Blockchain: a “disruptive” overview on various commercial sectors

Blockchain: a “disruptive” overview on various commercial sectors

Gilberto Macias (@gmaciasb)   August 10, 2018   No comments:

This post was first published on Your LATAM FlagshIP blog and was written in collaboration with Alessio Balbo.

“In 10 years 10 percent of the global GDP will be stored in blockchains” this data insight comes from the World Economic Forum, but what implications does it have (pragmatically) on nowadays society? This article will approach some advantages and disadvantages of the blockchain and how its possible applications may be disruptive in relation to many sectors but, first and foremost, let’s start with some brief background.

Created in 2008, the blockchain is an encrypted program that acts as an online ledger of transactions, and it provides an “irreversible, secure and time-stamped record”. Each block of transactions is linked to a chain, giving its participants an overall picture of what is taking place in the system. The program is designed to be decentralized, allowing transactions to take place between users without the need for third parties such as banks, or a central clearing system like SWIFT. In essence, in the context of finance, each user acts as their own independent bank —  free from administrative and associated costs, normally found in “traditional” financial centers. Each transaction is viewed as a single block where subsequent transactions or blocks are added. When a new transaction is recorded, a copy of the blockchain is sent to each node as they join the network (a node is each computer that is connected to the blockchain network). Blockchains can be public, private or hybrid (permissioned). The main principle behind it is trust, and the blockchain is safe, incorruptible and encrypted. By assigning to every single one of its users a public key, it allows them to identify their transaction publicly. Such key will not be disclosed by the blockchain, so every user can be totally anonymous, unless it is voluntarily disclosed.

Furthermore, records are not deleted on the blockchain, so nobody would be able to change the data stored on it, as it would have to change the whole “chain” of transactions.

As every new invention, one of the most important innovations is that the Blockchain is extremely cost-effective. This is because it excludes intermediaries from the picture, but it does not only cut costs by doing so, it also increases efficiency.

Let’s analyze the impact on a sector-by-sector analysis

In respect to banking, the blockchain could be effectively revolutionary. In fact, the implementation of the blockchain into the banking system would allow banks to save around 20B$ a year by 2022.

Looking at the latest news on the matter, it can be indisputably said that almost daily a new enterprise, a tech giant, or a new company comes out with an application of the blockchain. As an example, on the 15th of May, Amazon announced his partnership with Kaleido (CNBC article available here) in relation to the Bezos’ cloud computing service, to simplify the creation of a company based on the blockchain.

Particularly, one of the most interesting applications of the blockchain relates to healthcare. In fact, a distributed ledger in relation to health records would allow any hospital to access medical data belonging to any individual, with no need of additional paperwork. This could be particularly useful in relation to emergencies concerning patients rushed into surgery. The threat here would be addressed in the context of data protection and privacy.

Another further implication in the same industry (i.e. healthcare) could be the distribution and tracking of pharmaceuticals. To this regard, the well-known multinational company Merck has filed a patent claiming that the blockchain technology enables a reliable, secure storage of the reading results with very high data integrity, such that it is essentially impossible to manipulate or erase or otherwise taper [sic] with or lose such data, e.g., due to unintended or deliberate deletion or due to data corruption.”[1]. Blockchain adoption would result in increased transparency, safer and more secured delivery of pharmaceuticals and a decrease in the counterfeiting of healthcare products.

In the legal sector, the blockchain’s impact on Intellectual Property (IP) can be noteworthy. The constitution of blockchain networks in relation to IP offices, the traceability of trademarked products, the implementation of royalty distribution mechanism all have a sweet sound to the ears of the professionals working in this sector. In this regard, many international institutions are starting to use such technology to foster innovation. In fact, the European Union has set up the Bloomen project, where “blockchains will be used as a distributed database for media copyright information, for fast micropayments of media content, and for transparency in copyright management and monetization”. The expansion of such project would improve dramatically the efficiency of the sector.

