Public interest in the blockchain has spiked since the latter half of last year. As shown by Google Trends, web and news search of the term has grown exponentially since April 2017. The blockchain is essentially a decentralised ledger that stores data securely by encryption and distributes them publicly across a network of data-receiving nodes. Data stored on the blockchain are time-stamped and immutable, making the technology attractive for industries prone to fraud or wanting in transparency. As a platform for cryptocurrencies, the blockchain also supports direct micropayments by content end-users to creators.
Innovators have been looking to apply the blockchain to different data management systems, including the management of intellectual property. The blockchain may be used as a registry of intellectual property since original copies of registered items can be stored with a clear date and tamper-proof evidence of ownership. The blockchain may then track subsequent use of registered intellectual property as well as authenticate questionable items. Platforms such as Bitcoin notary, Binded and Bernstein, among others, have been providing blockchain-based solutions for intellectual property.
Another promising feature of the blockchain is that it powers smart contracts that are able to define rules and penalties of an agreement, and self-enforce them without involving intermediaries. For example, once the terms of a commercial contract are coded on the blockchain, events such as expiry date or price change can trigger the smart contract to execute the coded terms itself. This is believed to challenge the role of lawyers in ensuring due diligence in transactions and evaluating their performance.
While the business world is eagerly grappling with the vast potential blockchain technology brings, its practices are still evolving and associated risks have yet been adequately assessed. This is why Hong Kong has as of now no specific regulatory guidance on the implementation of blockchain technology.
This casts doubt on whether intellectual property registered on the blockchain as well as smart contracts will be recognised in Hong Kong, and the validity of any further action incurred. Organisations and individuals wishing to adopt blockchain-based solutions are advised to study thoroughly the regulations and measures, if any, in the jurisdiction(s) concerned and take extra precautions, especially in Asia where this technology is new. With smart contracts streamlining the formation and implementation of agreements and reducing related costs, the strategic advice, professional experience and networks of lawyers will add greater value to seekers of corporate and personal legal advice alike.
Published in the April 2018 issue of Hong Kong Lawyer