may be the most technically challenging example of tokenized copyright.

Finally, tokens could be used for remuneration as a payment cryptocurrency. A company or individual with works they want to tokenize could potentially utilize one or all of the above tokens in tandem with each other.

Blockchain and Copyright Intersections

The report identifies four copyright domains “where the implementation of blockchain technology is both promising and challenging, giving rise to a host of complex (and often interconnected) legal issues.” These four instances all assume that the blockchain technology itself functions as promised while realizing that things don’t always work the they are expected to.

Private Ordering – Fragmentation

Fragmentation can be largely eliminated by tokenizing the copyright rights. Using tokens on a blockchain, the desired rights that a creator wants to apply to their work would be applicable globally in any jurisdiction rather than in fragments. That situation, of course, would be under circumstances in which the applicable laws do not impose requirements for the transfer of tokens to be valid or effective.

There is, as of yet, no true international copyright law, however treaties may recognize the copyright right in various jurisdictions. “For instance, a very short ‘work’… may be protected in one jurisdiction but not in another, on the grounds that it lacks originality. Under the Berne Convention, a creator thus gets 176 different national bundles of copyright rights, if one counts the author’s own country.”

What’s more, each of those 176 individual copyrights can be divided and broken into any number of parts so that each specific right in an entire bundle of copyright rights can be owned and utilized differently in different jurisdictions. This causes serious headaches among copyright holders who wish to precisely protect their work from unauthorized use.

San Jose State University’s Ahmed Banafa adds, “Governance is an area of dispute. There was a proposal to use Ricardian Contracts to supplement Smart Contracts in situations such as copyright rights.”

Private Ordering – Licensing Coordination

Blockchain really comes into play in this scenario when factoring in the human aspect. Conflicts in coordination can easily be started if off-chain transactions are not properly recorded digitally. This can be avoided by eliminating all off-chain transactions.

The authors of the report acknowledge that coordinating transactions on and off-chain is extremely complex “when it comes to making sure that the reality as represented on a blockchain and the reality as represented through non-blockchain contracts and traditional institutions remains synchronous.” They assert that the simplest solution would be to program the smart contract to allow the creator or creators of a work to retain all of their copyright rights. Under such an arrangement where some transactions occur both on and off-chain, the creator could allow exclusive use of a right off-chain and allow non-exclusive use rights on-chain.

There are a great deal of conflicts which can emerge from this arrangement, however. First, a non-exclusive licensee may have a right to use which conflicts with the rights of an exclusive licensee, which becomes a matter of traditional contract. Second, the creators could transfer some of their rights to a collective management organization (CMO). This would create conflicts in a single territory or between territories which would require tremendous coordination efforts. A CMO could also own all the titles to a work which would produce a competition law violation.

Registries – Formalities

There are already real-world applications of DLT in the registration of information regarding works. Such registries would consist of a decentralized database of metadata on musical works with real-time update and tracking capabilities. “One could envision a world where the exploitation of works (at least of a certain type, such as sound recordings) in the digital realm is dependent on registration on a digital ledger. Copyright works within this blockchain-based system could be easily licensed, their use tracked, the corresponding remuneration paid, and of course enforced if that function can be performed by the accompanying smart contract.”

In the future, although maybe not enforced by law, registering works onto such a registry may become the broad norm in an industry requiring licenses for copyright rights use. Certainly using blockchain as a registry would make tracking the use or exploitation of a right much easier than it presumably is now since one can see from their office laptop all the details of the use of their work on the other side of the world.

Registries – Orphan Works and the Public Domain

A blockchain-based registry could be used as a database of copyright rights if used with an automatic search system. In that case, the rights could easily be found after a simple search for a title or creator.

Smart contracts being executed in tandem with a blockchain registry could enable automatic licensing of works. A system like that could “encompass other licensed works, out-of-commerce works, or even those that are in the public domain. It could even automate attribution mechanisms so as to enable the irreversible dedication of a work to the public domain.” Such a system would have a global impact, but so far its legal implications are unclear.

Rights Management Information

Blockchain technology in the RMI sense would not be used to circumvent TPM legal protections. Instead, it is posited that “blockchain-based systems make it easier for various players to cooperate. This is the case, for example, of numerous stakeholders in the music industry that may each own a ‘piece’ of a musical work.”

Ownership or control of copyrighted work is often seen as a source of power. This precludes the notion of open sharing of that work. If the cooperation of major RMI holders is absent, a database of such information could be built through crowdsourcing. While such an idea raises the issue of conflicting claims to the same work, a blockchain would excel at safeguarding the validity and origin of existing information. It would not, however, be able to verify the information when it is first entered into the system.

Fair Remuneration

To many artists and creators, this is the most important aspect and one which smart contracts decidedly excel at regulating without a third party. Firstly, smart contracts can facilitate the transfer of payments from existing platforms to a blockchain. Secondly, uses currently licensed through statutory or compulsory licenses and collective rights management schemes can be done via smart contract. Thirdly, blockchains may provide greater transparency.

An example of the first role might be a blockchain-empowered rights and payments system used by an artist or even a CMO, especially for a one-off license to perform or use musical works and recordings. An example of the second role would be a full switch to a rights and royalties management system based on blockchain technology, as EY and Microsoft have proposed in a joint project. Thirdly, blockchain-based licensing may meet one of the key demands of important creator groups in the online environment, namely transparency in financial flows.

Where works have a relatively small value but have a relatively large number of users and rights holders, prohibitively high transaction costs prevent efficient licensing. In that context, blockchain-functions may lower the costs of transactions to a level at which individual licensing may become the most efficient model for licensing. Smart contracts may automate such direct licensing, further lowering transaction costs since collective rights management schemes rely on blanket licensing of repertoires.

Conclusion

We can’t say yet that one side is right or wrong since there are clear benefits and detriments to both. The detriment to blockchain being that it is not yet wholly proven to deliver the scalability and transparency promised by developers, while traditional copyright law is cumbersome and muddled in confusing exceptions and by-laws.

Ahmed Banafa, an expert on the R&D of blockchain technology contests strongly, however, that “the technology issue is clear DLT (i.e.: Blockchain) will preserve the information of copyrights and IP without fear of losing or altering the data.”

Based on the increasingly real use-case of blockchain technology in copyright rights, there is palpable friction between the status quo of copyright law and what is possible with a blockchain. Some might call them growing pangs. There are the traditionalists from one social and economic standpoint, and those advocating for blockchain use from a different social and economic standpoint advocating for starkly divergent arrangements in the copyright rights domain.

Tokenizing copyrights goes a step further from the proposition just a few short years ago in Bitcoin Magazine to include a record of copyrights on a blockchain. “A hash of a work isn’t the same as the work itself.” A token showing ownership, however, would legitimize the contract between creator and user.

You’ve never heard a rock band sound good at their first show because it takes time to learn even how to sound check. A painter discards a dozen drafts before finishing their masterwork. An athlete often needs to fail miserably to learn how to truly succeed. We are watching blockchain technology just now stretch its legs and learn to walk. The copyright issue is one of hundreds of possible uses for smart contracts and blockchain as a whole, but we should stick around and see what is yet to come.