Clifford Chance

For several years now blockchain technology, in particular its major use case: blockchain-based crypto assets (like Bitcoin), is on the rise. Due to its decentralized nature, blockchain offers a verifiable, tamper-proof register to record any information stored in it by its users. In 2019 we talked in-depth about how any type of IP (e.g. patents, utility models, trademarks, know-how etc.) could be subject to a blockchain-application as the object of the transactions can be freely defined dependent on the purpose of the respective use case.¹ Against this background, as part of its "Action Plan IP", the EU intellectual property office ("EUIPO") is actively researching ways to put blockchain into use and has recently launched the world's first official blockchain-based trademark and design register.

I. What's blockchain?

In a nutshell, a blockchain is a special type of data structure (i.e. a database), distributed among its participants (distributed ledgers), in which the data is set out and built up in successive blocks. Through a consensus mechanism, new blocks are validated by a majority of participants, each of them maintaining the most current, true version of the blockchain at any given time.² While blockchain's first (and most famous) use case is Bitcoin, a plethora of projects applying the same or similar principles have popped up over time. Decentralized finance (DeFi) aspires to create a global peer-to-peer alternative to traditional financial services using permissionless blockchain technology³, while the market for non-fungible tokens (NFTs), or crypto assets representing proof of title to a unique digital version of an underlying asset (such as a digital or non-digital work of art) is soaring.⁴

II. First official blockchain-based trademark and design register

The Action Plan IP intends to strengthen and further develop the current EU IP framework in response to new technological and economic challenges in an ever-developing world. Accordingly, the EU Commission has identified five key focus areas with specific proposals for action⁵:

• upgrade the system for IP protection
• incentivise the use and deployment of IP, notably by medium-sized enterprises
• facilitate access to and sharing of intangible assets while guaranteeing a fair return on investment
• ensure better IP enforcement, and
• improve fair play at global level

The Action Plan IP explicitly references blockchain technology as potential remedy "to increase the effectiveness of our IP systems".⁶

As a result, in April 2021 the EU launched the first European IP register on blockchain in collaboration with participating offices. The new blockchain (with its first "genesis block" been created at 08.10 CET on 17 April 2021) automatically stores data related to registered IP rights across various IP offices in a decentralized manner (e.g. without the need of a central data provider/server). The use of blockchain enables an immutable and auditable historic record of IP rights across the register, facilitating lodging of priority claims for users and information requests and exchanges among participating IP offices.⁷

In addition, EUIPO's online platforms TMView and DesignView (gathering more than 62 million trade marks and 17 million designs) are now fully connected to the blockchain and updated in real time.⁸ Malta is the first country which has joined the blockchain network on 1 July 20219⁹ with many offices across Europe expected to join over the next months.

III. Other blockchain use cases promoted by EUIPO

Two further use cases currently taken into consideration by the EU Action Plan IP and EUIPO pertain to the (a) administration of copyrights and (b) the EU's anti-counterfeiting measures.

a. Administration of copyrights

One of the goals of the EU Action Plan IP is to explore blockchain use cases with respect to the administration of copyrights. According to the EU Action Plan IP the use of high quality metadata and new technologies such as blockchain could also help achieve more transparency and better rights data management, notably with regard to copyright and an improved identification of rights owners.

Unlike the US for example, EU law does not have a copyright register in order to prove time and place of the coming into existence (proof of existence) as well as ownership of a copyrighted work. Thus, without a respective register, it is on the claimant to provide such proof, which, depending on the particular case, may be tricky (in particular if several parties were involved in the development work). The copyrighted work's corresponding "digital fingerprint" (hash value) could be stored in the blockchain and be retrieved for verification purposes.

