Bitcoin & Database Right

Database right came into being in Europe (specifically the European Union) with the arrival in 1996 of EU Directive 96/9/EC on the legal protection of databases (the "Database Directive"). This was put into effect the following year in the UK by way of the Copyright and Rights in Databases Regulations 1997 (the "Database Regulations"), which is still in effect in the UK with a few post-Brexit amendments. 

Database right was an entirely new ('sui generis', i.e. of its own kind) thing, similar to copyright but intended to cover things that copyright could not cover directly, in particular pure information rather than literary works. In simple terms, database right was intended to protect a database owner's investment in creating and maintaining their database from being appropriated by others using information from the database without their permission. 

An early case in the UK relating to database right was British Horseracing Board v William Hill which, after a referral to the ECJ, ended up at the UK Court of Appeal in 2001. BHB's database right in racing data was found to be infringed by William Hill's unauthorised extraction and reuse in their online betting service. The case established that database right was potentially quite powerful for preventing others from using information that would not itself qualify for copyright protection. 

More recently, in November 2022 a claim was made by Craig Wright against various Bitcoin developers and companies, claiming infringement of copyright in the Bitcoin software, White Paper and 'Bitcoin File Format', along with infringement of database right in the Bitcoin blockchain. The copyright claim is fairly straightforward, in that Mr Wright claims to have written the White Paper and Bitcoin software and therefore anyone using or copying either will be infringing his copyright. This is, of course, disputed and the outcome will depend on whether Mr Wright can prove his claim. This will proceed to trial, although with the exception for the time being of the copyright claim to the Bitcoin File Format, which was struck out last week as having no prospect of success. The claim to database right, which will also be the subject of the trial, is a bit more complicated and, to me at least, is an interesting one to pick apart. So, in a change to my usual commentary on patent matters, I will carry out a brief review of database right, how this might be applied to Bitcoin and whether Mr Wright has any plausible claim. 

Firstly, what is a database? According to Section 6 of the Database Regulations a database is "a collection of independent works, data or other materials which - (a) are arranged in a systematic or methodical way, and (b) are individually accessible by electronic or other means". This broad definition appears to cover the Bitcoin blockchain. This is a series of data blocks that started to be created on 3 January 2009 and continues to be created with a new block arriving on average every ten minutes. Each block is generated by 'mining', which is a process of collating all transactions transmitted to the Bitcoin network that can be fit into a single (size limited) block, the block being created by the miner that finds a hash value for the block that meets a particular target difficulty. Once created, all other nodes on the network validate the block as correct and it becomes the next one in an unbroken chain, with each block referring to its immediately preceding block. The Bitcoin blockchain, which is accessible to anyone with an internet connection, therefore should qualify as a database, with the blocks being independent works in the database that are arranged in a systematic way and accessible by electronic means. 

Secondly, it is crucial to define who the maker of the database is. According to Section 14 of the Database Regulations, the maker is "the person who takes the initiative in obtaining, verifying or presenting the contents of a database and assumes the risk of investing in that obtaining, verification or presentation". The important part of this definition is the need for investment, which goes to the heart of why database right was created in the first place. The person who takes the initiative and assumes the risk of investing in creating a Bitcoin block is the miner. Mining is an energy-intensive process, requiring a large number of calculations to be made to find a correct hash value to mine a block. To do this requires substantial investment in equipment and energy. The maker of any Bitcoin block must therefore be the miner. In practice, this would be the person or company responsible for running a particular mining operation that created a block. 

There are in reality lots of miners, all independently trying to create new blocks in a competitive process that over time drives up the cost of creating blocks. The Bitcoin blockchain will therefore have many different makers. This is accounted for by Section 14(6), which states that "a database is made jointly if two or more persons acting together in collaboration take the initiative in obtaining, verifying or presenting the contents of the database and assume the risk of investing in that obtaining, verification or presentation". So, the Bitcoin blockchain is a database with many different makers. The miners can be considered to collaborate, given that each block is, once mined, transmitted to all other miners who then use it as the basis for subsequent blocks.

