In the spirit of Christmas, a time of faith and prayer, I have decided to make this post on a solution to digital rights management (DRM) that is radical to an almost religious extent. The idea is to make a global registry of copyrights in different sectors of the entertainment industry grounded in blockchains and blockchain-based smart contracts.
In many regards, the law struggles to keep up with digitalization. It should be safe to say that the transition from physical to digital media has taken its toll on traditional principles of copyright law. Increasingly, right holders use computer codes and other forms of DRM technology as a means of preventing copyright infringements. In my recent post, The Case Against DRM, I went through some of the disadvantages implied in using these sorts of technologies. The disadvantages include: Substantial costs to the right holders when implementing DRM technology, limits to the efficiency of DRM technology, no interoperability between different systems, lack of ownership to the buyers of a product, potential privacy issues, and restrictions on use for scientific and educational purposes.
Numerous academic articles have been published in recent years on how copyrights could practically be regulated by applying blockchain technology. In the second half of 2020, patent applications concerning the uses of blockchain for DRM have been filed by major companies such as Amazon, IBM, and Alibaba. The technology needed and the early signs of interest from relevant actors in the market are already there. However, we will most likely not see the initiative unfold in the immediate future. First of all, blockchain is still an immature technology in its early development stage. Secondly, the creation of a global copyright registry would require the participation of many key stakeholders. In many cases, the key stakeholders are profit-maximizing companies, and collaboration between these parties and the public sector will be dependent on a strong economic incentive.
I will give a general introduction to the topic in this post. Later on, in a future post, I will examine how blockchain solutions can, and already are, practically applied to solve major problems in the music industry.
The God Protocol
The title of this post inspired by Nick Szabo’s description of a “God Protocol” published in 1997. More than ten years before the world came to know about Bitcoin:
“Imagine the ideal protocol. It would have the most trustworthy third party imaginable – a deity who is on everybody’s side. All the parties would send their inputs to God. God would reliably determine the results and return the outputs. God is the ultimate in confessional discretion, no party would learn anything more about the other parties’ inputs than they could learn from their own inputs and the output.” 
If only God could serve as a trusted intermediary to our transactions with digital products. If that was the case, we could publish artistic or academic work to the world online with no fear of plagiarism or infringement of the integrity of our work. The interface of our work – the output – would be visible to viewers of the internet page, while the property rights and the rights to change it – the input – would be inaccessible for users.
Transactions with digital products today are in many cases based on mutual trust. When we share our work online, we just forced to trust that no one will copy it off, trust that we will receive fair compensation if anyone uses it, and trust that no one will be able to access the work without our permission. One of the main ideas behind The God Protocol is that the system should be trustless. Or as Szabo puts it: “(..) Too often we forced to treat people in a nearly theological manner because our infrastructure lacks the security needed to protect ourselves.”
Compared with physical products, digital products are much easier to copy and counterfeit. But nowadays even physical products are possible to copy with the help of 3D printing. If we imagined that Szabo’s God Protocol existed, we would know with a hundred percent certainty that the rights to the digital output of the work we created would remain within our control, and not end up in the hands of an ill-intending third party that unlawfully accesses the product or tries to pass it off as their own. The same double-spending problem that I have previously mentioned in the context of digital valuta applies with equal force to digital works.
A “God of Randomness”
No single entity owns or controls the Bitcoin algorithm, and that is exactly why blockchains are such a groundbreaking invention. You can own a bitcoin in one sense, but you cannot duplicate it, change its value, manipulate its coding, or use it outside of the network. Theft, fraud, counterfeiting, or double-spending a bitcoin is practically impossible. First of all, because every action you make stored on the blockchain, and publicly visible to all participants of the network.
Data on a blockchain is highly secured. The rules of the network are predefined, and cannot be changed without consensus among the miners. It is the consensus mechanism of the network that prevents bitcoins from being manipulated or “double-spent”. The objective of DRM systems is similarly to keep data secured. They prevent manipulation and double-spending of the digital work, so to speak, by embedding copyright laws directly into the digital file. That is done by limiting the user’s ability to view, copy, play, print, or otherwise alter the works.
With the God metaphor in mind, is it fair to say that the Bitcoin network, or rather blockchain technology in a broader sense, provides ultimate data protection? Resembling the God Protocol that Nick Szabo envisioned 25 years ago? Not in any religious sense at least. Rather, the bitcoin network is governed by randomness. The randomness lies in the proof-of-work mining process, which keeps the participants in the network incentivized to stay honest by randomizing who “wins the reward” for mining a bitcoin. By guessing through an almost infinite amount of hash numbers (not quite infinite like the biblical God), one of the nodes (computers) eventually confirms a block of transactions and receives the mining reward for that block. In this way, the security and efficiency of the network are based on mathematical randomness.
