Today we are pleased to present a guest contribution by Alessandro Rebucci, of the Johns Hopkins Carey Business School. This post is based on “Blockchain Technology and Government Applications: A Proposal for a Global Patent Office” (with E. Di Nicola Carena and P. La Mura), in A. Fatás (editor), The Economics of Fintech and Digital Currencies, CEPR ebook, Fintech and Digital Currencies Policy and Research Network, CEPR March 2019.
There is broad support among economists and policy makers for the notion that a certain degree of protection of property rights with patents and trade-marks provide incentives to innovations and fosters growth. The existing system of national patent offices, however, imposes lengthy and costly processes. Moreover, as the ongoing dispute between the US and China vividly illustrates, they fall well short of protecting property rights effectively in the context of international trade in goods, services, and assets.
Blockchain technology is particularly well suited to decentralize certification processes and could be applied to the design and development of a Global Patent Office (GPOX) under the auspices of Trade-Related Aspects of Intellectual Property Rights agreement of the World Trade Organization.
Blockchain has the potential to be applicable wherever ledger-based record keeping has a role to play. Examples include medical record-keeping, land and property registry, financial contracting, accounting standards and certification, and so on.
The idea to use blockchain to decentralise the functions of a patent office is not too far-fetched. Bitcoin is already used by private companies in the patenting field to store the hash value of documents related to inventions, or to timestamp the creation of a document, taking advantage of the sequence of characters that can be inserted when marking a transaction output as invalid. And these hash values can be admitted, like any other piece of evidence, in national enforcement proceedings. However, blockchain usage for this purpose can be pushed much further to fully manage the submission, editing, review, and storage of content subject to intellectual property right protection.
To achieve this, there is need to develop an open, community-based protocol to encrypt and store patents, trademarks, software, documents, graphical objects, and 3-D printed prototypes. The blockchain can contain either the actual content or the hash value in order to universally timestamp the content itself. More specifically, the registered invention is broadcasted to the GPOX network. The GPOX research community validates with the current criteria of originality, applicability, and replicability. Validation contributions will carry a reward in either cash or GPOX tokens. Tech experts and patent lawyers will continue to play a key role in the process, in order to assess and eventually validate a patent for final formal registration, but differently than in the traditional system. Their credibility and reliability can be established through algorithms that take into account the track record of previous works, successful disputes, and judgements from other peers.
Newer inventions enter in full, ideally the complete file. Older inventions could be re-registered on the GPOX database simply with reference to their traditional identification number, amplifying the reach and scope of the existing national patent systems. For inventions entered in full, adherence to submission standards can be checked through automated intelligent filters and natural language processing techniques.
All submitted content can be initially put in ‘stealth mode’, in a way that ensures time-stamping, but only its creator/owner (other authorised party) can access it. At any time, the owner can decide to switch the whole or part of the content to ‘visible mode’, while keeping the original time-stamp. At this time, the whole content must be made accessible to anyone through either dedicated public servers or a fully decentralised filing system. The GPOX platform would allow anyone to browse any open intellectually protected object and to review and annotate it. The novelty of an innovation in the GPOX system can be challenged by either referencing internal or external sources.
Once up and running, GPOX could be financially self-sufficient. The platform/protocol will use an incentive-based system of rewards for contributors of submissions, reviewers, upvotes and downvotes, akin to the one used in Steem applications. R&D entities will register their inventions on the platform, paying a submission fee. If ownership is transferred, the inventor gets registration costs back plus the market value of the invention assessed by the GPOX community within the platform. If ownership is not transferred, a maintenance fee is assessed annually for the life of the patent.
Any individual submitting new content subject to intellectual property right protection can choose to submit a legally binding, digitally signed form that transfers the rights of her/his invention in exchange for tokens created by the GPOX platform and bound to the invention itself. From that time, GPOX tokens bounded to the innovation will represent its ownership and could be freely exchanged and traded on the secondary market. This would establish a link between the protection of the invention to its financing and acquisition. In the long term, such a system could be used as a source for crowdfunding of pure ideas, which are much harder to finance than viable business entities even in the most advanced financial markets like those of the US.
GPOX’s ambition is to become a simplified and efficient source of intellectual protection that is globally accepted. Patent trials routinely rely on a variety of sources of evidence, but their validity is usually specific to each country, making the international patenting system incredibly expensive. In a legal proceeding, the time-stamped objects and the community reviews – especially when submitted by R&D professionals – could be used to support the novelty of the invention and to claim its rights, together with other more conventional tools. Initially, GPOX could operate alongside the national offices, prompting them to modernise and improve in the same way public exchanges compete for trading businesses nationally and internationally. But thanks to its lower costs, shorter approval times, and supranational validity, such a system has the potential to become the leading source of originality certification, especially in business areas in which the standard protection system is not working well, such as software and algorithms, and to stimulate the world supply of inventions in these areas.
How feasible is to implement such a blockchain application? It is now well understood that blockchain technology (i.e. encrypted decentralised ledgers) has potentially widespread applicability, well beyond the world of cryptocurrencies. What is less clearly understood is that not all ledger-based record keeping activities can be profitably decentralised via blockchain technology.
While the system of reward and fees outlined above can make GPOX financially self-sufficient in the long run, in order to prevent risks of bifurcation as witnessed in the cryptocurrency markets, there is the need for a sponsoring institution. One possibility is to task the WTO with the launch and initial adoption support of the GPOX application. The WTO already has a mandate on protection and enforcement of intellectual property under its Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement negotiated during the 1986-94 Uruguay Round. But TRIPS has proven not effective over the years in resolving disputes in this area, as the Apple-Samsung case exemplifies. Fundamental research has historically been subsidised by governments. Indeed, the internet was developed for defense purposes by the US Department of Defense, and internet applications took years to become mainstream in government and business.
The ongoing dispute on protection of property rights between the US and China is a golden opportunity to launch such a new multilateral initiative. It is possible to see how a platform designed along the lines above, under the auspices of the WTO, could address several of the issues on the table, resolving problems created by lack of trust and credibility with a community-based system of certification. It would be hugely popular in China, which is very eager to promote widespread adoption of blockchain technology and is also looking for ways to accommodate US demands without losing face domestically. The European Community has already developed a supranational patent office and would have important experience and know-how to contribute. And the US, currently enjoying the strongest and most successful national patent office, would have a way to extend its reach into the new economy on a global scale for years to come.
This post written by Alessandro Rebucci.