mercoledì, Aprile 24, 2024

Blockchain, smart contracts and the management of unregistered IP rights


The ways in which law and technology influence each other have been multiplying in the last decades, with an increasing interdependency that now becomes pervasive in our society. We are witnessing an ever evolving relationship that first started with the process of digitalizing information, then continued with the the partial automation of the decision-making process of lawmakers, judges and lawyers, and is now moving directly to the incorporation of legal rules into code and to the widespread deployment of softwares and platforms to execute contractual agreements and enforce rules.[1]

However, all of the substantial changes that we have witnessed so far have always involved some kind of middleman, from banks to publishers, to e-commerce platforms and other tech giants. These actors gained more and more power over the years and imposed their business models over the industry, especially thanks to their ability to store and retrieve data and information.

This is all going to change thanks to the rise of the blockchain, a decentralized, distributed ecosystem that promises to have far reaching social, economic and also legal implications. [2]

The purpose of this paper it to analyze some of the various legal and tech-related aspect of blockchain applications, particularly  in their relations with intellectual property issues. More specifically, the essay will focus on the benefits and drawbacks in the context of a blockchain-powered management of unregistered IP rights.

After a brief introduction about what the blockchain is and how smart contracts work, the paper will explore three useful applications to tackle the core issues of copyright law in the digital environment.

However, as it will be further explained, each of these solutions comes with its drawbacks, particularly in the almost complete absence of a legislative framework around this new technology.


Blockchain technology first emerged as the architecture underlying the Bitcoin protocol. According to what is written in the white paper by Satoshi Nakamoto, the pseudonymous father of the Bitcoin, the blockchain is a system “based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party”.[3]

A blockchain is essentially a network of peers, called “nodes”, which collect new transactions and convert (or “mine”) them into “blocks” that are added to the “chain” only if the transaction is validated by the network. The “mining process” entails the calculation of the “hash value” (the result of a mathematical equation that is uniquely linked to a single group of data) of each block, which is then included in the next block as a proof of the transaction. In this way, any modification of a previous block will compromise the whole chain, since the hash of that block will no longer be validly referenced by all the subsequent blocks.

Owing to the fact that this creates a secure, time-stamped and immutable record of transactions, the blockchain is quite promising in the field of fintech and cryptocurrencies, to the extent that it is considered to be the driving force of the shift from the “internet of information” to the “internet of value”.[4] However, there are plenty of applications  that have become attractive also to the IP sector.

Smart contracts

The disruptive effect of blockchain to the IP sector is not limited to the use of immutable distributed ledgers. In fact, one  step further into the evolving relationship between law and technology is provided by the introduction of smart contracts, a specific blockchain solution that allows the automatic and decentralized execution of agreements, thus reflecting an “increasing reliance on code not only to enforce legal rules but also to draft and elaborate these rules”.[5]

A smart contract is a code running on top of a blockchain and conveying a set of rules, under which the parties to that smart contract agree to interact with each other.[6] It consists of small snippets of code to be deployed directly on the blockchain and to be executed in a decentralized manner by every node in the network: if and when the nodes verify that the pre-defined rules are met, the agreement is automatically enforced.[7] When applied to legal agreements, the snippets of the  smart contract code facilitate, verify, and enforce the negotiation or performance of a transaction.

As a result, through the tamper-proof and time stamped blockchain technology, smart contracts create a non-traditional means of enforcement “with the assumption that in a perfect implementation of the system, wrong performance or non-performance become impossible”.[8]


Blockchain based registration systems

One of the most meaningful implementations of this technology involves the application of blockchain for the creation of registers for IP protected materials.

