Abstract :
There are several possible challenges to wide-ranging legal implementation of trademarks including issues of law and jurisdiction, data protection and privacy concerns. In spite of this, in the sense of IP-intensive industries, blockchain and related distributed ledger technology give specific possibilities for IP security and registration and as evidence, either at the registry level or in court. It therefore appears that it is only a matter of time until the law tackles the possible obstacles to large-scale legal implementation of technology – such as issues of law and jurisdiction, the enforceability of smart rights, data protection and privacy concerns, reliable rules and meanings of smart contracts – and permeates IP law and practice.
Key Words- Smart Contracts, IPR, Trademarks, Blockchain
Introduction :
Blockchain is considered to be how the future is going to look like. It is considered to be a potential solution for varied types of problems. Essentially, a blockchain is considered to be a distributed ledger system where all kinds of transactions can be recorded digitally. It consists of a set of linear blocks in sequence and these blocks keep getting added as in when there is a new transaction according to the timestamp and the hash.[1] The fact that the information on the chain is highly securable and incorruptible makes it staunch specially in IP heavy industries.
A primitive form of smart contract can be considered to be a vending machine. It involves P2P transactions where you select a number and insert some cash. The machine automatically delivers goods and the required change without the involvement of any third party. A smart contract is considered to be a self-executing agreement integrated in a computer code managed by a blockchain. This code contains certain rules and provisions and only after both the parties agree to these rules, can the contract be automatically enforced. The access rights are managed by the blockchain itself due to which there is no room for omitting, tampering or revising any provision which is already mentioned. Therefore, the system of smart contracts provides a verified and public way to come into a contract. The agreement can also be tracked in real-time due to which compliance and controlling becomes promiscuous.
The first factor to determine if smart contracts can be used in the field of IPR is the legality of the smart contracts itself. It is of due importance for the smart contracts to adhere to all the principles which exist in a traditional contract, the first one being ‘offer’. “When one person will signify to another person his willingness to do or not do something with the view to obtain the assent of such person to such an act or abstinence, he is said to make an offer”.[2] If a particular smart contract is deployed in such a manner where both the parties are allowed to interact with each other and execute the contract, there is a clear room for making an offer. For instance, in algorithmic trading, the parties are allowed to negotiate before the contract is being formed. Moreover, the offering party can send a proposal to the accepting party via blockchain itself, but this is more private and direct in nature.
The second main essential is acceptance to the said proposal. Acceptance is considered to be done when the party signifies his assent to the proposal directly or through his acts. When it comes to smart contracts, acceptance can easily be indicated by signing a private key. In this scenario, dissemination of the blockchain can be considered as the offer and signing it can be considered to be acceptance, if done correctly.
The third essential is consideration. Consideration maybe regarded as the price one party pays for the act of another. The blockchain technology allows the exchange of cryptocurrency. In fact, section 5 and 10 provide for the legality of acceptance of digital signatures for a contract to be legitimate and also enforceable by electronic means. Section 65B of the Indian Evidence Act says that even digitally signed contracts will be admissible in courts. Therefore, the legality of smart contracts does allow the use of the same. Many companies are already deploying the using of smart contracts. These include highly reputable establishments such as the Yes Bank, Bajaj Electronics and even the Mahindra Group. The institute of Banking and Technology introduces a paper which focuses on the implementation of blockchain technology in the Reserve Bank of India.
Analysis :
The term smart-contracts was first coined in the 1990s, and since then has earned a huge buzz in the legal field. The question which often arises is whether or not this would involve the intervention humans. One view suggests that smart contracts can work without lawyers since they are self-enforcing. However, this is often regarded to be oversimplified. Even though some binary responses and small disputes can be coded such as micropayments, the concept of self-enforcing contracts lacks a substantial hold when it comes to subjective matters.[3] The other view sees smart contracts as a type of coded instruction through which records are maintained. This definition sees smart contracts as computerised transaction protocols that execute contract terms automatically without the need for third parties. A counterparty performance is triggered automatically by a relevant act. Smart contract performance can be used to implement a contract without human involvement once the binary contract has been formed.
