Intro: You’re listening to Strictly Legal Osgoode Professional Development Podcast about all things legal. Each episode, we unpack current issues affecting the legal landscape with the help of some of the industry’s leading thinkers. This week who owns the Blockchain? Can this revolutionary technology transform my keylog? And now your host Amy ter Haar.
Amy ter Haar: This morning I’m very excited to welcome Paul Horbal, who is with me in our Toronto studio today. Welcome, Paul.
Paul Horbal: Thank you, Amy glad to be here.
Amy ter Haar: For a few announcements before we get into our topic today. Blockchains, smart contracts and the law is being presented by Osgoode Professional Development on November the 15th. This is a really important event in the blockchain calendar. It is a one day program where 17 top legal, tech and financial industry experts from the U.S. and Canada will discuss the biggest legal issues facing the blockchain with an unparalleled speaker roster, blockchain, smart contracts and the law delivers an exemplary experience highlighting the boldest and best of the industry. Our second announcement is also very exciting. Bearskin in Paris, FinTech Group is planning an intellectual property seminar focusing on fintech this fall. Paul, I think, yes, that’s right. And details will be announced shortly. But you can follow Paul on Twitter. His handle is at H O R B A L that at or Horbal or you can check out Bereskin & Parr Twitter or their Web site, their Twitter handle at B.E r e s k i n p a double R. You can check those out to find out more. So, Paul is an associate at Bereskin & Parr, where his practice focuses on pac-10 industrial design and tech law with an emphasis on securing and leveraging intellectual property rights for high technology clients. He advises clients of various sizes, but particularly enjoys working with startups and high-tech entrepreneurs. In addition to his work preparing and prosecuting patents, Paul advises clients regarding their intellectual property licensing needs. He speaks and writes regularly regarding intellectual property and is an active tweeter again. Check him out at Hobal. Thank you for being on the show today, Paul. Thanks, Amy. We’re in the middle of blockchain mania in the midst of this craze for bitcoin and Ethereum on the power of the blockchain tech behind these currencies is real. Last January, the Bitcoin trading price broke $1000 for the first time in three years. And today, already it’s nearly $5000. So heated fights over intellectual property are nothing new and promising technology markets. Are we poised for a revolution in the protection of all types of IP?
Paul Horbal: I think we’re going to see some some interesting applications of blockchain in protecting different types of intellectual property. Blockchain obviously can serve as a database of sorts. And I think you’re going to find applications of a blockchain in it as applied to different types of IP. So, for copyright, for example, we’re already seeing as we’ll be talking about a little bit later on in the show. We’re already seeing applications of blockchain technology for registering copyright and maintaining ownership databases. And I think we’ll see some of that applied to other types of IP. And there will definitely be battles over IP in the blockchain. And I think we’ll see some of that in the near future as well.
Amy ter Haar: Exciting, exciting times ahead for your practice. Since blockchain is another creation of the mind constitutes intellectual property and invention stemming from blockchain, which may also, I guess, constitute intellectual property. Since we’re lawyers let’s first try to understand a few definitions. As Lawyers usually do. That’s where we start. So, Paul, maybe you can give us two definitions. First, what is intellectual property for those of our listeners who don’t know? And secondly, what is the blockchain?
Paul Horbal: Sure. So intellectual property and I’ll borrow a definition here from the World Intellectual Property Organization. Intellectual property refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names and images used in commerce. And IP is protected in law by patents, copyright trademarks and industrial designs, which lets people earn recognition or financial benefit from what they’ve invented or created. And intellectual property law is generally trying to strike a balance between the interests of the innovators or creators and the wider public interest. And so there is a sort of quid pro quo that’s available. You want to give inventors and creators the benefit of their invention and some exclusivity, but you want the public to benefit from those inventions and creations as well. And so there is a balancing act that takes place.
Amy ter Haar: That was a great answer for IP. Secondly, what is a good definition of the blockchain?
