In the blockchain economy, intellectual property will be obsolete

Canada has a rich history of innovation, but in the next few decades, powerful technological forces will transform the global economy. Large multinational companies have jumped out to a headstart in the race to succeed, and Canada runs the risk of falling behind. At stake is nothing less than our prosperity and economic well-being. The FP set out explore what is needed for businesses to flourish and grow. Over the next three months, we’ll talk to some of the innovators, visionaries and scientists on the cutting edge of the new cutthroat economy about a blueprint for Canadian success. You can find all of our coverage here.

Back in March, amid threats of tariffs, the Trump administration put Canada on its 2018 “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.

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.