Thirdly, we need to define who actually owns the database. Section 15 simply states that "The maker of a database is the first owner of database rights in it". The Bitcoin blockchain is therefore a database that has many joint owners, all of which are miners. 

There is, however, a catch. Database right was originally defined by Section 18 as a right that would only apply to individuals and bodies national or resident within the European Economic Area (the EU plus a few extras). Following Brexit, this was redefined in the UK to be individuals or bodies national or resident within the UK (plus the Isle of Man). The Bitcoin blockchain would therefore only qualify for database right if blocks were made within the EEA or, as from 31 December 2020, within the UK. A further qualification to this is that the making has to have been at a "material time", which is defined as "the time when the database was made, or if the making extended over a period, a substantial part of that period". This would appear to allow for some part of a database to be made outside of the EEA or UK, provided a substantial part of it was made within the EEA or UK. It is evident that some blocks will inevitably have been made within the EEA since the creation of Bitcoin, but does this amount to a "substantial part"? 

Where does this leave Mr Wright? In his Particulars of Claim (PoC), he defines the Bitcoin blockchain as a database within the meaning of the Regulations, defining it in particular as the part from blocks 0 to 478,558 on 1 August 2017 and further in the period from October 2015 to 1 August 2017. Mr Wright, from his claim to have invented Bitcoin, also claims to be the owner of the database right in the blockchain. Mr Wright is, however, an Australian national and was, until around October 2015, resident in Australia. On this basis alone therefore, his claim does not appear to establish that there is any database right in the Bitcoin blockchain. To establish that there is, he would need to show that he was a joint maker in collaboration with others who would qualify as EEA/UK nationals or residents. This seems to be a difficult hurdle to overcome. At best, Mr Wright could claim to be a joint owner of database right in the Bitcoin blockchain, but only if other joint owners within the EEA or UK collaborated with him. 

But what about the period from October 2015 to 1 August 2017? If Mr Wright was in the UK during that period, wouldn't that establish a claim to database right? Perhaps, but only if he can prove that he created some blocks during that period. Mr Wright may then be able to claim to be a joint owner of database right without needing others to join him. There is, however, unfortunately no evidence provided to this effect. 

Another puzzle is, if database right is found to subsist in the Bitcoin blockchain, whether one out of many joint owners of the database is permitted to bring an infringement action without the permission  or involvement of the other joint owners. The Database Regulations do not say how action can be taken for a jointly owned database, but for other IP rights such as copyright and patents the other joint owners would need to be involved and at least made parties to the proceedings. This would clearly be a difficult process for the Bitcoin blockchain, involving possibly many thousands of parties, many if not most of which will be unidentifiable. 

As a final point, even if Mr Wright were to somehow overcome all of the above hurdles, he would still need to prove that he actually created some of the blocks of the blockchain. To anyone familiar with how Bitcoin works, this would be very simple. All that would be needed is to provide a signature verifying ownership of coins in the relevant coinbase addresses. Mr Wright has failed to do this for any addresses, so the possibility of this coming about seems remote. 

In summary, although the possibility of the Bitcoin blockchain qualifying for database right appears at least theoretically possible, the chances of Mr Wright establishing that he is an owner, let alone the sole owner, of the database right appear to be very small. I look forward to finding out how the trial turns out, but I suspect we will be waiting for quite some time. 

Postscript (20 Feb 2023): Although the database right question can most likely be resolved without needing to look at whether anyone is infringing Mr Wright's IP, if we consider that database right does subsist in the Bitcoin blockchain, can any owner claim infringement? This can be resolved simply by looking at the wording of Section 16, which states that "a person infringes database right in a database if, without the consent of the owner of the right, he extracts or re-utilises all or a substantial part of the contents of the database" (emphasis added). What happens once a block is mined? The miner immediately transmits the mined block to all others on the network so that they can verify it and add it to the blockchain. Otherwise, the miner will not be able to claim their coinbase and transaction fees for mining the block. A condition of mining is therefore that the miner consents that all other nodes on the network can copy and verify the block. Therefore, even if the miner is determined to be the owner, they automatically consent to the block being extracted or re-utilised by the act of transmitting it to other nodes on the network. There can therefore be no infringement of any database right in a Bitcoin block. 