If we focus in particular on the protection of unregistered IP rights, the deployment of blockchain technology could bring more certainty and transparency to copyright holders. By creating a time-stamp record of the artwork, the distributed ledger can provide evidence of creatorship and provenance authentication, and also track the distribution of copyrighted works.[9]

Since copyright law does not consider registration as a formal requirement, as the work is protected since the moment of its creation with no further state actions,[10] blockchain-based repositories can serve as an additional useful mechanisms of co-ordination between users and right holders, allowing the potential user to overcome the hurdle of tracing a work that is already available for free use in the public domain, thus easing accessibility in the mass of digital works generated daily.[11] Moreover, it could allow greater control and restrict potential duplication, distribution and unauthorized use over digital copies.[12]

An example of this use comes with Kodak One, a new image rights management and protection platform secured on the blockchain.[13] Developed by Kodak, it establishes proof of ownership and makes it easier to control and access information about images without recurring to a central distributor or authority. One of the main features of the platform is that it monitors the web to sort out infringement and, as a solution, offers the infringers the opportunity to legitimize their use of images with an easy payment to original right holders. [14]

Even if the application of blockchain for copyright registration is not so widespread at the moment, the introduction of blockchain registries in the long term could be deemed successful if we consider the benefits carried out by registration in other areas of property and intellectual property.[15]

IP management through smart contracts

It is still hard to sort out a unambiguous definition of smart contract. In 1997 (well before the creation of the first blockchain), Nick Szabo suggested that many contractual clauses could be embedded in software “in such a way as to make a breach of contract expensive (if desired, sometimes prohibitively so), for the breacher”. [16]

Considering its overall technical features,[17] there is no doubt that the degree of certainty provided by the outcome of a smart contract has no precedent: the employment of algorithms to ensure the automatic execution of legal terms “effectively eliminates non-performance risks because we have no choice of breach, no choice of damages”.[18]

If we consider for example modern music business, where compensation structure is considered to be exceedingly opaque and unfair, with artist getting paid after months or even years[19] on the basis of recording contracts that usually have very low royalty rates,[20] smart contracts promise to have a disruptive effect.

Mycelia[21] is just one of numerous start-ups that use smart contracts to allow direct licensing between copyright holders and users, seeking to solve the problems that are usually related with the unjustifiable amount of profit taken by labels and intermediaries.

With the purpose of essentially cutting out the middleman, Mycelia has been created as a fair-trade music business that harnesses blockchain (it is built on Ethereum) to provide automatic calculation and payment of royalties, ensuring that all the authors are fully acknowledged and paid. This method turns out to be particularly useful in the case of works that are created via collaboration, as a smart contract could automatically calculate the remuneration for each and every single purchase or reproduction of the single, depending on the percentage of the different interests at stake. Moreover, using blockchain will help reducing service fees, as smart contract implemented on the blockchain can automate all the actions starting with the purchase, thus offering a direct and fast solution to the problem of managing statistics, database retrievals and royalty distribution. [22]

Copyright enforcement

Aside from the benefits for copyright traceability and management, blockchain can also become a central means for protecting digital assets and provide the rightholder with the ability to pursue civil and criminal remedies.

The possible benefit that blockchain can bring to copyright enforcement comes with its inherent deployment of the hash function, which creates a digital “fingerprint” of each work. Two hash digests can be the same if and only if the initial data is the same. Given that once “mined” into a block and recorded into the chain,  the hash function cannot be modified without altering all the subsequent blocks, the result is an immutable record that can be confronted by judges and lawyers to verify and prove the violation of copyright.

In June 2018, the Court of Hangzou in China, specialized in Internet-related cases, ruled that data uploaded to a blockchain can be used as evidence during litigation.[23] In order to evaluate the strength of the electronic evidence stored on the ledger, the Court went in-depth with examining the integrity of blockchain electronic evidence uploads, concluding that:

Electronic data saved and secured using technological means should be analyzed and determine case by case with an attitude of being open and neutral. The technologies like blockchain should not be dismissed or the standard of determination thereof should not be raised because they are novels and complex technical means at present, nor should the standard of determination be lowered because it is difficult to tamper with or delete the technology.[24]

The transparency and immutability of the blockchain can be particularly useful not only with evidences needed in generic litigation, but particularly with disputes related to unregistered IP rights. In fact, as mentioned above, a registration process based on blockchain could render publicly and easily accessible all the details related to a creation, included the information about the right holder or holders and the percentage of ownership.[25] Moreover, while by default different copies of the same copyrighted work cannot be distinguished from one another, the application of a unique cryptographic hash function will allow the possibility to track the individual history of each copy distributed via blockchain.[26]