Other figures within Intellectual Property, will may also take advantage of the use of the Blockchain, for example, regarding trademarks, it is expected that it will be possible to register or renew a mark using Blockchain technology. We know that the EUIPO is looking very seriously and actively at using blockchain to records and enforce IP Rights. However, in the USA, there is already an online platform using Blockchain technology to file trademarks (Cognate). The use of blockchain in the protection of trademarks or patents would represent a real revolution in the registration of these assets.

Similarly, another giant in the field of consultancy, Deloitte, is partnering up with the next participant to blockhaton, Seal Network, to develop an anti-counterfeiting platform and technology to stop such illegal practices.

In a different sector, another giant, Alibaba, has announced the pilot program to track international shipments to China, in order to safely be aware of the origin, shipment and destination of the effective product ordered.

In relation to fashion, blockchain may be disruptive too, as QR codes or tracking numbers on labels may be able to tell the customers the origin of the specific item, the full history of the supply chain behind each garment and possibly even more (i.e. the history of the company, the materials used, the instructions on how to wash, etc.). Since the statistics only for 2016 amounted to 1 billion dollars of counterfeited articles sold, blockchain would be a blessing for the sector, allowing to fight more effectively against the growing scourge of counterfeits and piracy.

A similar approach has been applied to food, for instance, in emerging markets. A traceability of the product “from farm to fork” would simply facilitate the business of guaranteeing an origin and avoid corruption and quality control. The matter concerning food safety has historically increased up to the point of creating Agencies in charge of such control. A giant in the industry of supermarkets, Walmart, has already successfully carried out several blockchain projects, proving that such technology is a real game changer. Blockchain could also have an important role in the protection of foods identified and commercialized with a Protected Geographical Indication or a Designation of Origin, the control of raw materials (as to their origin, use, transformation, etc.), all of the aforesaid could be followed with greater ease and transparency.

The jewelry business may also be reformed and secured. Chemical fingerprints could radically change the industry and blockchain may be the key to track the diamonds, in order to guarantee the effective origin and a safe shipment too.

The industry of photography and works protected by copyright exposed to the dangers of internet may be helped by blockchain too. Since copyright does not need any registration to be valid, it does not depend to registries (unless the holder of such rights decides to submit them for registration to an Office). In this field, the real issue has always been the distribution of royalties to the legitimate owners and to the management entities of competence. As everyone can imagine, the internet has certainly opened a new way of making business in this sector, but it has also exposed works to more infringements and violations. For instance, by allowing a file to be downloaded, the author spreads his/her work online and reaches bigger audiences indeed, but such audiences may not always be having pure and honest intentions and may misappropriate the copyrighted work.

Particularly, the aforementioned applies to the music industry. In fact, the advent of new technologies transformed the music industry into an important source of income with high levels of exploitation, notwithstanding the existence of blatant disadvantages (i.e. the increase in piracy and the lack of payment in relation to the reproductions).

The effects of technology in the music industry are twofold, on the one side, there is the acceleration in the diffusion of musical works, which allows us to visualize a very positive scenario for authors and intermediaries, just as consumers are greatly benefited from this fact. On the other, there is the uncontrolled circulation in the network, the speed at which music circulates on the internet is unstoppable and untraceable by the holders of rights since it facilitates the unauthorized use of digital works and recordings. Uncontrolled circulation reveals very negative consequences for the basic and intellectual property industry.

Another consequence derived from the implantation of new technologies in the basic industry is the change in the relations between the authors of music, services, intermediaries and consumers. The digital environment allows a direct connection between the creator of the musical work and the audience, and that is precisely why the blockchain could be a real game-changer in the music industry. Media Chain, for instance, a company recently acquired by Spotify, takes care of the royalty distribution matter, offering music platforms to protect the authors and their works in the online world. Mediachain allows artists to create a digital record for songs on the Bitcoin blockchain and InterPlanetary File System. Spotify, in fact, aims to use such tool to create fairer conditions and more transparency in respect to the payment to artists for their musical works.