What Does My Claim Cover?: UNION-IP Roundtable, Munich, 24 February 2023

It is almost inevitable that at some point during prosecution of a patent application, amendments will need to be made. If amendments to the claims are made, this will undoubtedly affect the scope of protection of the resulting patent. Indeed, this is the primary aim of making amendments to the claims. However, it is not clear whether amendments made to the description are either necessary or would actually result in the scope of protection being affected post-grant. 

The European Patent Office would like everyone to agree with them that it is important to amend the description to align it with the claims because "Any inconsistency between the description and the claims must be avoided if it could throw doubt on the subject-matter for which protection is sought" (Guidelines F-IV 4.3). But is this necessary? Is it justified by the case law? Is it even relevant for post-grant proceedings at national courts? To address these questions, UNION-IP has gathered together some illustrious and knowledgeable people from across Europe to discuss the matter at a 'roundtable' event to be held at the German Patent and Trade Mark Office (DPMA) in Munich on Friday 24 February 2023. 

The event, titled "What Does My Claim Cover? - Intended and Unintended Consequences of Amendments During Prosecution and Post-Grant Proceedings", will be an excellent opportunity to debate the impact of the changes to the Guidelines for Examination (F-IV 4.3 in particular) in relation to amendments to the description, in judicial proceedings and before the EPO. There will be two panels comprising speakers including judges and experienced professionals.

The first panel, which will discuss the changes to the Guidelines and how they have changed practice at the EPO, will include Gerry van Dooren (EPO DG1 Operations Director), Felix Hermann (Boehmert & Boehmert) and Thomas Burchardi (Ericsson).

The second panel, which will discuss how claim scope is affected by the description in litigation, will include Edgar F. Brinkman (Senior Judge, District Court of The Hague), Matthias Zigann (Presiding Judge at Regional Court Munich, UPC Judge for Munich Local Division), James Mellor (UK Patents Court Judge) and Lionel Martin (August Debouzy). 

The panels will be moderated by UNION-IP Patents Commission President Rui Gomez and Vice-President Joana Santos. The event will be introduced by Fabian Edlund, President of UNION-IP, together with Bernd Maile, Vice-President of the DPMA. 

The registration fee, which includes lunch at the DPMA (which has always been very good at past events) is 175 Euros for non-members and 120 Euros for UNION-IP members. 

A brochure for the event, which includes details of how to register, is available here from the UNION-IP website. 

The event is the first one to be held in person since February 2020, so will be a very good opportunity to finally get out of the office and meet some people in real life, particularly as trips to Munich are getting more infrequent. I look forward to seeing you there!

University IP and Fair Shares: What's Not to Like?

A long time ago, while I was working as a post-doctoral researcher, I invented a thing. It is not important what that thing is (but you can check here if you're interested). What was important is that it was of commercial interest to a company I was working with at the time. The company came to an agreement with the university and bought the IP rights, which was primarily the invention itself. A while later I went to work for the company to help them develop the invention, from which many other patent applications followed. This was interesting for a while until I got distracted by the IP aspects of the work and switched to becoming a patent attorney. The invention therefore, in a roundabout way, led to my change of career, which has turned out quite well so far. 

Without going into too much detail, a key aspect of the change of career turned out to relate to the contractual terms at the university that specified how much was given to the inventor(s) and how much the university got from proceeds relating to an invention. The share at the time, which was decided at the university level, was that the university's commercial arm would take an initial cut and the rest would be divided between the relevant university department and the inventor(s). Since I was the sole named university inventor on the patent application, the inventor share was all mine. At the time, it did not occur to me to think that the share was in any way unfair, as I thought it was quite generous. I was after all employed by the university, so whatever I did on work time was understood to belong to the university. If I were to be working for a private company I would not expect to receive any share of the proceeds, particularly if I was employed in a position where it was not unreasonable to expect that an invention might come up at some point. The deal therefore seemed to me to be a fair way to compensate those who might come up with something commercially useful, perhaps partly because those working at a university might not be paid as well as those in the private sector.