In the IPR world, smart contracts can be used to establish as to who owns the particular IP right such as licenses, and allow payment in real time. Such smart information could also include rights management information like ownership, use permissions and payment terms. These ideas are fast becoming mainstream, with commercial providers, start-ups and non-profit organizations such as the Accord project.[4]
The potential of IPR in the blockchain paradigm is high and upcoming. Recording all types of intellectual property rights in a blockchain or online distributed ledger is much better than storing it in a traditional database. The idea of a “smart IP registry” is regarded to be one of the most efficient ways to store the rights. This would include a centralized and accountable authority which would record all types of events in a particular IP transaction. This could contain an immutable record of when a right was applied for, registered, first used and can also include the design and assignment. This would not only help in saving the data from tampering, but tracking the life cycle of the rights will also become easy due to which IP right audits can become very smooth. It is important to note that any type of IP rights can be registered using blockchain-application. A public registry can be created such as the Indian patent and trademark registries where the parties can directly enter the chain without spending a dime or consulting third-parties. The registration process can be free of any type of red-tapism and can also lighten the burden on IP-holders and officers.[5]
In India, there is a requirement to establish the usage of a particular trademark with some kind of evidence. This evidence can be in the form of advertisements, customer feedbacks and testimonies. If all the trademarks are registered under a particular chain, it is possible to act as an evidence of use. So, if the smart contract technology does become legal in India, proving the distinctiveness or secondary use can be easier to prove. This means that reliable use and the actual use of a particular right can easily be determined using smart contracts. Further, the required IP officer will be notified whenever the specific trademark is being used.This makes it easier for the right holder to know about the state of the market and also the infringement risks. The latest version of the blockchain technology allows to segregate between public and private elements. This feature allows to have the benefit of information without delay and any kind of resources. The idea of “creatorship” plays a huge role in any form of IPR. By giving a permanent record, negotiating parties will have the exact knowledge about the fact pertaining to the said product or service.
The blockchain technology also helps in identifying as to whether a said certificate is fake or real. For instance, if someone claims a product to be made of 100% wool, a certificate is prescribed contingent to the fact that it meets the requires standards. Fake certificates can be identified easily making it easy for both the right holder and the consumer himself. It also allows to prove the authentication of a particular good by allowing the consumers to verify when and where the products were made. This information is highly relevant for registering for a said trademark.
Another obvious advantage would be identifying the creator even when it comes to unregistered rights. The blockchain can give vital information regarding the evidence of conception of use and also whether the right is still in the period of protection. The existence of a timestamp and solid evidence would help in proving as to who is the creator of the said intellectual property. Another fascinating feature about the blockchain technology is that you can add new blocks as in when the product progresses from the manufacturing stage to the market. This feature makes it easy for the trademark holders to identify where exactly each of their good is. Keeping a track of this makes it easy to differentiate between the grey goods in cases of parallel imports. Therefore, the technology allows the provenance of the authentication of a particular good by identifying where, how and when it was made.
Conclusion :
Even though the blockchain technology seems to be very idealistic, it does have certain inherent flaws. For instance, the technology itself can impose hurdles when it comes to scaling and standardization. Moreover, various legal issues come into play while questioning the jurisdiction and governing laws. Another major problem is that the blockchain only accepts things which are objective in nature. Anything which is not binary cannot be transacted with smart contracts. The technology cannot extend to interpretation or assessment of the terms and conditions which are pivotal in in every type of contract. Therefore, it will be essential for the lawyers to make the underlying contract in order to trigger the ‘smart’ contract and this whole procedure can prove to be robust in nature.
Platforms which use smart contracts already exist. Estonia uses a platform called “BINATION” for recording the death and birth certificates to contracts. Inf act, countries like Germany and Switzerland are already looking into investing upon commercial agents who use smart contracts as a mode of transaction. Canada has invested “identity management systems” on blockchain. There is no system which focuses on IPR and smart contracts as of now. This ambit is still left to be explored in almost all legislations.
It cannot be established that smart contracts will surely solve all the problems which do exist in the world of trademarks but, it will surely help with moving a step forward. The idea of smart contracts in India is still in its initial stage and will hopefully undergo development in the near future. The link between technology and law cannot be ignored as this is what the future will look like. As in when the technology starts establishing, the system will become more uniform with more participants and more applications.
References:
[1] . Julia Golosava & Andrejs Romanovs, (PDF) The Advantages and Disadvantages of the Blockchain TechnologyResearchGate (2018), Source (last visited Sep 21, 2020).
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