Paul Horbal: So the blockchain is a technology that’s perhaps best described as a distributed ledger system. It allows many parties to keep their own record of the transactions that take place over time and in a way that is mutually agreed upon and difficult, almost impossible to change after the fact. And it uses techniques that have been available for quite some time. There are some things like public key cryptography, hash functions and merkle trees to make this happen. And that’s a way of saying that you’re using special math to do two things. Number one, keep secrets. And number two, do that in a way that you can easily verify that information is not tampered with. Merkle trees were patented in 1979. Yeah, they were. And you know, there are a lot of things in blockchain or in the in Bitcoin at least that were available well before Bitcoin came out. Bitcoin kind of combined a number of technologies and algorithms in a clever way that allows you to do transactions in an easily verifiable way without allowing tampering after the fact. And one of those things that enables that to happen is the concept of the Merkle tree also called a hash tree. And it’s a way to sort of compress the blockchain over time. So rather than storing all of the information about all the transactions that are taking place, you sort of make a mathematical representation that’s much shorter and very hard to fake. And you build up a tree of those over time so that each as as a tree branch gets full use sort of permanent and replace it with this little hash and then you build up those trees of hashes over time. And that’s how the blockchain stays usable without having to carry around all the all the information where every transaction that’s happened since the dawn of the blockchain.
Amy ter Haar: Wow. I’m really fascinated about them. The Merkle. Yeah. Being patented so long ago.
Paul Horbal: Yeah. There’s a there’s probably other parts of it that were also patented. Public key cryptography is one. There are parts of that that were patented in the 70s. Yeah. It’s existed before.
Amy ter Haar: What we’re they using public key cryptography in the 70s.
Paul Horbal: Well for espionage for for keeping secrets. Public key cryptography is it’s a technology has many applications. It started out being used mainly for the military. It’s a way of exchanging secrets with an untrusted channel. So you can have people hear what you’re communicating back and forth and still guarantee that what the information exchange with another party is going to be secret. Even though some everyone, the people in between can hear everything that you’re exchanging, and you can still keep a secret and public key cryptography lets you do that. He uses some really fancy math to do it. And this technology’s been around for 30 or 40 years at least. And it finds many applications. You use it when you go to a Website and you see a little lock icon. The H.T T.P.S. is being protected with public key cryptography. And it’s found in many areas today.
Amy ter Haar: I think to see original cypherpunks really rely on established body of research.
Paul Horbal: Yeah. In this this. I like to say technology is oftentimes and most of the time incremental. So you’re building on what already exists and public key cryptography is a major, major building block of the internet today.
Amy ter Haar: And you have an engineering background.
Paul Horbal: Than I do. Yeah. Electrical engineering background. I studied microelectronics, so making microchips when I was a student and then I went off into law school and became a patent lawyer. It’s such a great application. I didn’t want to lose the engineering side of things. And I always say that I used one of the things I really loved about engineering was learning new things all the time. And this is a great combination where I can apply my engineering knowledge and still learn new things every week or every couple of weeks. I have really smart, brilliant clients that come to us with great ideas and they teach me all about them. So perpetually learning.
Amy ter Haar: That’s amazing. So, I mean, blockchain really implicates, I guess, a host of IP related laws and legal constructs, as you mentioned from licensing to distribution to the doctrine of for sale in the states, we’ve got the Digital Millennium Copyright Act and also here in Canada, the Copyright Modernization Act. Will the blockchain influence the development of IP law as dramatically as the Internet did? Yes, I guess that’s my first question. And then secondly, how do you see blockchain impacting IP intensive industries?
Paul Horbal: So I think the impact of blockchain technology on IP law will. It will happen. But I think initially to be modest for one main main reason is that IP rights exist because governments say they exist. Governments provide the means with which to enforce rights. And without those enforcement means; I don’t think you’ll find blockchain replacing IP laws anytime soon. There’ll be more of a complement that, you know, it sort of runs against the nature of the blockchain industry today, which says that you can have distributed decentralized systems, replace old centralized authorities, and you see that in Bitcoin, which does away or promises to do away with central banks, with credit card credit card providers and other financial institutions. But Bitcoin works without a central authority for two reasons. It guarantees an artificially scarce resource and it takes an enforcement mechanism. Bitcoin’s can’t be copied to make more, and you can only acquire or get rid of bitcoin if everyone agrees to what’s happened. So for Bob to acquire one bitcoin, Alice has to update the ledger to reduce her bitcoin balance and increase Bob’s by the same amount. And everyone has to agree that that’s what happened. There’s no easy way for Bob to behave badly. But IP rates are different. The resource isn’t created by computers according to an algorithm like Bitcoin. It’s created by people through creativity. More importantly, intellectual property inherently can be copied because at some point has to be seen or heard by a person to serve its purpose. And since intellectual property can be copied, it’s difficult to protect using blockchain technology in the same way that you can protect your bitcoin.