The blockchain does not uniquely help the music sector in relation to copyright. In fact, it applies also to photographers, whose works are constantly at risk of being copied, used or transformed without being remunerated. The need to broadcast and divulge the work is often the most significant mistake that leads to piracy. To this regard, Kodak, earlier on in January 2018, firmly declared to be willing to develop a blockchain based platform to remunerate photographers through the use of Ethereum. Photographers will register their photos on the KodakOne platform and buyers will purchase rights using the KodakCoin cryptocurrency. The platform will provide cryptographic proof of ownership and monitor the web for infringement, offering an easy payment system for infringers to legitimize their use of photographs. A pioneer to this regard is Fernando Alonso, the Formula 1 player who recently announced that he will be protecting his image and copyrights with KodakOne[2]. Mr. Alonso is the first public figure to release such a statement.

Another sector where the blockchain has arrived into is the timestamped proving of paternity of literary works. An example of this is Po.et, a shared, open, universal ledger designed to record metadata and ownership information for digital creative assets. Po.et is a continuation of Proof of Existence, the first non-financial application of the blockchain.

An interesting article from February 2018 explained how the blockchain may be a solution which could definitely solve the adult industry of pornography. Already various projects are underway with ICOs in relation to this industry, as stated by the author of the article on El País(cryptocurrencies like Sexcoin, Titcoin will be used as purchasable tokens and reusable on the various adult blockchains by keeping complete anonymity).

Conclusions

The blockchain technology has created a whole new playing field, and the game could yet be very hard-fought. With the prize at stake of higher transparency, efficiency and cost-effectiveness, it remains to be seen whether this becomes a winner-takes-it-all race and how the issue of standards for the technology will be managed.

Blockchain enables a completely new level of information exchange between different kind of industries, some of them unknown until now and others just emerging.

This new technology has a huge potential to help everybody improve their creativity, their relationship with technology and the realization of new business and, consequently, increase the value of such new creations. Obviously, the protection of these new assets will be closely linked to the protection of intellectual property, a field in which, as we have seen previously, Blockchain is already playing a leading role, providing different solutions to securing IP assets and innovation processes.

In our opinion, although blockchain is still growing day after day, it is getting closer to its breakout moment and it is just a matter of time before it will be necessary to adapt all related regulation, inter alia, IP laws.

[1] https://cryptodisrupt.com/blockchain-in-pharmaceuticals-fighting-counterfeit-drugs/

[2] http://www.expansion.com/directivos/deporte-negocio/2018/07/03/5b3a8605e5fdea8f2f8b45ba.html

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Third Country Producers Exempt from the Compulsory Use PDO and PGI Symbols on Product Labels

Third Country Producers Exempt from the Compulsory Use PDO and PGI Symbols on Product Labels

Patricia Covarrubia   January 12, 2016   No comments:

From the 4th January 2016 the use of PDO and PGI logos on the labelling of agricultural products bearing names protected as Geographical Indications under the EU legislation has become compulsory, as an effect of Article 12 Regulation (EU) 1151/2012 coming into force. According to section 6 of the same Article 12, this provision does not apply to GI products from Third Countries (meaning: non-EU Member States) whose names are included in the EU register as a PDO or PGI.

Since 1992 (Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs [1992] OJ L 208/1), the EU has introduced certifications aimed at guaranteeing the authenticity of methods of production of some agricultural products, mainly intended for human consumption, that have a link with a determined geographic area. Tools like PDO (Protected denomination of Origin) and PGI (Protected Geographical Indication) have been established under EU legislation; their difference is the closer or looser link to the geographic area, required to obtain the award.