The ONI nanoimager: literally a black box.

It turns out, however, that not all university researchers felt the same way as me, as I found by reading the recent decision in the case of Oxford University Innovation Limited v Oxford Nanoimaging Limited [2022] EWHC 3200 (Pat), which issued just before Christmas. The decision is extremely long winded, running to 651 paragraphs (177 pages in the pdf version). The case, however, is actually relatively simple and deals with two key points. The first is the issue of whether an invention should be owned by an employer under Section 39, while the second (which takes up the bulk of the judgment) deals with whether a contractual agreement between a lowly researcher and a University employer is unfair pursuant to the European Directive on Unfair Terms in Consumer Contracts, 93/13/EEC (the UTCD). 

What's inside the black box?

The story started with a talented researcher named Jing Bo (Mr Jing), who went to work at the University of Oxford in 2012 to help develop a new microscope. Mr Jing invented an improved version of a microscope that researchers at the University had been working on. Two patent applications covering the new microscope were applied for, the first one published as WO 2015/059842 A1 (see Fig. 2 of the application here) and the second as WO 2016/170370 A2. 

The microscope was considered to be of sufficient commercial potential that a spin-out company was formed, Oxford Nanoimaging Limited. In line with the University's usual terms, ONI was set up so that the inventors (Mr Jing and two others from the University research group) owned 50% of the shares and the University owned the other 50%. Any royalties paid were also arranged to be distributed so that both the University and the inventors received a share. The company, with Mr Jing working first as CTO and then as CEO, turned out to be quite successful and royalties started to come in. At that point, you might imagine all would seem well. The University would be justified in getting their share of the proceeds and the inventors too, with Mr Jing being in his position due largely to being the right person in the right place at the right time to take advantage. 

In 2019, however, ONI, under Mr Jing's charge, stopped paying royalties to the University. By 2021 the amount owed to the University stood at over £700k (and has increased since). The dispute between ONI and the University (or more specifically its commercial arm, Oxford University Innovations Limited, or OUI) was that Mr Jing challenged the University's right to own the inventions under Section 39 of the UK Patents Act and also challenged the terms of the contract agreed to by Mr Jing while working at the University as being unfair due to the status of the parties being unbalanced at the time. 

Section 39 states that "an invention made by an employee shall [...] belong to his employer [...] if it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties". Mr Jing argued that he was a lowly researcher, who was paid very little at the time of coming up with the invention, and should not therefore have his invention owned by the University because it was not reasonable to expect that an invention might result from his employment. A problem with this argument, however, was that Mr Jing did a very successful job at selling himself to the University to get the position in the first place, providing references that described him as someone who "thinks very logically and analytically" and was "skilled at solving technical problems". Mr Jing was indeed not paid very much, but the judge found that he was engaged to work on a potentially exciting project and he was an experienced researcher who was expected to do valuable work on the microscope project. It was therefore clear that an invention could reasonably have been expected to arise (see paragraphs 211-212). The judge also considered that "The pay of an employee was not a relevant consideration under s.39 if, because of their duties and characteristics, invention would be expected from them" (para 213). 

From a patent law perspective therefore, the decision seems uncontroversial. I would have been very surprised had the judge found any differently. Even though there are few precedents, the principle is clear: if you are paid to invent then the invention belongs to your employer. Considerations beyond this that go into whether the amount paid was not enough to justify ownership of any inventions is not for a court to decide. 

