IP, Counterfeiting and the Blockchain

With the advent of globalisation on a mass scale in the 1990s, coinciding with the fall of the USSR and the rapid development of emerging economies in Asia, Africa and South America, there has been a correlated rise in the problem of counterfeit goods.

Counterfeit goods are not a benign infringement of one’s intellectual property (‘IP’). Though that pair of knock-off sunglasses you bought from the beachside hawker on your holidays might appear to be a relatively small-scale usurpation of Ray Ban’s IP, counterfeit goods can pose a much more serious issue, even threat, when it comes to health and safety.

Consider counterfeit medicines, for example. The Covid-19 vaccines developed by Pfizer, Moderna, Janssen and Astra Zeneca are all widely available in the UK, Ireland and the rest of the world. Healthcare professionals and their patients rely on the rigorous testing drugs must go through by the European Medicines Board, the Food and Drug Administration (FDA), and others, before they are deemed safe for humans. The drug companies rely on patents of their drugs to both protect their investment (the cost of getting a new drug to market can run into the billions) and to incentivise continuous research and development (R&D). After all, if any pretender could come in and sell the latest wonder drug, why would the pharmaceutical companies bother to commit millions, if not billions, to further R&D?

This is where blockchain technology can be of use to owners of intellectual property. It can help tackle this problem and reduce the risk of harmful goods entering and circulating within the EU.

Blockchains are like a shared and immutable digital ‘ledger’ that allows everyone in a chain or group to have a copy of all transactions conducted between multiple parties in that concerned group. When someone wants to change their own version of the ledger, everyone must agree. Otherwise, the book is no longer accepted by the rest of the network. It’s like a decentralised peer review mechanism.

Decentralised track and trace solutions offer distinct advantages over more traditional centralised and siloed systems. The European Commission, in partnership with the European Union Intellectual Property Office (‘EUIPO’), is exploring how to implement blockchain technology in the area of IP ownership, managing the supply chain of goods and proof of their authenticity.

To address the lack, or perceived lack, of trust among supply chain stakeholders in a given industry, the EUIPO wants to develop blockchain infrastructure that will guarantee access to data relating to goods and their ‘journey’ through the supply chain, which would discourage the making and distribution of counterfeit items (wine & spirits, watches, art, clothing, medicines, and so on). The system would ask the EUIPO to validate rights holders’ identities 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 such as non-fungible tokens (‘NFTs’).

It has become clear that blockchain technology has uses beyond the speculative and volatile cryptocurrency space and the future of IP enforcement is likely to be one where technology such as blockchain and the law such as the existing trade mark, patent and copyright legislative frameworks, will continue working together to reinforce trust in both international commerce and e-commerce for the benefit and safety of consumers.