Amy ter Haar: Right. So, I guess we’re seeing the emergence of blockchain based solutions for intellectual property management, I guess, which is really one of the most obvious applications of blockchain technology. A registry of IP rights to catalog and store original works. And since the blockchain is immutable. Once the work has been registered to a blockchain, that information can’t really be lost or changed. So in theory, third parties could use the blockchain to see the complete chain of ownership of a work I guess, including any licenses, sub-licenses and assignments. And then and then we can imagine start to imagine a world where you could easily register and claim ownership over your original creative works from music to photos to blogs. So gone would be the days of seeing your work duplicated all over the internet without proper credit and having no way to prove ownership with the use of blockchain tech. I guess I mean, theoretically, that world is not so far away. Do you think distributed ledger technology promises to transfer form the way intellectual property rights are established and enforced and the way IP creators are compensated?
Paul Horbal: I think the way they’re established and the way they’re recorded is definitely something that could change with the advent of blockchain technology. Right now, IP databases are maintained just like financial records were maintained, their maintained by one big institution. And in this case, the government the government keeps a database of who owns patents and who owns trademarks and who they’re license to. And the same thing with copyright. You can register your copyright ownership with the government, and they keep it all one big database. It’s available online. But the mechanisms for getting that information in there and getting out of there are firmly rooted in past decades. So maybe that’s something that governments can explore going forward as a way to modernize or to improve the way that this information gets recorded and shared and stored to take advantage of some of the blockchain technology that that allows this. This updating this record to be maintained in a robust and verifiable way.
Amy ter Haar: But do you think that distributed ledger tech promises to transform or transform the way intellectual property rights are established in and forth? OK. So are the way IP creators are compensated?
Paul Horbal: Yeah. So the way they’re established or enforced and the way their IP creators are are are giving credit or compensated. I think I think blockchain is an interesting concept and it definitely has the potential to disrupt more traditional models in the music industry. But I don’t think that’s necessarily because of the blockchain. And it’s going back to my earlier point. I don’t think the blockchain really solves the enforcement problem. With IP rights, A lets you record who owns technology and something. There is technology such as smart contracts which are coming along which can provide some sort of compensatory mechanism. But the proposals I’ve seen so far only get you so far. They can record. They can offer a way for artists to get paid, but they don’t give you a solution for enforcing rights when someone doesn’t want to play along. And so what do you do if someone isn’t willing to behave with existing IP systems? You have institutions provided by the government to allow for enforcement. You have noticed regimes like the DMCA in the US and the notice and notice system in Canada. You have the courts, of course, and in some cases you even have the police that will help enforce your rights. Those are all ways to compel good behavior, sometimes by punishing bad behavior. And I don’t think a blockchain based approach can replace the role of government anytime soon because it doesn’t solve the enforcement problem, at least not that I’ve seen. So in that sense, I think we can view these applications of blockchain in intellectual property space as complementary solutions. They won’t replace the existing legal framework and they don’t offer a complete solution, especially when it comes to enforcement. But at the end of the day, they can coexist. You can have a blockchain give you most of the things that are a blockchain is really good. And then you can still fall back on the legal system for the enforcement mechanisms when you have two or hopefully you don’t have to. But if you do, it’s there.
Amy ter Haar: I think Imogen Heap is a great example. She’s for those listeners who don’t know that Grammy Award winning music artist. And she’s really been, I guess, leading the charge when it comes to compensating artists. So she use distributes and receives her digital payments through a blockchain platform. And the system allows her and artists like her to have control over access to the works and to ensure faster direct payments to the artists themselves. And really, I guess it could impact the role of i-Tunes or other intermediaries that insert themselves between the artists and consumer. So by putting IP on the blockchain, in that sense, creators can have an immutable, secure timestamped record of the creation and distribution of their works. The blockchain can be used to establish and enforce licenses for IP through smart contracts and even to transmit payments in real time to IP owners. So, I mean, how do you think the distributed ledger technology promises to transform how artists are compensated in that way and how they distribute their IP on the blockchain?
