This Article has been written by Ms. Khushboo Sharma, a 5th year student of Vivekananda Institute of Professional Studies, Delhi.
Abstract
The Blockchains and smart contracts are a fascinating part of the Fintech. The blockchains aim at storing information that is encrypted and secured whereas the smart contracts are a subset of blockchain where automated contracts take place upon fulfilment of certain conditions. Nevertheless, the blockchain and smart contracts are relatively safe for information processing and storage and have positive impact on the Intellectual property rights. However, even though these programmes are transparent, certain limitations still follow that might create hinderance in their development in India. The same is discussed and elaborated upon in this Article.
Keywords: Block chains, Smart contracts, Intellectual property rights, information, agreements
Introduction
What is Blockchain?
Blockchain are a type of shared database or ledger that is distributed among a computer network node. They differ from typical database in the way they store the information and how they are structured and accessed. The blockchain consist of scripts that conducts a task in a database. The peculiar feature of blockchain is that it is distributed in the sense that there are multiple copies that are saved on different devices and they all must match so that it is valid. A blockchain collects the information related to the transaction and enters it into a ‘block’, once the block is full, the information is subject to an ‘encryption algorithm’ that creates a hexadecimal number which is known as the ‘hash’. This hash is entered into the following block header where it is encrypted with other information in the block, thus creating a series of block chained altogether.
Anything of value can virtually be tracked and traded on a blockchain network. This reduces the risks and cutting costs for all that are involved.
Importance of Blockchain
Today, businesses run on information. It is a fact that the faster the information is received the more accurate it is as in case if it takes longer other unwanted information might get involved. Blockchain is considered to be ideal for delivering the information. Owing to the fact that it provides instant, shared and entirely transparent information that is stored on an immutable ledger. The ledger can be accessed only by members of the network who are so authorised.
Tracking orders, accounts, payments, production and other things can be carried on by blockchain systems. Every member has access to the same thing where end to end details of a transaction is made available. It aims at boosting as new efficiencies and opportunities in the business and members. It is also necessary to mention that the Blockchain involves immutable records which means that no member/ participant can tamper with a transaction so recorded on the shared ledger.
What are Smart contracts?
Smart contracts are a key element of Blockchains. In order to speed up transactions, a smart contract is stored on the blockchain and executed automatically. According to eminent American computer scientist, Nick Szabo, smart contracts are “computerized transaction protocols that execute the terms of a contract”. In other words, a smart contract can be termed a self-executing program that automates the actions particularly needed in a contract. A smart contract can define conditions for corporate bond transfers as well.
These programs are stored on Blockchain that run when pre-determined conditions are met. A smart contract is also known as a crypto contract. With the help of such contracts, trusted transactions and agreements are carried out among anonymous parties. This can be done without the need for an external enforcement mechanism or legal system. Upon completion, the transactions become trackable though irreversible.
The smart contracts are enforceable in India by virtue of the Indian Contract Act, 1872, if they fulfil the required criteria. The smart contracts are used in various industries such as healthcare, real-estate, finance, etc.
Systango, Monkhub Innovations, SoluLAb, Kellton, etc are some of the best Indian smart contracts developers.
What are Intellectual Property Rights
Intellectual property rights are such rights that are given to the individuals over the creations/ innovations that take form through their minds. These rights generally give the creator an exclusive right over the use of his/her creation for a considerable specific period of time. These include copyrights, trademarks, trade secrets, designs, patents, Geographical Indication etc.
In the Fintech Sector, the copyright law extends to computer codes, programme, algorithms etc. Such programmes are also a creation of a human and the copyright of his creation regarding moral and monetary rights vests in him only unless the creation has been licensed or assigned to someone else.
Relationship of Blockchain and Intellectual Property
It is observed that both Block chain and IP have a dual relationship where IP system protects blockchain and where Block are used to strengthen the IP regime. The use of Blockchain in Intellectual property can help in establishing first inventorship in cases of patents, copyrights and first use in trademarks. It acts as evidence and helps in identification of the rightful owner/ creator.
Another benefit of blockchain is that it offers synchronised search databases. Such databases can help patent examiners in searching the invention on a single consolidated platform that is meant for patent literature. Further, it aids in registration and record keeping as well. The IP offices all round the world maintain registers for the purpose of record keeping whether in the form of paper or stored electronically. The registers have observed to have evidentiary value in the courts of law in order to justify the rightful claim.
With blockchain such record keeping/ ledger maintenance can get especially easier. The tasks of real time updation of records, ensuring that the data is correct and away from any fraudulent activity and data verification will become simpler and tamper-proof with the help of such blockchain.
Data maintained on blockchain makes it easier to track and also detect an Intellectual property violation, for e.g., parallel imports, fake goods and their passing off etc. As the blockchain technology is immutable, they act as the best form of evidence and in addition to this, it can also lead to minimized litigation cases in India.