Legal and Tech issues

Blockchain based registration systems

Even if decentralized ledgers are transnational, since they don’t rely on a central server, one potential hurdle to large scale-application of the above mentioned registration systems is the difference between jurisdictions in the way they conceive and apply rules concerning copyright.[27]

According to a questionnaire proposed by the WIPO, 48 of its Member States, first of all the U.S.,[28] allow voluntary registration in order to provide additional utilities to copyright protection.[29] In a large number of this countries, registration is limited to certain types of copyrighted works (for example, just some of them expressly include computer programs in the list, whereas other registration system are created only for literary works or for cinematograph films).[30]

Registration systems also differ on the purpose of their implementation: while almost none of the countries has established a registry for recognition of creation, some of them require registration as a necessary prerequisite for the initiation of judicial proceedings, and some others require that transfer of rights shall be recorded in order to ensure enforceability vis à vis third parties.[31]

On top of that, we should also mention the fact that copyright duration isn’t the same in all jurisdictions (EU, US and Australia allow 70 years after the right of the author, while Canada and New Zealand stick to the minimum of 50 years) and that in some countries many individual uses do not need to be licensed, as they fall under the scope of fair use or fair dealing.[32]

Apart from the listed legal pitfalls, there are also some technical hurdles (such as the volatile price of the cryptocurrencies used to reward miners in public blockchains,[33] and the fact that blockchain can actually be hacked[34]) that would render copyright registration services based on blockchain much expensive and unstable.

IP management through smart contracts

The inherent ambiguity of the legal system — necessary to ensure a proper application of the law on a case-by-case basis — ultimately gives software developers and engineers the power to embed their own interpretation of the law into the technical artifacts that they create”.[35] What we are witnessing is the paradox of  “Law regulating code regulating law”,[36] where developers, as they write the code, can implement values or neglect them, enable freedoms or restrict them: they are de facto full regulators of the cyberspace.[37]

With the advent of smart contracts, code is now used not only to manage, but also to “define” property rights.[38] As developers write the code, all the technical restrictions provided by the blockchain infrastructure could eventually be extended beyond the scope of copyright law.[39] This drives towards an increasingly formalized system where blockchain progressively becomes a “regulatory technology”,[40] whose reliance on self-executing smart contracts that allow zero-tolerance on deviation, but also on rightful invalidation and non-enforceability of contractual clauses (as in the context of consumer protection), inevitably raises the question of what is legally and what is technically binding.[41]

A doubt that intensifies if we consider that the legal status of smart contract is yet to be clarified. Some argue that they are “unprecedented methods of ensuring contractual compliance[42], that their ex-ante enforcement basically provides “adjudication as a service[43] and that, incorporating regulation through code, they can work without an overreaching framework and instead will provide an alternative to the whole legal system.[44]

On the other side, across different countries the positions of policy makers and lawyers around the opportunities and risks associated with smart contracts are often contradicting.[45] For instance, under UK and Australian law, the fact that a contract could be fully electronic is unlikely to affect the application of usual rules concerning contract formation, whereas in the US courts will attribute validity to self-enforceable contracts according to strict standards, only if they have proof that the parties have been noticed and accepted the terms.[46] In Canada there are serious legal hurdles when addressing the enforceability of smart contracts,[47] while in China some issues arise considering that the current law allows the parties to request a letter of confirmation prior to the conclusion of a contract in the form of data messages, which will likely limit the efficacy of transactions in an entirely electronic form.[48]

Overall, the widespread perception is that relying on code to bring about regulatory outcomes would mean to transform technical artifacts into social resources,[49] with the risk of undervaluing “the decision-making processes that are central to legitimate constraint on behavior”.[50]

Copyright enforcement 

There are many issues linked to the record and verification of proof of ownership through the blockchain. For example, if someone records someone else’s work on the ledger before the actual rightholder, for the latter it will be very difficult to prove otherwise.[51]

The hash “fingerprint” stored on a blockchain is particularly useful to record and trace back the ownership of a digital work, and therefore reduce dubbing and copying. However, if we consider that if someone changes a single musical note in a song, it will be treated as a separate song because it will have a different hash,[52] we immediately understand that even those works that  have undergone minimal modifications, and as such should be covered by the original copyrights’s work (e.g. remixed audio tracks or images incorporated in a video), will be associated with a different hash, thus rendering the copyright protection hardly effective.

