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A digitising world
There was a time, when most owned assets were physical and tangible in nature, when protecting the rights of the asset owner was a simpler process, ingrained in black and white in easily-understood legislation.
As our economies become ever more digitised, protecting our digital assets becomes an increasingly complex task. Traditional existing legislation surrounding ownership, intellectual property and copyright was not built to accommodate the volume or the nature of many new and emerging digital assets.
Silicon Valley giants have effectively capitalised on digital assets such as NFTs, social media posts and even our spending habits and preferences, but regulatory and legislative oversight has struggled to keep pace with the rapidly evolving digital world. Technology can help, but it too has its limits and its use can have unintended consequences. For example, if the wrong information is stored on an immutable Blockchain, it then cannot be amended afterwards to reflect the actual facts and protect the rights of the owner or creator.
Growth in desire for digital assets
As society increasingly becomes digitised, so do the assets we own and desire. For example, the on-line gaming industry in 2020 was estimated to be worth $173billion and expected to grow by 2026 with a value at over £313billion. We have recently seen many on-line games being launched (sometimes referred to as GameFi) which enable players to earn as they play. According to Cryopto.com, this digital asset classification is worth over $32 billion and includes games such as Axie Infinity, valued at over $8 billion, and Decentraland, worth almost $7 billion.
However, the use of an immutable technology such as Blockchain can potentially lead to serious complications in the case of copyright violations. Put simply, how can you remove, amend or give the correct accreditation retrospectively if the information and data itself cannot be amended on the blockchain?
This challenge is potentially of real concern when using a public, as opposed to a private blockchain. By allowing ex-post modifications (in order to amend copyright infringements), one of the fundamental drivers of using Blockchain technology, its immutability, is undermined.
In the case of immutable blockchains, the issue of regulation and legal recourse is complicated. Imagine an individual or company using someone else's intellectual property (IP) without realising it to create a Non-Fungible Token (NFT). Once a digital representation of the IP has been put on a blockchain, what damages could a court realistically apply to the legal owner of the IP if the digital representation could not be removed? It begs the question of whether the immutability of blockchain leaves the legal system and any potential future regulatory bodies toothless?
An issue of copyright?
Currently, copyright registries around the world are not harmonised, nor is one copyright effective on a world-wide basis. Indeed, the Berne Convention on copyrights from 1886 (amended 1979), does not require a national registration for copyrights for the right to have legal effect. Copyrights and protection of IP certainly present a challenge since different approaches exist, depending on the jurisdiction.
In Europe, EU copyright law reform traces its history back over 20 years, when the Information Society Directive (2001/29/EC) was adopted. It was proposed that copyright laws would be updated to protect digital assets and IP in particular, given the increasing digital nature of our day to day lives. June 2021 was, in fact, the deadline when EU member states were required to implement provisions of Directive 2019/790 on copyright.
According to Legal Zoom, in North America digital IP is meant to meet the same criteria as physical creative work:
The work must be fixed in some tangible medium that can be perceived, reproduced or otherwise communicated, either by itself or with the aid of a machine....copyright protection begins as soon as a work has been created and fixed in a tangible medium. You do not have to register your copyright or place a copyright notice on your work. In general, copyright lasts for the lifetime of the author, plus 70 years after the author’s death.
An opportunity to protect intellectual property rights
A key issue for buyers, especially as regards digital IP, is how they can be certain that the alleged creator/seller of the IP is indeed the owner. This is one area in which Blockchain technology is potentially able to facilitate. The originator of the IP could record their claim to the IP on a blockchain and then have time-stamped proof of when the IP had been registered. One business that offers such a service is California-based FileProtected.
For a very small sum, IP can be recorded on a blockchain and even a QR code can be attached to the digital IP. This way, those wishing to have a license to use the IP (or simply obtain more details about the IP) can do so easily by scanning the QR code and be taken to the IP owner’s website. Another interesting feature of using Blockchain technology is the ability to establish smart contracts so that every time a digital asset is sold, the originator of the IP can receive a percentage of the sale and so create an on-going income from their creative work.
Digital Rights Management
In business, Digital Rights Management (DRM), is not merely about protecting a company’s logo, the photos you take or the words you write, but it encompasses many of the files and day to day activities that all of us use and create and undertake, working in our homes and offices. Adobe described DRM as including:
All the processes, policies, and technologies organizations use to control how content creators use and share digital assets. DRM considers intellectual property and copyright laws to protect both content owners and corporations as they distribute and create content.
Our spending habits and preferences generate, in effect, personalised digital assets which many of the Silicon Valley giants such as Amazon, Google, Facebook etc. have capitalised on so effectively by selling digital data to advertisers. The protection of digital assets is a complex field but one that business intrinsically needs to address and understand as we march inexorably towards an ever more digital economy.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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- 11 May 20222 minute read
Find out more about Daylight, Superscript’s brand new dedicated insurance product for digital asset businesses operating on the blockchain, the first of its kind from a Lloyd’s broker.