From being a disruptor of the financial system to an alleged Ponzi scheme, cryptocurrency is certainly a financial system that has ignited a plethora of interest across the globe. Behind the glitz and glamour, it would be interesting to take a look behind the curtain and peek into the intellectual property (IP) that is imbedded in its blockchain technology.

What is Blockchain?

Blockchain is defined as a system of data base that is verified by numerous ledgers. These ledgers are encrypted and data therein is verified by numerous participants to the network. This is where the role of a miner comes in. Miners are those with powerful computers equipped with the necessary software to verify data and add ledgers to the blockchain. As a reward to the miners, they are awarded cryptocurrencies.

The advantage of blockchain lies in there being no intermediary, hence reducing cost. It is also said that data recorded is immutable. However, some may argue that blockchain is still susceptible to hackers and technical errors. The application of blockchain technology appears to be endless as not only is it used for data encryption software but possibly also smart contracts.

Where does intellectual property come in in all this?

We have heard of the mad rush to file for patent protection for blockchain technology. But unlike patent laws in the other side of the world, Malaysia does not clearly provide for patent protection in relation to computer software or source codes. While the law on patents remains unclear, we do note that there has been at least one utility innovation application relating to blockchain based on a search done on the online database of the Intellectual Property Corporation of Malaysia (MyIPO) as well as a trade mark application for the mark “BITCOIN”.

Traditionally, the route for software protection is by way of copyright protection. In Malaysia, as is the case for most common law countries, copyright subsists automatically. This is in contrast to patents and trade marks which require the filing of the relevant applications with the MyIPO. Some would however argue that copyright protection is insufficient since it merely protects the expression of an idea as opposed to the ideas itself. In contrast, a patent grant protects the invention itself. Since it is possible for a blockchain application to be written with different source codes and yet achieve the same outcome, copyright protection for blockchains would clearly be inadequate.

Furthermore, it can be argued that IP protection which confers monolopy protection is antithesis to the underlying principle for blockchain technology which is premised on communal contribution, particularly in relation to public blockchains which are based on open source software. Determining the ownership for such data may be a challenge given that the creation of a public blockchain requires great collaborative effort involving many people.

Does this mean that rights existing in the blockchain database are free for all? This would depend on the extent of skill and effort expended for the work. It would also be interesting to see if this is indeed the case or if the rights subsist in the various miners who are essentially authors of the blockchain, as they play a vital role in keeping the blockchain system running by adding ledgers to it. It appears that the answer to the question posed would depend on the facts of each case and the terms of the platform, although it would seem unlikely that such rights would subsist in the miners. Such would result in disruption within the blockchain ecosystem as each miner would then claim rights to the particular ledger that they have added.

Will there come a time when blockchain technology would be recognised as a form of open database that can be shared to all and sundry? Only time will tell.

Before we reach that stage, recognition of IP for blockchain technology remains uncertain. However, it is undeniable that blockchain technology is gaining immense popularity, especially in the financial sector. Financial institutions appear to be especially eager to tap into this technology in the form of private blockchains in order to save operational costs and time in processing transactions.

In the meantime, as an added measure of protection, entities seeking to create its own blockchain application should take steps to protect its technology (i.e. the source code or software) by handling the information and technology as confidential information. Employees or third parties commissioned to create or test the blockchain application on behalf of a company should be made to sign a non-disclosure agreement.