Bitcoin introduced so-called digital scarcity. In the year 2140, 21 million bitcoins have been mined, and after that point, no new bitcoins can be generated. The element of scarcity is what gives bitcoins their substantial value. For the same reason, bitcoins are sometimes referred to as “digital gold”. The unknown creator of Bitcoin, Satoshi Nakamoto himself, used this parable to describe bitcoins:
“As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: – boring grey in color – not a good conductor of electricity – not particularly strong, but not ductile or easily malleable either – not useful for any practical or ornamental purpose and one special, magical property: – can be transported over a communications channel.”
Digital works are far from a scarce resource as they can currently be used and copied indefinitely. That is the double-spending problem in a nutshell. If it was not for digital rights laws and DRM technologies, digital works would essentially be valueless after the first sale because the content could be copied and shared freely without costs.
International Laws on Exhaustion and Regulation of Copyrights on Digital Products
In my recent article on the EU Case, Tom Kabinet I explained the meaning of exhaustion, and I also go through some of the essential legal principles that underpin the current copyright regime on digital works in the EU. The Tom Kabinet case illustrates how difficult and complex it is to regulate copyrights on digital works in practice.
However, these rules only apply in the EU. It gets even more complex as each country is allowed to choose its own level of protection. International copyright treaties such as the WIPO Copyright Treaty and the Berne Convention recognize the protection of copyright in multiple jurisdictions but based on the domestic law of each jurisdiction. As a result, a simple digital work may be copyright protected in one jurisdiction, but not in another, because it lacks originality.
On top of this complexity, it should be remembered that the rights to a digital work often is fragmented as various rights holders can be involved. In my post, Copyrights on Recorded Music I explained how a single recording of a song typically involves separate rights to the performing artists, the instrument players, the composer of the melody, the songwriters, the producers, the publishing company, and the record label. The revenue of a song has to be split between all these rights holders. To take another example of fragmentation, the author of literary work may license or transfer to a third party only the right to translate work in a specific language or market.
Finally, each country is free to choose its own rules of exhaustion. It follows expressly from WIPO Copyright Treaty Article 6 (2) and TRIPS Article 6 that the international copyright treaties do not address the issue. This means that although a digital copy of a work cannot be resold legally in the EU, different rules may apply in other jurisdictions. If for example an e-book was sold in the EU to a consumer outside of the EU, the copy of the E-book may be possible to resell in that jurisdiction.
International Laws on DRM
The WIPO (World Intellectual Property Rights Organization) Copyright Treaty (1996) provides a legal framework for the use of DRM technologies.
Article 11 concerns “Technological Measures” and obligate its contracting parties: “[to] provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that used by authors (..) and that restrict acts, in respect of their works, which not authorized by the authors concerned or permitted by law.”
Article 12 of the WIPOs international copyright treaty concerns “Rights Management Information” and prescribes that the contracting states shall provide adequate legal protection and effective legal remedies against any person knowingly performing any of the following acts: “(i) to remove or alter any electronic rights management information without authority; (ii) to distribute, import for distribution, broadcast or communicate to the public, without authority, works or copies of works knowing that electronic rights management information has been removed or altered without authority. (..)”
The WIPO Copyright Treaty was implemented in the EU by the European Union’s Information Society Directive from 2001 (InfoSoc Directive), and in the US by the US Digital Millennium Copyright Act from 1998 (DMCA).
The Infosec Directive implements the DRM-related provisions in Article 6 and Article 7. The Directive leaves it up to the Member States to provide appropriate sanctions and remedies for unauthorized removal or circumvention of DRM technologies (Article 8). The US introduced the anti-circumvention provisions by adding a new section 1201 to the US Copyright Act. The circumvention of DRM technologies is severely penalized under Title 17 of the U.S. Code § 1204 (a) (1) and (2), with a fine of up to 500.000 USD or up to five years of imprisonment for the first-time offense. While for subsequent offenses the fine goes up to 1.000.000 USD or up to 10 years of imprisonment.
The legislative framework on the rights to apply DRM systems seems to be in place. However, the laws have been criticized for being too expansive, vague, and ambiguous.  In a very real sense, the right to apply DRM technologies can substitute the legal protection of copyrights. Regulation of the content through legal sanctions becomes far less attractive when the content can be controlled directly by built-in technological restrictions.
One problem with the legal framework is that copyrightable content is typically mixed with uncopyrightable content such as facts, public domain materials, or purely functional work, which will also be under the control of DRM systems. There are currently no laws in place to protect against excessive use of DRM technology that exceeds the scope of copyright protection. This might effectively lead to anti-competitive practices and may give leeway for private parties to assert their own interests above public policy aims.
A Global Copyright Registry – Promises and Challenges
The creation of a blockchain-based global copyright registry would open the gates to a world, where the complex regulation of digital copyrights, and the extensive use of DRM technologies could be abandoned once and for all. Potentially, this would be to the benefit of right holders, lawyers, policymakers, and the public at large. The prospect of a global, blockchain-based copyright registry comes with bright promises, but also substantial challenges.