The problem is that, at its current state, blockchain technology is able to contain only metadata about transactions, non creative content itself.[53]

This is the “hashing issue” of the a blockchain-powered system of copyright management, and it is just one of the issues that arise when relying on a public and permissionless ledger that aims at being trustless and based just on algorithmical consensus: is the person that registered the work the same who created it?

In the end, trust turns out to be “absolutely central to the viability if the technology as well as its capacity to be widely adopted”.[54]

The problem could be partially overcome by using a private blockchain, a permissioned ledger where a central actor has the authority to grant permission to join. With private blockchains, which are based on deterministic consensus, all the actors involved in the validation process are known, identified (or “permitted”) and potentially accountable for their actions.[55]

Nevertheless many problems arise also with this kind of blockchain, saying that a permissioned ledger is essentially the anathema of the anti-hierarchical and decentralized ethos underling the concept of blockchain itself,[56] as the owner owner of the private blockchain will have control over all the transactions. This dominant position will likely drive  towards considering the blockchain owner responsible for the quality of the digital asset that is stored on the blockchain. However, some argue that the owner acts more similarly to a hosting provider,[57] an online intermediary that, according to the current legislation, is not directly liable for copyright infringement perpetrated by its users (although it can be sued for contributory liability based on knowledge of users’ infringement).[58]


In its interaction with copyright related issues, blockchain is presented as an opportunity to improve the efficiency and transparency of the market, but there are still many frictions between the design of the technology and the legal architecture surrounding the droit d’auteur.

Such frictions occur not only between blockchain and copyright in a structural way, but in a broader sense between the different social, economic and political conditions in which blockchain and the copyright system emerged.[59] The latter was born in a world built around intermediaries that were trusted thanks to their competences, which were much needed but often leveraged to achieve dominant position.  In order to protect people from abuse, lawmakers intervened and introduced rules on copyright, consumer protection, antitrust, privacy etc.

Now, with a technology that only at  first glance can be considered trustless, trust just shifts from intermediaries to the blockchain itself, as well as to our ability to audit softwares and defend ourselves in a code-driven world.[60] In the current legal framework, where copyright legal provision are highly fragmentary, the Berne Convention forbids mandatory registration of copyrighted works and smart contracts are drowning in legal uncertainty, the rise of the so-called Lex Cryptographia[61] could throw the world of copyright into chaos. Indeed, the only way for the blockchain to achieve more robust trust and solidity is through the legal system.[62]

This approach is vital if we consider that, as a relatively new technology, the blockchain is very likely to be the subject of further innovation through new applications on real-world circumstances. Yet, little legal clarity and unity will discourage innovation, as developers and entrepreneurs understandably fear investing heavily in new technologies when the risk is that their product will turn out to be unfeasible or non-compliant.

In order to effectively foster the adoption of blockchain solution by institutions and enterprises, legislators should adopt safe harbors and “sandbox approaches”, thus providing good spaces for experimentation, regardless national boundaries.[63]

We are likely facing an exciting crypto-revolution (following the digital revolution), but in order to express the full potential of the Blockchain, first we need to ensure a sufficient political and legal debate and provide a common set of standards, to be globally recognized, that  can balance the progress of technology with the inclinations of users and society.

[1] Primavera De Filippi and Samer Hassan, ‘Blockchain technology as a regulatory technology: from code is law to law is code’ (2016) 21(12) First Monday, available here:

[2] Vijay Gupta, ‘The Promise of Blockchain Is a World Without Middlemen’ (2017) 6 (3) Harvard Business Review.

[3] Satoshi Nakamoto, Bitcoin, A Peer-to-Peer Electronic Cash System (2008), available here:

[4] Don Tapscott and Alex Tapscott, ‘Realizing Potential of the Blockchain’ (White Paper No 34436, World Economic Forum, 24 June 2017) 4.

[5] De Filippi and Hassan, above  n 1.

[6] BlockchainHub, Smart Contracts, available here:

[7] De Filippi and Hassan, above  n 1.

