Analysis: blockchain evidence accepted by Chinese court

In June 2018, the Hangzhou Internet Court in China accepted a claimant’s use of a blockchain service to preserve online evidence of a copyright infringement. The case involved an infringement claim by a media company called Huatai, who claimed that Daotong, another media company, had posted a copyrighted photograph and article without its permission on a website.

When compiling its evidence for the case, Huatai used a third-party blockchain service called Baoquan to obtain Daotong’s webpage with the infringing material.

The case marked the first time that blockchain technology was recognised as a legitimate source for storing evidence during a court proceeding in China and is likely to have far-reaching implications in Chinese courts and around the world.

Baoquan isn’t the only digital service that provides legal evidence on a digital platform. Many other providers have come to the fore in recent years, offering similar platforms for fixing digital evidence. The technology itself functions by mimicking a web browser request, which then downloads and stores website files in an archive. A unique code is created for the file when it is digitally signed and ‘hashed’ by an algorithm. This is then timestamped and distributed on to the bitcoin and Factom blockchains.

Using the hashing and digital signing process protects the evidence, since even the smallest modification of the archived file would result in a completely different hash code being generated. To check for any modifications of a file, you can simply compare the hash code distributed on the blockchain to that of the archive file.

The evidence for blockchain

The court assessed the blockchain evidence against the established Electronic Signature Law in China and decided on the veracity of the evidence according to three main considerations.

First, the court had to consider the reliability of the data that was initially recorded in the blockchain (ie, to verify that the website captured in the digital evidence was the same as the website appeared on the date of the alleged infringement). With this the court examined the process used to mimic web browser requests and download the website and found it reliable.

Second, the court had to judge that the evidence stored in the blockchain had not been tampered with or modified. The court’s final consideration was the overall accessibility of the evidence during court proceedings.

These three requirements were met and the company providing the service was found as ‘without conflict of interests’ so the court held that the platform was a legal platform that could be used to prove IP infringement. As Huatai was able to prove that the digital archive of the website was accurate and could not have been altered, the court accepted that Daoteng had shared its copyrighted materials.

The case for using blockchain to fix digital evidence in legal disputes is growing. This is particularly true in China, where litigants must obtain and preserve their own evidence. The process for this is often difficult, since litigants must show that their evidence has not been modified. As a result, they usually rely on the process of evidence notorisation, which can be a very costly and lengthy process.

Many potential litigants are not confident that these costs are worth the compensation that could be awarded through damages. This therefore provides a greater cost incentive for those considering litigation.

In Huatai’s case, the cost of the blockchain deposition was likely to be as little as RMB 1 ($0.15) for each web page. The cost of notorisation is around 4,000 RMB ($581) for web pages through usual channels, which is roughly the same amount for the damages awarded to Huatai.

Conclusion

The case highlights an increasing openness to technology from some courts and is a step in the right direction for utilising technology to modernise legal processes. Hangzhou Internet Court is already leading the way in this area, as it already employs technology such as video conferencing for hearings and electronic submission of evidence, all of which are likely to become increasingly common in the sector.

Hangzhou Internet Court specifically handles internet-related disputes concerning ownership of copyright, online shopping, personal rights, product liability and domain names and two similar Internet Courts are expected to open in China in the near future. Back in May 2018, China's Ministry of Public Security filed a patent application for a blockchain system that securely stores evidence gathered during police investigations. Both developments are clear indications of the country’s continued drive to use technology to bring about a more transparent and tamper-proof evidence deposition process.

Although the ruling may pave the way for future uses of blockchain evidence, the judge advised courts to consider the use of the platform on a case-by-case basis. The judge suggested that it could not be completely excluded from legal disputes due to its complexity, but also cautioned against over-reliance on the technology simply because it is “tamper-proof and traceable”.

Indeed, blockchain technology might be a viable solution for litigants in proving that their files have not been changed since the ‘fixing’ date, but by itself does not prove that the digital file or web page has not previously been tampered with prior to ‘fixing’.

Nonetheless, a cost-effective and reliable solution for evidence preservation is urgently needed to resolve the issues facing litigants when tackling online infringers en masse. Blockchain technology can be used to address some of these challenges and it is likely to be only a matter of time before other courts recognise the benefits of the technology too.

James Godefroy is consultant at Rouse’s Guangzhou office. He can be contacted at:  jgodefroy@rouse.com