Firstly, blockchains allow digital assets to be precisely tracked through tokens that could be used as evidence of copyright ownership. The tokens will be publicly visible, and any transfer of ownership or license will be recorded on the blockchain ledger, a registry that anyone can access.
Instead of managing copyrights by expensive and cumbersome DRM systems, blockchain technology offers a relatively simple mechanism to control use rights and maintain copyright permissions. As mentioned before, the copyrighted material will be represented on the blockchain by tokens, while the copyrighted material itself will remain off-chain. When the embedded metadata of the tokens contains the rights and permissions of the digital asset, a smart contract encrypted with this information could be used to grant access to the work and facilitate automatic payments to the rights holders.
If for example you buy access to a movie online, the purchase will be recorded on the blockchain. When you want to watch it and open it on your device, communication will be triggered to the blockchain through the retailer’s service. The rest of the process is automated via a smart contract. The smart contract scans the registry for the necessary permissions, and grants you access to the movie. If you have rented the movie for a limited period of time, the smart contract will consult a time-server, compare the current date and time with the time-stamp of the transaction, and take away access once your lease is over. Finally, because of the embedded metadata in the tokens, a smart contract can automatically execute micropayments directly to the crypto wallets of all right holders (the streaming platform, directors, producers, actors, cameramen, soundmen, etc.) soon after you have made your purchase.
Another beautiful feature of this automated process is that the right holders retain full control of who accesses their product even without intruding on the user’s privacy. The smart contract will be encoded in such a way that only the authorized user’s private key will have permission to access the copyrighted material.  I have previously explained the meaning of private and public keys in my article on digital signatures in the Bitcoin network.
When a user wants to stream or purchase digital content, the user sends his public key to the content provider along with the payment. When the transaction has been confirmed, the users will only be able to access the content with his or her private key. The user will stay anonymous on the blockchain as a new public key is generated with each transaction. The individual public keys can be shown on the blockchain whenever the user accesses the product. The private key forms basis of the contract with the right holders that allows the user to access the content.
At the outset of this post, I briefly described two fundamental challenges that stands in the way of adopting a global copyright registry governed by blockchain technology.
The first major challenge is that the technology at its current stage is not nearly mature enough to carry out the huge task of managing copyrights on a global scale. Additionally, the current volatileness of cryptocurrencies makes them unappealing as a means of royalty payment.  The second major challenge is that actors in the entertainment industry will have to be motivated to engage in long and difficult dialogues with each other and with the public sector to realize blockchains potential. It is currently hard to see where the incitement should come from. In the music industry, previous, high-ambitioned attempts to create a global registry of copyrights have failed due to disagreements between the stakeholders, and possibly due to certain stakeholder’s fear of losing out on revenues (see also Problems in the Music Industry).
Even if the technology was fully ready to be adopted, there is a multitude of social, economic, and legal interests that has to be balanced out. Engagement from public sector in the negotiating and implementation process is also immensely important. Otherwise, there is indeed a danger that the blockchain database will be subject to the control of private actors and thus turn out to be a stronger, more intrusive form of DRM.
 Michele Finck & Valentina Moscon (2018), Copyright Law on Blockchains: Between New Forms of Rights Administration and Digital Rights Management 2.0.
 Retrieved at https://satoshi.nakamotoinstitute.org/quotes/economics/?order=desc (26-12-2020).
 Balázs Bodó, Daniel Gervais and João Pedro Quintais (2018), Blockchain and smart contracts: the missing link
in copyright licensing?, International Journal of Law and Information Technology, 2018, 26, 311–336, pg. 320.
 WIPO Copyright Treaty, Dec. 20, 1996 S. Treaty Doc. No. 105-17 (1997); 2186 U.N.T.S. 121; 36 I.L.M. 65 (1997.
 Directive 2001/29/EC of the European Parliament. And of the Council of 22 May 2001 on the harmonization of certain aspects of copyright. And related rights in the information society.
 To amend title 17, United States Code. To implement the World Intellectual Property Organization Copyright Treaty and Performances and Phonograms Treaty. And for other purposes, PUBLIC LAW 105–304—OCT. 28, 1998.
 Lucie Guibault, Guido Westkamp, and Thomas Rieber-Mohn (2012). Study on the Implementation and Effect in Member States’ Laws of Directive 2001/29/EC on the Harmonisation of Certain Aspects of Copyright. And Related Rights in the Information Society. Amsterdam Law School Legal Studies Research Paper No. 2012-28, pg. 81.
 See Ibid.
 Dan L. Burk (2003), Anti-circumvention misuse. UCLA Law Rev 10, pg. 1096–1097.
 Ibid., pg. 1097.
 Ibid., pg. 1108.
 See also Guibalt et. al (2012).
 Finck and Moscon (2018).
 Annabel Tresise, Jake Goldenfein and Dan Hunter (2018), What Blockchain Can and Can’t Do for Copyright, pg. 7.
 the Ibid.
 Guibalt et. al (2012).