27 June, 2022

How blockchain technology can help protect IP owners and consumers
The link between block chain technology and intellectual property protection rights.

The VHS, the CD, the internet, e-commerce, virtual assistants, cryptocurrencies … every few years, new technologies revolutionise our lives and make them more interconnected across territories and countries.

For intellectual property (IP), these advancements usually entail new ways for rights holders to exploit their assets and for consumers to access them, but also new ways of infringing IP rights and new challenges for their protection and enforcement as a result.

With the internationalisation of markets and economies, counterfeiting has been on the rise. There are also several cases in which consuming fake and counterfeit goods can pose risks to one’s own health (medicines and cosmetics, for example), safety (like toys used by children or spare parts for cars) and the environment (just think of pesticides or chemicals). A recent study released by the EUIPO shows that most of these goods (60 %) are purchased online and that, together with the United States of America, the European Union (EU) is the main destination economy for these ‘dangerous fakes’ from third countries.

How can we tackle this problem and also reduce the risk of harmful goods entering and circulating within the EU market? There is some good news on this front.

The advantages of track and trace solutions based on blockchain technology

Track and trace solutions allow parties to know where a product is and who has it. Then add the new kid on the block, blockchain technology, and you have promising tool synergy to protect rights holders and consumers alike.

Put simply, blockchain is like a shared and immutable digital book (called ‘ledger’) that allows everyone to have a copy of all transactions conducted between multiple parties. When someone wants to change their own version of the book, everyone must agree. Otherwise, the book is no longer accepted by the rest of the network.

Decentralised track and trace solutions offer distinct advantages over more traditional centralised and siloed systems. For starters, they provide more secure, agile and cost-effective structures than ‘older’ systems. This is particularly true when it comes to managing the supply chain and authenticity. It is essentially for these reasons that the EUIPO (with prior solid experience in the implementation of blockchain solutions), in collaboration with the European Commission, has been exploring the potential of track and trace solutions based on blockchain technology to protect IP rights.

The EU Anti-Counterfeiting Blockathon Forum and the Blockathon Infrastructure Contest

An achievement of the joint efforts of the EUIPO and the European Commission is the Anti-Counterfeiting Blockathon Forum. The main goal of the forum – established in the aftermath of the EU Blockathon 2018 competition – is to encourage the transportation and proof of authentic goods in the EU and address the challenges of counterfeiting. The forum seeks to bring together people and organisations working on developing anti-counterfeiting infrastructure.

And if you wonder about the infrastructure, there is some news on that front too!

In March 2022, among the several entries submitted, the EUIPO selected ELSA as the winner of the Anti-Counterfeiting Blockathon Infrastructure contest. The result of a joint effort by designers and digital architects, this project is a blockchain infrastructure design whose key goal is to guarantee access to data relating to goods and their ‘journey’ through the supply chain, which would discourage making and distributing fake and counterfeit items. The system would ask the EUIPO to validate rights holders’ identity and, in turn, provide them with a digital anti-counterfeiting digital label which they can place on their goods through QR codes or other serialisation technologies. ‘The lack of trust among the supply chain stakeholders is a problem that we want to address’, said Thomas Rossi, a member of ELSA.

A key feature of this project is that it is open-source software, meaning that it is freely available and can be modified and redistributed. Not only does this mean a low adoption barrier, but also the possibility of continuously improving its performance by updating the underlying software. Thomas stressed how, in the future, ‘the open-source nature character of ELSA will also allow the community to build additional features for a broader usage’.

A mix of solutions

With all of the above, what does the future of supply chain and data management look like? It is likely to be a mix of technological solutions and policy and legal developments.

Track and trace solutions have displayed clear potential and already made it possible to achieve important results. In any event, this is likely to just be the beginning: it has become clear that blockchain technology can be used in several different and promising ways, including as a digital diploma or for product circular economy purposes.

Besides technological solutions, legislative developments must also be considered. The EU Digital Services Act draft, for example, aims to ensure that what is illegal offline is also illegal online. To this end, it seeks to make internet actors, including online marketplaces, more accountable than they are today. A political agreement on this proposed EU regulation was reached in the spring of 2022, and the final text will be adopted imminently.

In conclusion: the future of IP enforcement is likely to be one where technology and the law will continue working together to reinforce trust in both international commerce and e-commerce along with supply chain stakeholders.

Article authored by Eleonora Rosati.