Digital content on the blockchain: navigating copyright and ownership issues
Distributed ledger technologies, such as blockchain, provide a cryptographically secure, immutable and decentralised mechanism for storing and synchronising data across not only organisations, but also geographic and political borders.
Although early blockchain implementations facilitated transactions in cryptocurrencies such as Bitcoin and Ethereum the disruptive nature of blockchain technologies now impacts nearly every segment of the financial industry. It has extended to a wide variety of other industries, businesses and organisations such as, but not limited to, the healthcare industry, the transportation and shipping industry, cloud storage providers and providers of digital content.
Indeed, some digital content providers now look to blockchain technologies not only as a tool for securely and immutably recording ownership interests in digital content, and for securely and immutably tracking royalty payments derived from authorised use of the digital content, but also as an integral component in a mechanism for storing and distributing that digital content to authorised users in a decentralised, cryptographically secure and immutable fashion.
In many instances, however, the immutable and cryptographically secure recordation of elements of digital content onto blockchain (eg, as “on-chain” digital content), and the secure distribution of elements of on-chain digital content to authorised users, presents unique copyright and ownership issues not often faced by conventional, internet-based distribution platforms.
Understanding blockchain technologies
At a basic level, a blockchain represents an open, digitised ledger (eg, a blockchain ledger) that records and tracks transactions, business information or other digital content in a cryptographically secure and immutable format. In contrast to conventional ledger technologies, which maintain a single, authoritative copy of the digitised ledger at a centralised authority, blockchain technologies transition the authoritative copy of the distributed ledger from the centralised authority to peer nodes operating within a distributed computing environment, which collectively establish a decentralised blockchain network.
The blockchain ledger includes any number of linked ledger “blocks”, each of which includes discrete elements of digitally signed (and in some instances, encrypted) data along with a corresponding “hash” value. For example, the hash value can represent a fingerprint for the data elements, and often corresponds to a number having a specified length, generated based on an application of a known hash algorithm to the discrete data elements.
Further, each peer node within the blockchain network maintains a copy of the blockchain ledger, and any update to the blockchain ledger is based on a consensus-based process implemented collectively by each of the peer nodes.
By way of example, a particular peer node can receive a request to record data within the blockchain ledger and can generate a corresponding hash value based on an application of the known hash function to all or a portion of the data. The particular peer node then packages the data, the corresponding hash value and a digital signature within a new ledger block, and broadcasts the new ledger block to each of the other peer nodes within the blockchain network.
The peer nodes then perform operations that verify and validate the new ledger block via the consensus-based processes, eg, through the computation of an appropriate, mathematically complex “proof-of-work” or “proof-of-stake”. Upon successful verification and validation, the new ledger block can be appended to a prior version of the blockchain ledger. An updated version of the blockchain ledger, which includes the new ledger block, can then be distributed among the peer nodes.
In some instances, the inclusion of the hash value within the ledger blocks ensures an integrity of each of ledger block and an immutability of the blockchain ledger, since an authorised party could access the ledger blocks, recompute the hash values based on an application of the known hash function to the underlying data, and compare the recomputed hash values against those stored within the respective ledger blocks.
Further, as each new ledger block is verified through consensus-based processes, and as each peer node maintains a discrete copy of the blockchain ledger, the blockchain ledger is highly resistant to attacks by malicious third parties, since any successful attack must modify information not only on a single copy of the blockchain ledger, but on the multiple discrete copies maintained by the geographically dispersed peer nodes of the blockchain network.
Copyright and ownership issues
As described above, a digital content provider may adopt blockchain technologies that immutably record, within ledger blocks of a blockchain ledger, discrete elements of digital content owned by one or more third parties, along with additional data identifying and characterising an ownership interest in each of the digital content elements by a corresponding one of the third parties. While such a blockchain-based solution may establish a digital platform capable of distributing the elements of digital content to authorised users in a decentralised, cryptographically secure and immutable fashion, and of tracking royalty payments derived from the authorised use of the digital content elements, the immutable and cryptographically secure recordation of the digital content within the blockchain ledger often presents unique copyright and ownership issues.
