Patentability and copyrightability of blockchain assets in India

INTRODUCTION

Blockchain, Cryptocurrencies, and NFTs will get surrounded in our life in the potential future. The scope of blockchain is increasing day by day. The use of blockchain started with the Finance–Tech industry, i.e., cryptocurrencies. Its use has expanded to include the healthcare industry, real estate, governance, e-commerce and more. With its commercial use, several legal issues have started to come up. These issues include the patentability and copyrightability of blockchain.

Here, two questions arise- what is blockchain and what does patentability and copyrightability entail. Blockchain is a type of distributed ledger technology. At any moment, blockchain keeps a secure and transparent account of all transactions from the beginning to the end in the form of blocks. This article aims to highlight the patentability and copyrightability of blockchain in India and discuss the potential solutions.

BLOCKCHAIN PATENT IN INDIA

Seeing the potential of blockchain technology, various companies have started to file their patent applications. Thereby raising issues of intellectual property rights in each jurisdiction. A patent is a kind of Intellectual Property Right. In India, patent applications must pass three essential criteria- novelty, non-obviousness and industrial application.

Blockchain patents aim to protect a combination of application software and encryption. Therefore, they are linked to software patents. Section 3(k) of the Patent Act 1970 states that “mathematical or business method or a computer programme per se or algorithms are excluded from patentability.” In recent developments, computer programmes have been granted an exclusion from this provision and can be considered a patent if they have a technical effect.

Therefore, two main issues relating to blockchain patents are-

1. Will invention be considered patentable subject matter under Section 3(k) of the Indian Patent Act?

2. How to decide whether blockchain technology developed is novel and non-obvious?

• Issue 1- u/s 3(k) of Indian Patent Act

In “Ericsson v. Intex Technologies, the Delhi High court interpreted the term per se. It stated, “any invention which has a technical contribution or has a technical effect and is not merely a computer program per se” is patentable. This was also upheld in Ferid Allani vs UoI, wherein it was held that “If the invention demonstrates a ‘technical effect’ or a ‘technical contribution’, it is patentable even if it is a computer program. The Court relied on the Computer Related Inventions Guidelines 2013 to define technical effect”. Therefore, for blockchain technology to be considered for a patent application, it must demonstrate a specialised product or technical contribution.

• Issue 2- Novelty and Non-obvious

There are three main essentials for a patent application- novelty, non-obviousness and industrial application. In the introduction, blockchain has vast applications in different industries. The main issues lie with originality and non-obviousness. It is noted that blockchain technology has limited novel features because innovators are merely using existing technology for making transactions. Concerning non-obvious nature, it’s essential to figure out whether a person who is usually skilled in the art can apply the same technique to blockchain technology.

On top of that, few people understand how this technology works. To overcome this, government employees technologically advanced specialists must determine whether the application is novel and has an inventive step. It is essential as granting a patent to a technology that is not novel and is vital would give a monopoly to a company and further reduce the growth of technology.

THE INTERSECTION OF COPYRIGHT AND BLOCKCHAIN

You might be hearing the word NFT accompanied by the news, such as The girl in this viral meme selling her iconic image as an NFT for $1,000,000. So, you might be thinking, what is an NFT and what does the selling of NFT means?

NFT stands for a non-fungible token, a digital token representing art, films, video and other media and is recorded on a blockchain and kept as a link. They are purchased and traded over the internet using cryptocurrency, primarily Ethereum. Artists monetise their digital art, audio, and other digital assets by selling them to anybody in the world using NFTs. NFT has also raised important questions in Intellectual Property Rights- Does selling of NFT confers IP Rights to the buyer? What are the implications of selling NFT by infringing the IP rights of the creator? What are the remedies in case of infringement?

NFT is a form of expression. Therefore it embodies the copyright of the creator in it. “Many people think that owning NFT is the same as owning the copyright to work. However, it is not the case. Copyright always remains with the creator, and only ownership is transferred to the buyer. It is the same as owning a physical copy of an artist’s painting. Here, the artist who painted the picture would be the holder of copyrights in it, and he will be entitled to make duplicates and create other derivatives of it”.

Given how frequently things are copied and distributed online, NFT can be copied and circulated indefinitely. As a result, there’s a reasonable risk that NFT’s copyright will be violated. The Copyright Act of 1957 protects and registers the author’s creative works in India. Copyright can be obtained for original literary, musical, dramatic, and artistic works that last sixty years after the author’s death. “Section 51 of the Act specifies the circumstances under which a copyrighted work is considered infringing. Interlocutory injunctions and damages are available as remedies for infringement. Infringers will face up to three years in jail and a fine of two lakhs if they violate the copyright”.

These remedies are ineffective when persons make money by selling NFTs under false identities. There are currently no stringent laws to prevent copyright infringement in the case of NFTs. It is essential to enact legislation that will aid in assessing the legitimacy of the underlying asset.

CONCLUSION

Blockchain has gained prominence worldwide with its varied industrial and innovative applications. Legal solutions related to IPR, such as patent and copyright, play a vital role in determining its future. Blockchain and NFT trading present several IP issues, and it is required to develop worldwide norms based on pre-existing IP laws and treaties to prevent a breach. This will eventually defend the creator’s moral and commercial rights.

In addition, blockchain technology would help in the protection of intellectual property. The content owner will register how they want their material to be utilised and disseminated on the database. The decentralised ledger will ensure that the content is delivered in a regulated way. There will be no confusion about where the content came from, who contributed it, who used it, and how it was used, as well as the constraints that came with it, putting a stop to conflicts. Content artists, like authors, might use blockchain’s decentralised, peer-to-peer structure to directly distribute their work to customers, circumventing existing distribution methods and retaining a more significant part of earnings. This might influence everyone from huge media companies to small blogs, allowing artists to connect directly with their audiences.

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