Smart Contracts and the Intellectual Property Rights Regime

MSC Intellectual Property and Technology Law|Originally published on canaanbridgesconsulting.com| by Marsha S. Cadogan.

Blockchain technologies are one of the most disruptive technologies of all time. Smart contracts are a major component of many innovative activities performed on blockchain platforms. They are automated processes that perform specific tasks within the blockchain if certain terms and conditions are met. They are alternatives to conventional contracts, and are intended to replace the need for legal representatives where they were usually called upon to draft, complete or negotiate a contract over transactions between parties.

There are strong alignments and disconnects between smart contracts and intellectual property rights. In 2020 and onward, the challenge will be to find a middle-ground where the quest to provide platforms to consumers that disrupt traditional intermediaries, keep apace of the varied interest of users and the integrity of domestic and international legal frameworks.

A few plus points of smart contracts use in the intellectual property fora include:

  • A less costly and time-consuming way of doing business (in the short term)
  • May offer solutions to dispute resolution which resolve issues in more efficient ways than the Courts system.
  • Builds on the inventiveness of entrepreneurs (as reflected by blockchain patent filings and registrations), and may be a useful indicator of innovation in domestic and global economies.
  • Helpful in infringement claims as a means of verifying when specific transactions took place on the blockchain (for example, the registration or recording of a trademark or copyright interest).

In terms of disconnects between smart contracts and the intellectual property system, the following are the more crucial (going forward):

  • How beneficial the term of the smart contract is to the user (this is more consequential for the less knowledgeable user)
  • Should dispute(s) arise, the type of forum options available to the parties. For example, could WIPO Mediation and Arbitration services be contemplated and used by the parties?
  • Will the conclusion of the smart contract really lead to the conclusion of the whole matter? For example, will transfers in copyright interest on a blockchain be valid in all jurisdictions? What if the copyright interest is jointly held, but the information is not disclosed on the blockchain, and only one party consents to the transfer? Should such a transfer operate on rules outside what is legally permissible in jurisdictions pertaining to the transfer (whether by license or assignment) of interest in copyright?
  • The necessary infrastructural framework needed to operate smart contracts within blockchain technologies may not be available in all regions across the globe. This impacts its usability, especially in least developed and developing countries.

Smart contracts may add value to IP-related transactions on blockchains. However, the technology is not without its challenges. Connections between the two systems should be strategically approached and developed.


This post is for general information and is not meant to be legal advise. For advise on smart contracts contact marsha@marshacadoganip.com

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