Budding Blockchain, Copyright Relationship Needs Work

By Alexis Kramer

Blockchain and copyright law are on a collision course.

Companies and individuals are likely to turn to blockchain to store copyrighted material such as photos, documents, and software code as the technology matures, industry officials and copyright attorneys say. Others may use the decentralized, tamperproof digital ledger system to distribute infringing media—sharing pirated copies of films or music, for instance.

Today, if a copyright holder finds infringing content online, they can ask a publisher or internet service provider to remove it. And as long as those hosts take down the content when they are notified, they are protected from liability by the 20-year-old Digital Millennium Copyright Act.

But the law, as with any new technology, hasn’t kept pace with blockchain, which has gained popularity in part because no single person can remove or alter information or transaction records. That means copyright holders who discover infringed content on a blockchain could find it nearly impossible to have it removed.

“The whole idea of blockchain is it’s immutable, so there really is no way to take content down,” Jeffrey D. Neuburger, a partner and co-head of the technology, media and communications group at Proskauer Rose LLP in New York, said.

At the same time, blockchain could boost protections for rightsholders. Companies, including Eastman Kodak Co. and Sony Corp., are working on blockchain tools to record and verify copyright ownership on the ledger. But the industry will have to work out the technological kinks that enable infringing works to stay on the blockchain without a feasible way to remove them, industry officials and attorneys say.

Rightsholders, in the meantime, will need to monitor and self-police infringement on blockchains, and ensure they are using platforms created for legitimate purposes, Greg Shatan, an intellectual property and technology attorney at Moses & Singer LLP in New York, said.

Experimenting with blockchain is exploding across industries, finding applications in sectors ranging from finance to healthcare to online gaming. The global blockchain market is estimated to reach $10 billion by 2021, according to data from the International Data Corp.

Obstacles to Removal

Blockchain is a decentralized ledger, which means that it operates across a peer-to-peer network of computers. It lacks a central authority, and generally no one person can comply with a takedown notice.

Uploading bulky files to blockchains, for now, isn’t common due to storage capacity limits, Stephen Middlebrook, a financial technology attorney at Womble Bond Dickinson, said.

Instead, users can embed a link or other digital “pointer” to the file on the blockchain but store it elsewhere, he said. In terms of copyright, some companies are leveraging blockchain so only the digital rights are recorded there—not the actual content, Intel Corp.'s blockchain program office director, Michael J. Reed, told Bloomberg Law.

But eventually, developers will figure out how to overcome storage constraints to upload larger files on the blockchain, Shatan said. Then, a copyright holder who identifies infringing content may try to get the content removed, just as they can now file a takedown notice with an internet service provider.

But that practice may not work on blockchain.

Copyright holders with content on a blockchain may have to send notices to every person on that chain, Jeffery S. Norman, a technology and IP attorney at Kirkland & Ellis LLP, said.

Identifying every one of those participants, who could number in the thousands, would be nearly impossible. Even if a majority are identified, they would then have to agree to remove the content at issue, he said.

The way the technology is built also poses a challenge for those seeking content removal. Removing a piece of content would require rebuilding a blockchain from the point at which the infringing content was inserted, Norman said. Every new transaction adds a block to the ledger in a sequential chain.

“You can’t remove one knot without removing the string of knots,” Norman said. “As blocks grow and the ropes become more knotted together, it’d be almost impossible to do that.”

Control Back to Creators

Some companies see potential in using blockchain to protect rightsholders, despite the envisioned obstacles to content removal.

Kodak and image recognition firm WENN Digital Inc. are developing a blockchain platform called KodakOne that will allow photographers to register, license, and sell digital images. The platform will document proof of ownership and licensing information on an unchangeable record.

Managing digital rights on the blockchain “brings the control back to the creators” and allows them to keep track of how and where their images are being used, WENN Digital Chief Information Officer Volker Brendel told Bloomberg Law.

Sony has filed a patent application for a blockchain-based system that would store and validate users’ digital rights. Intel also has filed an application for a blockchain that would track the use and derivation of digital content. Several startups, including New York-based Dot Blockchain Media, are developing similar uses.

Blockchain may not perfectly square with the DMCA’s notice and takedown system. But experiments in using the technology to record and profit from digital content rights suggest the benefits to rightsholders may outweigh the harm, according to Nash Foster, CEO of cryptocurrency startup Pyrofex and core developer of RChain, a blockchain platform.

“It may not be possible to do takedowns tomorrow any easier than it is today, but it will be easier to monetize your rights,” Foster said.

To contact the reporter on this story: Alexis Kramer in Washington at akramer@bloomberglaw.com

To contact the editor responsible for this story: Roger Yu at ryu@bloomberglaw.com

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