Way back in March 2018, amid threats of tariffs, the Trump administration put Canada on its “Priority Watch List” of trading partners with “the most onerous or egregious acts, policies, or practices” around intellectual property rights. Among U.S. grievances were allegations of ineffective policing of online piracy and inaction against digital pirates. But this blustery rhetoric misses the point: Canada’s IP policies and practices are not the problem.
The real problem is the technology itself. The Internet renders stronger laws and government enforcement insufficient and ultimately futile. The first era of the Internet — the Internet of information — effectively broke the IP property regime because it made copying digital assets easy. Consider music: Once real assets delivered on a physical medium like a compact disc or vinyl record, songs have been run through the Internet’s copier until their marginal value neared zero. Labels lost money, artists lost their livelihoods.
Yes, the Internet is a powerful tool that has transformed how we share and access information and how we communicate. But it’s also the ultimate bootleg press, peep hole on all things private and costume closet for identity thieves. The upshot is that now the only artists consistently making money are the con artists.
Fortunately, rather than yet another regulation or tougher prosecution — which become barriers to entry for individual artists, inventors and start-ups — there is now a better deterrent to counterfeiting, fraud and IP theft: it is the blockchain, the technology behind cryptocurrencies like bitcoin.
A blockchain is a peer-to-peer transactional network for anything of value, whether stocks, money, music, diamonds, carbon credits, or even intellectual property. Rather than a single intermediary like a bank or government keeping records in a proprietary ledger, a distributed network of computers works to verify transactions, with the results recorded in a shared ledger that anyone in the network can access and no single entity can hack.
Bitcoin was the first breakthrough. It demonstrated the creation and preservation of digital scarcity through cryptography and clever code, transforming a highly fickle Internet of information into a secure and permanent Internet of value.
But cryptocurrencies were just the beginning. Not only can we record and verify clear ownership of IP rights, we can use smart contracts — software that mimics the logic of a business agreement, incentivizes performance, and executes deal terms — to activate these rights and maximize their value, all the while complying with regulations and enforcing trade agreements.
There are implications for core Canadian industries, such as manufacturing, technology and medicine that rely on patents and industrial designs; mining and agriculture benefiting from geographical indicators; and music and film depending on copyright.
Patents and product design
Consider how the company Moog leverages its industrial designs on a blockchain. Based in New York, Moog is an aircraft precision part manufacturer operating in a highly regulated industry. It counts the U.S. Department of Defense, Airbus, Boeing and Lockheed Martin among its customers. Any counterfeits in its products, inefficiencies in its supply chain, or violations of IP rights can delay missions, compromise critical systems and endanger lives. So Moog has worked with a Canadian technology platform, the Aion Foundation, to create a blockchain that reduces complexity and increases the integrity of its supply chain by tracking and recording every action of its partners. Moog has also placed such intangible assets as design files and licences in smart contracts: for each download of a design file, the IP rights holder instantly receives a royalty. These transactions are timestamped on the shared ledger, making IP audits easier. Similar systems would benefit Canada’s industrial and manufacturing sectors as well as its digital companies.
Provenance and geographical indicators
The Kimberley Process has reduced the trade of blood diamonds by requiring diamond-mining countries to certify that their exports are conflict-free. However, the largely paper-based certification process is rife with corruption, forgeries and inefficiencies, so that compromised diamonds continue to enter the supply chain. To close the gap, a London-based company called Everledger is using blockchain and other emerging technologies to create a global digital ledger for diamonds. Producers, consumers, insurers and regulators can use this shared ledger to track the flow of individual diamonds through the supply chain, from the mines to jewellers. Incorporating blockchain into the diamond supply chain also minimizes insurance fraud. The value of verifying authenticity, provenance and custody through blockchain obviously holds for a wide range of items — from Canadian rye whiskey to paintings.
Anyone who follows the music industry knows of the tussles between artists and those who rely on their creative output. The traditional food chain is a long one. Between those who create the music and those who pay for it are online retailers (Apple), streaming audio (Spotify), video services (YouTube), concert venues, merchandisers, tour promoters (Live Nation), performance rights organizations (PRS, PPL, ASCAP, BMI), the labels (Sony, Universal, Warner), music producers, recording studios and talent agencies, each with its own contract and accounting system. Each takes a cut of the revenues and passes along the rest, the leftovers reaching the artists themselves six to 18 months later per the terms of their contracts. Before the Internet, a songwriter might earn US$45,000 in royalties for a song that sold a million copies. Now that songwriter might earn only US$35 for a million streams.
Imagine instead a world where artists decide how they’d like their music to be shared or experienced — simply by uploading a verified, searchable piece of music and all its related content online. Through the triggering of smart contracts, a song could become its own business, collecting royalties and allocating them to the digital wallets of rights owners such as songwriters and studio musicians. Artists and other creators would get paid first and fairly, rather than last and least.
Soon it will be possible to manage, store and exchange any digital asset using this technology — from patents to carbon credits to our personal health data.
Even better, blockchain is a made-in-Canada story. Some of the world’s most successful blockchain projects — Ethereum, Aion, and Cosmos, to name a few — were started here. Canada’s culture of innovation, openness and entrepreneurship allowed them to flourish. Now we can harness this technology to strengthen other industries and ensure that Canada’s intellectual capital is not only protected but allowed to thrive.