By way of example, the digital platform performs operations that immutably record a particular element of digital content, such as a digital image, within a ledger block of the blockchain ledger. Further, for example, a third party (eg, a copyright holder) may hold a US copyright on that image, and may obtain information that the digital image was received by the digital platform and recorded onto the blockchain ledger without the copyright holder’s permission.
The immutable recordation of the digital image into the blockchain ledger, the distribution of the blockchain ledger (which includes the digital image) to each of the peer nodes within the decentralised blockchain network, and a potential distribution of that image data to other users can present numerous copyright issues that impact both the copyright holder and the digital platform.
Many of these copyright issues are unique to digital content maintained immutably using blockchain technologies, and often represent issues of first impression subject to clarification by the courts as blockchain further matures and experiences wider adoption.
As an initial point, the local maintenance of the blockchain ledger, which includes the image data within the corresponding ledger block, by each of the peer nodes in the decentralised blockchain network may render each of the peer nodes, and additionally or alternatively the digital platform, legally liable for copyright infringement under 17 USC §§501–513. The exact nature and extent of the potential legal liability of the individual peer nodes and/or of the digital platform may, however, represent an open question subject to judicial resolution, and may depend on facts surrounding the particular blockchain-based solution implemented by the digital platform.
For example, and based on the facts surrounding the particular blockchain-based solution, a court may initially determine whether the recordation of the infringing image data onto a new ledger block, or the local maintenance of an updated copy of the blockchain ledger (eg, that includes the infringing image data), represents “volitional activity” sufficient to render an operator of one or more of the peer nodes, or of the digital platform itself, liable for direct copyright infringement under 17 USC §501. See, eg, Religious Tech Center v Netcom On-Line Comm, 907 F. Supp. 1361, 1365–1366, 1381–1382 (ND Cal. 1995).
Further, in establishing liability for direct infringement, additional uncertainty exists regarding applicability of the “server test” set forth in Perfect 10 v Amazon, 508 F.3d 1146 (2007) to digital content stored locally within one or more of the peer nodes operating within the decentralised blockchain network, especially in view of the recent decision in Goldman v Breitbart News Network et al, No. 17-03144 (SDNY Feb. 15, 2018).
For example, in Perfect 10, the Ninth Circuit affirmed the district court’s determination that an operator of “a computer that does not store and serve … electronic information to a user is not displaying that information, even if such [operator] in-line links to or frames the electronic information,” and as such, the operator is not liable for direct copyright infringement. See Perfect 10, 508 F.3d at 1159–1160.
In Goldman, however, a New York district court declined to apply the server test to a digital content provider that embedded digital content (ie, hosted on an unrelated third-party server) containing an unauthorised upload of a plaintiff’s copyrighted photo within a corresponding website, holding instead that such embedding represents a display of the copyrighted photo. See Goldman, slip op. at 17–20.
The ultimate applicability of the “server test” to the peer-to-peer dissemination of digital content, including digital content encrypted within a ledger block of the blockchain ledger described, and the liability of the peer nodes or the digital platform for direct copyright infringement under 17 USC §501 remains uncertain and is likely to depend strongly on the particular blockchain-based solution implemented by the digital platform and the peer nodes.
Further, even in the absence of direct copyright infringement by the operators of the peer nodes or the digital platform, the courts may still analyse the facts surrounding the particular blockchain-based solution and the relationship between the operators of the digital platform and the peer nodes to determine whether the digital platform induced or substantially contributed to the infringement of the copyright digital image by the peer nodes and, as such, whether the digital platform is liable for contributory copyright infringement.
Moreover, open questions also surround the application of the Digital Millennium Copyright Act (DMCA) to potentially infringing digital content immutably recorded within a blockchain ledger distributed among, and locally maintained by, geographically dispersed peer nodes operating within a decentralised blockchain network.