Apart from evidencing existence and ownership, a blockchain-based IP register could open the door to micro-licensing scenarios where licenses could be monetized automatically, e.g., through smart contract applications connected to the blockchain.¹⁰ Accordingly, the EU Action Plan IP points out:

The Commission will further work with relevant stakeholders to promote the quality of copyright data and achieve a well-functioning “copyright infrastructure” (e.g. improve authoritative and updated information on right holders, terms and conditions and licensing opportunities).

b. Anti-Counterfeiting Blockathon Forum

In the fight against counterfeiting, EUIPO has launched the "Anti-Counterfeiting Blockathon Forum" which shall "bring together people and organizations to shape and deliver the future anti-counterfeiting infrastructure based on blockchain".¹¹ The Forum's goal is to build a common blockchain infrastructure where all stakeholders (intermediaries, rights holders and law enforcement agencies) may share data to protect supply chains from infiltration by counterfeit goods.¹²

One concept developed in this context is based, for example, on companies registering each good in a blockchain, i.e. each good or batch of goods becomes a unique token (tokenization). "Rights holders may authorise other parties, such as manufacturing and packaging suppliers, to create and handle tokens on their behalf and record events and information for their goods".¹³ This way the entire journey of any (tokenized) good becomes completely trackable with a higher degree of legal certainty. The platform (which is in development since 2018) shall feed into risk analysis tools of EU enforcement authorities and other EUIPO tools and facilities, such as the European Observatory on Infringements of Intellectual Property Rights.

IV. Conclusion

The launch of the first official blockchain-based trademark and design register is a milestone as it promotes an immutable and auditable record and therefore a higher degree of legal certainty with respect to the priority of a registered IP right and other information contained in the register entry. This concept might also be promising with respect to a potential EU copyright register which is something market participants might welcome. However, while the technology underlying the register might have been updated, it should be noted that the trademark and design register's declaratory nature remains, i.e. register entries might not correctly reflect the actual legal situation (e.g. in case of unrecorded assignments of an IP right to a third party).

With the Anti-Counterfeiting Blockathon Forum, the EUIPO has applied a strategy usually observed in the private sector by attracting technical expertise through respective "coding" competitions (usually called "Hackathon"). If done properly, such development concept is a smart way to explore and finally implement feasible, industry standard solutions. In any event, like the blockchain-based IP register the Anti-Counterfeiting Blockathon Forum reflects, and appears to be in line with, the EU Commission's goals set in the EU Action Plan IP to increase the effectiveness of the EU IP system and promote opportunities for right holders by use of blockchain technology.

¹ See "Blockchain and its application in the field of IP Smart Contracts and IPR management", https:// talkingtech.cliffordchance.com/en/emerging-technologies/blockchain---distributed-ledgertechnology/blockchain-and-its-application-in-the-field-of-ip.html (updated on 5 November 2021)

² "Blockchain What it is and why it's important", https://talkingtech.cliffordchance.com/en/emergingtechnologies/blockchain---distributed-ledger-technology/blockchain---what-it-is-and-why-it-simportant.html

³ "Fintech in 2021 – the five trends to watch", https://talkingtech.cliffordchance.com/en/industries/ fintech/fintech-in-2021---the-five-trends-to-watch.html

⁴ Non-fungible tokens - global impact", https://talkingtech.cliffordchance.com/en/industries/ecommerce/non-fungible_tokensthegloballegalimpact.htm

⁵ 25 November 2020, COM(2020) 760 final

⁶ 25 November 2020, COM(2020) 760 final

⁷ https://euipo.europa.eu/ohimportal/en/news/-/action/view/8662923

⁸ https://euipo.europa.eu/ohimportal/en/news/-/action/view/8662923

⁹ https://euipo.europa.eu/ohimportal/en/web/guest/news/-/action/view/8793606

¹⁰ https://talkingtech.cliffordchance.com/en/emerging-technologies/blockchain---distributed-ledgertechnology/blockchain-and-its-application-in-the-field-of-ip.html

¹¹ https://euipo.europa.eu/ohimportal/de/news/-/action/view/4963920

¹² https://euipo.europa.eu/ohimportal/en/web/observatory/blockathon/acbi

¹³ https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/documents/ Blockathon/Blockathon-Forum_Blockchain-Use-Case.pdf