[8] Christopher Clack et al, ‘Smart contract templates, foundation, design landscape and research directions’ (2016) 2, available here:

[9] Brigit Clark, ‘Blockchain and IP Law, a match made in crypto heaven?’ (2018) 1/2018 WIPO Magazine, available here:

[10] Berne Convention for the Protection of Literary and Artistic Works, opened for signature 9 September 1886, 1161 UNTS 30 (entered into force 5 December 1887) art 5(2).

[11] Annabelle Treasuse et al ‘What Blockchain Can and Can’t Do for Copyright” (2018) 28 Australian Intellectual Property Journal 144, 147.

[12] Ibid 150.

[13] Kodakone, Roadmap, available here: .

[14] Chris Berg et al, ‘Kodak One Could Be The Start of a New Intellectual Property’, The Conversation (online), 12 January 2018,available here:

[15] Treasuse, above n 11, 148. On the benefits carried out by copyright registration, see generally Christopher J. Sprigman, ‘Reform(aliz)ing Copyright’ (2004) 57 Stanford Law Review, 485.

[16]Nick Szabo, ‘Formalizing and Securing Relationships on Public Networks’ (1997) 2(9) First Monday, available here:

[17] See above section 1.2.

[18] Tapscott and Tapscott, above n 4, 23.

[19] Sherman Lee, ‘Embracing blockchain could change completely the way we artists sell music and interact with fans’, Forbes, 25 April 2018, available here:

[20] Berklee Institute for Creative Entrepreneurship, ‘Rethink Music initiative, Fair Music: Transparency and Payment Flows in the Music Industry’  (2015).

[21] Mycelia, Mycelia, available here:

[22]Treasuse et al, above n 11.

[23] Han-Mei Tso and Jude Yi, ‘The First Case in China Using Blockchain Technology to Preserve Electronic Evidence’, Oshaliang (online),  1 August 2018, available here: .

[24] «华泰医美公司  道通有限公司» [Huatai Yimei Co. v. Did Daotong Co. Ltd], 杭州互联网法院  [Hangzhou Internet Court] 28 June 2018.

[25] Treasuse et al, above n 11, 146.

[26] Alexander I. Savelyev, ‘Copyright in the Blockchain Era: Promises and Challenges’ (Research Paper No WP BRP 77/LAW/2017, Higher School of Economics, 2017) 10.

[27] Kai Stinchombe, ‘Blockchain is not only crappy technology but a bad vision of the future’, Medium (online), 5 April 2018,available here:

[28] 17 USC § 411 (1996). The US also established the eCO (Electronic Copyright Office), a registration platform that may help validate copyright claims in court.

[29] Graham Greenleaf and David Lindsay, ‘Summary of the Responses to the Questionnaire for Survey on Copyright Registration and Deposit Systems: A Copyright Registration and Recordation’ (Summary No 21, World Intellectual Property Organization, 2010)  1,available here:

[30] Ibid, 2-3.

[31] Ibid, 6.

[32] Martin Senftleben, ‘Comparative Approaches to Fair Use: An Important Impulse for Reforms in EU Copyright Law’ in G.B. Dinwoodie (ed), Methods and Perspectives in Intellectual Property, (Edward Elgar, 2014) 30, 37.

[33] Jing Zeng et al ‘A Solution to Digital Image Copyright Registration Based on Consortium Blockchain’ in Yongtian Wang et al (eds)  Image and Graphics Technolgies and Application (Springer 2018) 228.

[34] James Riberg, ‘Yes, the blockchain can be hacked’, Coincentral (online), 7 May 2018, available here:

[35] De Filippi and Hassan, above  n 1.

[36] Lawrence Lessig, ‘Law Regulating Code Regulating Law’ (2003) 35(1) Loyola University Chicago Law Journal 1.

[37] Lawrence Lessig, Code: Version 2.0 (BasicBooks, 2006) 4-8.

[38] De Filippi and Hassan, above  n 1.

[39] Ibid.

[40] Aaron Wright and Primavera De Filippi ‘Decentralized Blockchain Technology and the Rise of Lex Cryptographia’ (2015) SSRN Electronic Journals.

[41] Ibid, 24-26, 43.

[42] Don Tapscott and Alx Tapscott, Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business and the World (Penguin Random House, 2016) 47.

