USE OF BLOCKCHAIN IN MANAGING INTELLECTUAL PROPERTY RIGHTS

Introduction

The last two decades have seen a tremendous surge in the development and uptake of digital goods for instance securities, currency, media, and games.¹ New technologies have also emerged including the Distributed Ledgers Technology (DLT) often, mistakenly, referred to as Blockchain. Distributed Ledgers use independent computers known as nodes which record and synchronize information in their respective electronic ledgers as opposed to centrally processing and controlling information.² Blockchain, on the other hand refers to the organization of data into blocks that are chained together³ and is a type of DLT.

One of the recommendations⁴ of the taskforce on The DLT and Artificial Intelligence (AI), that was formed and commissioned to investigate the possible applications of the technology,⁵ was its use in the elimination of corruption. Through the establishment of immutable records, and smart contracts that are self-executing, the decentralized records would help curb corruption because an individual would not make changes on any given register without the permission from others in the chain.

Possible application to end corruption

The collection and distribution of royalties in Kenya has since time immemorial been bedevilled as corrupt as there is no transparency between the Collective Management Organizations (CMOs), users of copyright works, as well as the copyright holders. The situation gets more complicated when other content aggregators enter the scene and, through unclear contract terms, reap large chunks of money from copyright holders.⁶ The bedrock of the problem is in lack of transparency between the different players engaged in the collective administration of copyright.

There are several complaints registered at the Kenya Copyright Board offices where artistes have executed contracts with content aggregators for the use of their music, but they do not receive royalties as expected.⁷ The first anomaly with this arrangement is the fact that the artists, in most cases, do not retain a copy of the contract. It then becomes almost impossible to get a copy of the same from the content aggregator as the common explanation is usually that the contract cannot be traced. The artist then receives statements from the Collective Management Organizations (CMOs) detailing how the songs (copyright works) grossed over a given financial period. The statement is usually riddled with lots of deductions mostly withholding tax and CMO costs, as well as administration costs. On further investigation from the CMOs, the explanation given is that there exists a business model under which a large percentage of the royalties goes directly to one of the middlemen. The net payment that finally ends up in the artist’s account is a far cry from the gross earnings from the song.

The artists have a part to play to minimize the execution of contracts without proper due diligence or legal advice, and to retain a copy of the contract which makes it possible to ascertain the terms under which the contract was executed. That notwithstanding, it should be possible to minimize the loss of royalties to middlemen if a proper accounting system was put in place.

The Kenya Copyright Board (KECOBO) has responded to this outcry by putting in place several policies, tools, and guidelines. One of the tools that have been employed is the National Rights Registry (NRR)⁸, an online portal for the registration of copyright. The portal has three other CMO functions namely, the media monitoring tool, the licensing tool, and the distribution tool.⁹ However, the limitation of this portal is that only the works submitted for registration enjoy the privilege of the three CMO functions. Since copyright registration is not mandatory, it follows that some copyright works will not be subjected to the system. The other shortcoming of the system is that the media monitoring tool does not involve the copyright holder. Therefore, much as the logs are captured in the system, the copyright holder is in the dark and does not get real time information on this.

The solution would be to employ a system that involves the artist, to enable him or her to know when his/her music is used and how much it earns at that time. It therefore follows that blockchain or any other suitable DLT would be the most appropriate mode of getting everyone involved to participate at all levels.

Use of blockchain in royalty management.

The usefulness of blockchain starts with the creation of an immutable record of ownership.¹⁰ Blockchain provides tamper-proof evidence of ownership as it is impossible to change the ownership details of a given registered work without changing all the other hash values in the chain.¹¹ The National Rights Registry does not have this function and it is currently possible to register the same copyright work more than once. It then becomes the responsibility of the original copyright holder to inform KECOBO of duplication in the register for the same to be resolved. The portal is a work in progress and will be improved over time, but this is a current challenge.

The other usefulness of blockchain in royalty management is the smart contracts function.¹² The challenge of the copyright holder not knowing when and who uses a copyright work can easily be solved by smart contracts which allow a user to use the copyright works upon fulfilling certain conditions for instance paying the requisite license fee. In this way, the copyright holder is aware of how his/her works are utilized at any given time. In some jurisdictions, this is already in use as copyright holders receive instant payments every time their licensed work is used¹³. An example of such is Imogen Heap from Britain.¹⁴ Fans can buy her music via Ether¹⁵, and the money goes directly to the musician, producer, and all parties involved. There are no middlemen for instance CMOs, or content aggregators involved. Although we have not identified any African examples of artists who have employed blockchain in the management of their copyright, it is only a matter of time before that happens. This can be seen by the uptake of the technology in various sectors across Africa.¹⁶

Challenges associated with blockchain

Some of the reasons why blockchain is yet to experience widespread application in Africa is that it is not an offline function. Internet access is a requirement. In Africa, the level of internet penetration is at a paltry 35.2%.¹⁷ This means that about 885 million Africans do not have internet access.¹⁸ The situation in Kenya is however not as dire, with 85% of Kenyans reported as having access to the internet.¹⁹ This is not to say that Kenya’s policy makers should rest on their laurels, there is still much to do to cover the 15%. A population that does not have internet access cannot benefit from the advantages that come with the technology. For instance, an artist based in the remote rural areas may not be able to know when a smart contract concerning the use of his/her music is executed.

The other major challenge is the ignorance and lack of proper information concerning the technology. In fact, most people who have a rough idea about blockchain simply associate it with bitcoin. This ignorance, coupled with lack of interoperability between different sectors and industries has made the uptake of the technology in the management of copyright slow. The administration of copyright involves several sectors for instance, the broadcasting sector, the transport sector, tourism sector and several Small and Medium Enterprises (SMEs) that use copyright works. Getting all of them in one blockchain transaction for an artist to collect all royalties is not easy.

Conclusion

The taskforce on the Distributed Ledgers Technology and Artificial Intelligence²⁰ did not make any direct recommendation of the employment of the technology in management of copyright or Intellectual Property (IP) in general. This is unfortunate considering the value attached to IP and other intangible assets. The failure to include the use of DLT in the management of IP speaks to the perception most policy makers have of IP. Most of the recommendations were on tangible assets for instance land and housing, yet Kenya has lots of intangible assets which can be protected under various IP Regimes for instance patents, copyright, utility models, trademarks, traditional knowledge and traditional cultural expressions. Due to its rich cultural heritage, Kenya boasts of a wide variety of cultural goods which are often misappropriated by foreigners. Its varied climatic conditions also give it a wide variety of plant, animal and inanimate goods for instance soapstone which can be marketed abroad as Kenyan.

It is laudable that the Kenya Copyright Board has set up the national rights registry, NRR. However, other IPR are not documented in such a format. They are still subjected to the traditional searches which are tedious and cumbersome. There has been some effort from some county governments to document their traditional knowledge and cultural expressions, but this does not guard against misappropriation. It is also unfortunate that there does not exist any Geographical Indications law in Kenya.

The recommendation to curb the likely loss of valuable intangible assets as enumerated in the foregoing paragraphs is to have a policy of proper management of all IP rights which includes the use of a trusted tool for instance blockchain. Kenya’s technology ecosystem is often referred to as a silicon savanna²¹ due to the ingenuity of Kenyans in the technology space. Kenya can also enter the annals of history by being the first to manage IP using blockchain. The challenges associated with blockchain are surmountable as all that is required is investment in internet penetration and the demystification of the technology through training and education. The investment in regulatory sandboxes would also help in identifying the strong and weak points of the technology before rolling it out.

 Image by Tumisu from Pixabay