Paul Horbal: I think I think it’s a perfect example of the strengths of blockchain technology with what they’re doing here essentially is replacing or maybe building on digital rights management technologies, which have been around for 20 years now. And blockchain is really good at establishing who owns something. And then with smart contracts, providing a payment mechanism. And so if I was i-Tunes or Spotify or or Netflix, for example, I might be a little bit nervous with this technology because it it might do away with a middleman that that provides that payment and digital rights management solution. And if you can use the blockchain to do this in smart contracts and find some way to get paid, each time someone plays the music or download some songs, then that’s that’s a great application of blockchain technology. But going back to my earlier point, I think it still doesn’t provide you with an enforcement mechanism. If someone decides not to play along. So if someone copies a song from Imogen Heap and finds a way to start playing it without paying the micropayments or without honoring the smart contracts, then there’s still there’s nothing that can be done at that point using the blockchain other than to prove that Imogen Heap is the owner and that you shouldn’t be playing it. But if there’s no way to stop that person other than going through the enforcement mechanism mechanisms that have that have been established by governments and that provide legal recourse.
Amy ter Haar: All right. So what is the state of blockchain IP in Canada at least?
Paul Horbal: There’s a lot of activity. I did a little bit of research a couple of months ago and found that since about 2012, the number of patent applications that have been filed that Meng mentioned the words blockchain or distributed ledger, they’ve been on the rise steadily. And there are now dozens, if not hundreds of patent applications that have been filed that at least mention the word blockchain. And many of them are directed to applications of blockchain technology. So the technology itself is it was published in the last decade and it built on technology that’s been around for a long time. There’s some. The blockchain uses called Merkle Trees, which is a computer science term that was patented. I believe in 1979 and the patent has long since expired. So it’s free. It’s free to free to use for the world. And so some of the blockchain technology is is out there. It’s free to the public to use. And so what you’re going to see with patents in the blockchain space is not a patent over. Not a patent over all of blockchain, but patents on implementations or applications of the blockchain technology to different problems. And one is, for example, digital music distribution. There might be others. Another good example is bitcoin. Cryptocurrency is a great application of the technology to a particular problem, which is currency or on the online space. And there are many other applications of blockchain technology, one that we’re seeing a lot of activity in right now. As I’m sure you know, Amy, is identity. Digital identity, which is a major problem. We saw the Equifax hack and which wasn’t last week. It was months and months ago. And, you know, as consumers, as citizens, we have no way to opt out of that system, really. And blockchain technology might promise or does promise to give people control over their online identity. And I think there’s going to be a lot of there’s a lot of activity in that space and where there’s a lot of activity and it’s industrially valuable, commercially valuable, then you can expect patenting to follow. And so that’s that’s an area where I’m excited personally as a patent lawyer. And I think there’s also I mean; the trademarks are used when it comes to business. They’re a way of identifying a brand or a business identity. And so just like any other area of business, you’re going to see activity when you have companies and individuals developing products and they get a brand, a reputation that they want to protect. And that’s where trademarks will come in. So I don’t think that’s any different than any other area of business. But the patent side of things will be interesting for sure. Do you think there’s a looming patent war? I don’t I don’t know. I don’t have a crystal ball. If I did, I’d probably be out chasing somebody’s car and trying to find out if if they’re interested in hiring Bereskin Parr. But I think, you know, where there’s commercially valuable activity, where there’s a lot of money on the line and there’s high technology in use. It’s not unusual for there to be patent disputes that develop. You saw that in the smartphone space with an Apple going after Samsung and Nokia going after Apple and many, many different companies suing each other with large companies they will often come to an arrangement because they all have patents there is a sort of mutually assured destruction if you continue through the courts. But you never know. I don’t think we’ll get through the next 10 years without seeing any patent lawsuits regarding blockchain. That’s probably my most ambitious prediction. My prime at least ambitious prediction.
Amy ter Haar: That seems like it’s safe one to bank on. So, I mean, really, it’s clear the implications of blockchain tech are robust and diverse in many areas and especially in IP. Whether you’re a tech company or a professional service provider, I think it’s really important to do your homework and understand blockchain, how blockchain tech might secure or affect your business. What would you what do you tell your clients about blockchain and IP?
Paul Horbal: Yeah, I don’t think we’re telling clients anything about blockchain that they don’t already know. Maybe that’s the best way to put it. Our clients are telling us what they’re doing with blockchain. Right?
Amy ter Haar: Thank you so much for being on the on the show today, Paul. This has been most enlightening. I’ve really learned a lot and I had no idea that Merkle trees were patterned 1979. So this is this is really, really cool to know. So hopefully we’ll see you at our program on smart contracts, blockchains and the law on November the 15th. That one, Dundas Street Street West here in Toronto. Register soon if you’re interested, because space is running out. You can register it at osgoodepd.ca/blockchainlaw. Thanks so much, Paul, look forward to seeing you then.
Paul Horbal: Thanks Amy. My pleasure.
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