[43] Rob Marvin, ‘Blockchain in 2017: The Year of Smart Contracts’, PC Magazine Australia (online), 12 December 2016, available here:

[44] See generally Alexander I. Savelyev, ‘Contract Law 2.0: ‘Smart’ Contracts As the Beginning of the End of Classic Contract Law’ Research Paper No WP BRP 71/LAW/2016, Higher School of Economics, 2016.

[45] Savelyev, above n 26, 18-19.

[46] Sean Murphy and Charlie Cooper, ‘Can Smart Contracts Be Legally Binding Contracts?’ (White Paper No 144851, Norton Rose Fulbright and R3) 26-29.

[47] See more generally, on the enforceability of contracts entered into over the Internet, Century 21 Canada Ltd Partnership v Rogers Communications Inc [2011] BCSC 1196; Kanitz v Rogers Cable Inc [2002] OJ 665, 37, addressing the issue of establishing “reasonable” notice and arising some questions around unconscionability.

[48]  «中华人民共和国合同法» [Contract Law of the People’s Republic of China] (People’s Republic of China) National People’s Congress, 15 March 1999, art 33.

[49] Karen E.C. Levy, ‘Book-Smart, Not Street-Smart: Blockchain -Based  Smart Contracts and the Social Working of Law’ (2017) 3 Engaging Science, Technology and Society, 1,1.

[50] Mark Verstraete, ‘The Stakes of Smart Contracts’ (forthcoming 2018) 50 Loyola University Chicago Law Journal, 47.

[51] Steve Hoberman, Blockchainopoly, How Blockchain Change the Rules of the Game (Baskin Ridge 2018).

[52] Ibid.

[53] Savelyev, above n 26, 12.

[54] Thibault Schrepel, ‘Is Blockchain the Death of Antitrust Law? The Blockchain Antitrust Paradox’ (forthcoming 2018) 3 Georgetown Law Techology Review.

[55] David G.W. Birch and Salome Parulava, ‘Shared Ledger Technology and Radical Transparency for Next Generation Financial Services’ in David L.K. Chuen and Robert H. Deng (eds) Handbook of Blockchain, Digital Finance and Inclusion: Cryptocurrency, FinTech, InsurTech and Regulation (Elsevier Science & Technology, 2017) 381-382.

[56] Mike Orcutt, ‘How Secure is the Blockchain Really?’ MIT Technology Review (online), 25 April 2018, available here:

[57] Savelyev, above n 26, 13.

[58] See e.g. Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) [2000], OJ L 178/1, art 12-15; 17 USC § 512; Copyright Act 1905 (Cth), s 112(e), as commented by the Full Court in Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23.

[59] Balázs Bodó et al,‘Blockchain and smart contracts: the missing link in copyright licensing?’ (2018) International Journal of Law and Information Technology, eay014.

[60] Stinchcombe, above n 27.

[61] Wright and De Filippi, above n 40, 51.

[62] Kevin Werbach, ‘Trust, But Verify: Why the Blockchain Needs the Law’ (2018) 32 Berkeley Technology Law Journal, 42.

[63] Wolf is Zhao, ‘EU, US Lawmakers Tout ‘Sandbox’ Approach for Blockchain Development’, Coindesk (online), 14 May 2018

Marianna Riedo

Classe 1996, frequenta l’ultimo anno di  Giurisprudenza presso l’Alma Mater Studiorum-Università di Bologna. Da tempo interessata al rapporto fra diritto e nuove tecnologie e desiderosa di approfondire questa tematica con un periodo di studio all’estero, ha deciso di trascorrere un semestre di exchange in Australia. Qui ha frequentato la UTS: University of Technology Sydney, dove ha seguito corsi inerenti a materie quali proprietà intellettuale, informatica e innovazione imprenditoriale. Attualmente si trova in Estonia, dove collabora con il ruolo di Research Trainee presso l’IT Law Programme dell’Università di Tartu. Nel febbraio 2017 ha iniziato a collaborare con ELSA Bologna (the European Law Students’s Association) per poi assumere la guida dell’area Attività Accademiche in qualità di Vicepresidente e, infine, arrivare a ricopre il ruolo di Presidente. È Senior Associate Editor della University of Bologna Law Review, realtà con la quale collabora dal 2016.

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