There are many companies in India that makes the use of blockchain technology and they are: SoluLab, Infosys, Tata Consultancy services (TCS), Accenture, Signzy, etc.
Smart contract and Intellectual Property Rights
Smart contracts are enabled through blockchain. They can prove to be highly useful in the licensing of Intellectual property rights and such other contract agreements. This can be attributed to the self-monitoring, maintenance of immutable proof and real time updating aspects of the blockchain. It is believed that the management of Intellectual Property rights can be simplified with the help of blockchain as the information about the rights and the right-holders along with the prospective users will be made available on real-time verifiable basis.
The smart contracts are the solution for all the problems as it facilitates self-executing IP licenses. These contracts can reduce associated cost and administrative burdens in order to ensure that legal formalities are smoothly executed. The smart contracts also aim at eliminating financial intermediaries such as accountants, banks that maintain records or essential checklists. These smart contracts promote transparency and a sort of easy in accounting formats.
The primary benefit of using smart contracts in the intellectual property management is its capability to automate several processes, like for e.g., licensing agreements and royalty payments. A smart can be programmed to automatically distribute royalties to the owners of the copyright every time it is sold. This, however, aids in eliminating the intermediaries and also undertakes to ensure that the payments are made timely and with accuracy.
Secondly, the smart contracts can be used in licensing agreements. The management and grant of license can become much easier by encoding the terms of license directly into the contract. This is much helpful in saving time and resources meant for negotiation and enforcement of such agreements meant for licensing. On the other hand, it simultaneously provides a very transparent and secure record of the agreed terms and conditions.
Another probable application of these contracts in the field of intellectual property management is patent registration and its enforcement. Presently, the process of registering a patent is considered as time-consuming and heavy on the pocket. The Patent registration also most often involve multiple jurisdictions and different legal systems. With the use of such smart contracts along with relevant information deposited securely on the blockchain, the registration process for patent can become more simplified and even more effective.
In Addition to this, these smart contracts can also prove to be helpful in automatic enforcement of patent rights. Such enforcement can be made possible through monitoring the use of patented technology and imposing penalties for unauthorized use such patented technology.
Furthermore, in addition to these specific contributions, for the purpose of Intellectual property management, the use of smart contracts can also offer a more transparent ecosystem. This could be attributed to the decentralized nature of the blockchain technology, which means that the transactions and agreements are made available on public ledger and therefore, can be accessed and verified by anyone and everyone.
However, as everything has its pros and cons, the smart contracts apart from its potential benefits have its limitations as well. The most important challenge is the issue of interoperability among different blockchain platforms. On the other hand, there exists the challenge of integration of such contracts with those of the existing legal frameworks. It is also to be noted that this technology is relatively new therefore any unforeseen risks or challenges may be very difficult to address.
Well, it is much evident that blockchain and role of smart contract in Intellectual Property Management looks prominent in the near future, however, in order to reach its full potential it is important that the challenges must be addressed and also it should be made sure that this technology is put to use very responsibly.
Conclusion
The blockchain and smart contracts are indeed helpful in promoting and protecting the Intellectual Property Rights. However, the IP offices must adopt such practice involving blockchain technology on an every-day basis. This will help not only in faster examination, reliable record management but also in promoting transparency, and enhanced contractual agreements. The block chain and smart contracts are extremely essential in enforcement of Intellectual property rights and easier settlement of Intellectual property infringement disputes. It is no doubt that blockchain has a huge potential yet to offer, however, there are restrictions in relating to security, speed, network, and transactional rates. Even the Possibilities of choked blockchain network is also apprehended may a times in cases where numerous transactions take place all at once. These shortcomings/ hurdles must be addressed appropriately so that Indian Fintech sector and economy can take due benefit of the blockchain technology.
References
- https://www.investopedia.com/terms/s/smart-contracts.asp (what are Smart contract on the blockchain and how they work by Jake Frankenfield)
- https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm
- https://www.ibm.com/topics/blockchain
- https://www.iiitmk.ac.in/kba/
- Blockchain Technology and Intellectual Property Rights (By BP Singh and Anand Kumar Tripathi in Journal of Intellectual Property Rights Vol 24, January-March 2019 pp 41-44)
https://nopr.niscpr.res.in/bitstream/123456789/49934/1/JIPR%2024%281-2%29%2041-44.pdf
- https://themanifest.com/in/blockchain/smart-contract/companies
- https://www.kashishworld.com/blog/smart-contracts-for-better-management-of-intellectual-property-rights/
- The Role of Smart Contracts in Intellectual Property Management (by Marcin Frąckiewicz)
https://ts2.space/en/the-role-of-smart-contracts-in-intellectual-property-management/#gsc.tab=0