Right holders can market their products using the registered names alongside the indications “Protected denomination of Origin” or “Protected Geographical Indication” or the corresponding abbreviations “PDO” or “PGI”. They can also use the associated graphic symbols, or logos, which were created at communitary level in 1994 and 1994, with the purpose to raise consumer awareness regarding the “European agricultural quality schemes”, and to make it difficult to counterfeit authentic products. Visual attempts to further attract the attention of the consumers, with the change of the colour of the two logos, were subsequently operated by Commission Regulation (EC) No 628/2008 (amending Regulation (EC) No 1898/2006 laying down detailed rules of implementation of Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs [2008] OJ L 173/3).

The original 1992 Regulation has been replaced by a new Regulation in 2006 (see below); this has been, in turn, repealed by Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs (Official Journal of the European Union L 343 of 14 December 2012. Similar, yet separate, schemes are established for wines, spirits and aromatised drinks), currently in force since 1st January 2013.
However, according to Article 59 Regulation 1151, the provisions under Article 12 of the same Regulation only came into force on 4th January 2016. Under section 3 of Article 12, the use of PDO and PGI logos on the labelling of agricultural products bearing names protected as Geographical Indications under the EU legislation has become compulsory. In addition, the registered name of the product should appear in the same field of vision.

An important waiver to this provision is laid down by Article 12, section 6, in the case of products originating in third countries marketed under a name entered in the register. To understand this waiver, the certification process must be briefly recalled. This has been laid down by the original Council Regulation (EEC) No 2081/92, and stayed substantially untouched until 2005.
In that year, a WTO Panel (25 April 2005 - WTO WT/DS 124/23 and WT/DS 290/21) ruled on a contention raised by the US and Australia on a matter of national treatment with regard to Regulation 2081; the panel found that said Regulation required that a registration of a GI from a country outside the European Community was contingent upon the Government of that country adopting a system of GI protection equivalent to the EC’s sui generis system and offering reciprocal protection to EC GIs; as such, the registration process for third country producers was not compliant with TRIPs obligations, because it restricted their access to the EC system. As a result, the EC had to replace Regulation 2081 with Council Regulation (EC) No 510/2006 of 20 March 2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs [2006] (Official Journal of the European Union L 93/12).

After the opening of the system, extra-EU products have been registered as PDOs or PGIs: in October 2007, after more than two years of evaluation by the European Commission in Brussels, Café de Colombia became the first agricultural food product from a country that does not belong to the European Union to receive PGI recognition in Europe.

With regard to the aspect analysed in this post, Article 8 of Regulation 510/06 already laid down a waiver for Third Country producers as to the compulsory use of the indication “PDO”, “PGI” in alternative to (or in conjunction with) the use of the European logos. The choice of the application of the logos on the labels was left to the producers (rectius: right holders); under the new Regulation 1151, they are still dispensed from such apposition. This is expressly laid down by Article 12, section 6, derogating from the provision in section 3 analysed above; the latter is therefore applicable to the European producers only.

This provision seems to encourage registrations from producers from Third Countries without burdening them with additional obligations; as such, it could be interpreted as a way of promoting the EU sui generis GI system, and could therefore be framed within a wider commercial strategy by the EU. Those operators are let free not to print the PDO or PGI logo on the label; nevertheless, there are advantages in actually using the EU symbols, not at least for marketing purposes: European consumers, or at least those leaving in the Member States where the EU origin schemes are better known, are willing to pay a premium price, when they associate implicit qualities in the origin of a product. This is why some of the (not numerous) non-EU products recognised in the EU register bear the PDO or PGI logo well visible on the packaging.

Finally, according to Article 12 section 4, which is applicable to Third Country products as well, “In addition, the following may also appear on the labelling: depictions of the geographical area of origin, (…) and text, graphics or symbols referring to the Member State and/or region in which that geographical area of origin is located.” This is a reference to all those elements, such as flags or contours of a Country which could be legitimately used if genuinely linked to a geographical name, whether recognised as a GI or not; but if their use is misleading to the consumers, this could amount to an act of unfair competition, or as a prohibited “evocation” if falsely referred to a name protected under Regulation 1151.

By Nicola Coppola – Bournemouth University

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