The other point is of less interest to me as a patent professional, but has some interest from a personal perspective, having been in a similar position to Mr Jing while at another university. I will not even attempt to summarise the legal analysis in the judgment, which runs to over 400 paragraphs. The gist, however, is that Mr Jing, while working as a DPhil student (which followed a short period of employment during which he came up with the first microscope invention), should have been treated as a "consumer" within the meaning of the UCTD and the University should have treated him as such. The terms of the contractual agreement, however, as noted briefly above, were not unfair and the positions of the parties were not unbalanced. Indeed, the terms were much better than any employee working for a private company could have expected to get. As the judge found, the University's "general benefit sharing policies were not out of line with those of other institutions when the issue is properly examined, including with regard to the scope for differences in reasonable policy choices the University could make" (para 559). There was no unfairness in the way the University allocated benefits under its IP Provisions as between researchers and the University, including as to share of royalties and equity. Those most involved in the project received substantial equity shares and royalties and the University, supporting the work, ensured that the benefits were spread more widely. This was not unfair but instead, as the judge noted, "the reasonable response to such a scenario is not a complaint but: 'what's not to like?'" (para 562). 

In summary, it seems that the case does not set any new tests or guidance regarding University inventions or how proceeds from such inventions should be handled. Instead, it in effect largely confirms that what Universities have generally been doing for a long while is quite fair, if not generous, and there really is no need to complain if you are or were a University researcher and your invention becomes successful. A small share in something very big is, after all, better than a big share of nothing at all. 

A Change in Practice for Compliance Periods and 'Divisionals' in the UK

The way that 'divisional' applications are treated in the UK is a bit different to how they are treated at the EPO. This sometimes catches applicants out, which I wrote about a while ago in this post. In brief, unlike at the EPO where the rule is that a divisional application can be filed as long as there is a pending parent application (with some additional leeway for the time allowed for filing an appeal against refusal), Rule 19(2)(b) of the UK 2007 Patents Rules requires a new application under section 15(9) (commonly termed a divisional application) to be filed before the period ending three months before the compliance date of the earlier application. The compliance date is defined by Rule 30 as the end of the period of four years and six months from the date of filing (or the earliest priority date) or, if later, twelve months from the date of the first examination report. This can sometimes catch applicants out if they find themselves running up to the end of the compliance period and, with their EPO frame of mind, thinking that they still have time to file a divisional while the parent is still pending. Although extensions are available to the compliance period under Rule 108, any as of right extension is limited to only two months. It is therefore necessary to rely on the discretion of the examiner to get a divisional validly filed if you are already less then two months away from the compliance date. 

Practice at the UK IPO has been to take any extension to the compliance period applied to the parent application as being also applied to any divisional application. The effect of this has been that, in some cases, applicants can take advantage of repeated extensions to the compliance period and still file a divisional application if things are not going their way just to keep something pending. An example of this is in decision BL O/610/22 (Wei Xu), where the applicant filed repeated requests under Rule 108 to keep extending the compliance period and filed several divisional applications, keeping prosecution going on multiple related applications for years. The IPO eventually grew tired of this and refused to grant any further requests under Rule 108 because the applicant was not making any realistic attempts to progress the applications. It looks like this kind of practice, if not this actual case, has now made the IPO look again at how the compliance period should be determined for divisional applications. The IPO has recently issued some statutory guidance on how they will be determining the compliance period as from 1 May 2023. This states:

In accordance with r.30(3)(b) of the Patents Rules 2007 (as amended), from Monday 1st May 2023, the IPO will attribute to a divisional application filed on that date or after, a compliance period of:

• four years and six months beginning immediately after

(i) where there is no declared priority date, the date of filing of the application, or

(ii) where there is a declared priority date, that date; or

• if it expires later, the period of twelve months beginning immediately after the date on which the first substantive examination report is sent to the applicant, in relation to the earlier parent application.

This change in practice will mean that the IPO will no longer treat the compliance period of the earlier parent application that has been extended under r.108(2)/r.108(3) as the un-extended compliance period of the divisional application. Extensions to the compliance period of both parent and divisional applications will continue to be available under r.108 in the normal way.

The key part of the guidance is underlined above. The effect of this is that the practice of repeated extensions will no longer allow applicants to keep the option open of filing divisionals. This will also very tightly compress timescales for getting divisionals allowed, relying more on the IPO's discretion to allow extensions. Applicants and their attorneys, particularly those used to the more generous provisions at the EPO or USPTO, should pay close attention.