September 2, 2021

Blockchain Applications in the Legal Field

Introduction

In recent years Blockchain has created quite a buzz, and could quickly make its way into the legal tech sphere. The success of Blockchain emerged with the success of crypto-currencies. It can transform e-payment, electronic medical records, education credentials, etc. If we consider its applicability in the legal sphere, it has tremendous potential to revolutionize Electronic Signatures, Intellectual Property Rights, Chain of Custody, Arbitration, and so on. This article mainly focuses on the scope of Blockchain in the legal industry. 

What is Blockchain?

In 2008, someone using the pseudonym of Satoshi Nakamoto first described Blockchain in a paper distributed online.  The concepts of Nakamoto’s paper were implemented to create a private decentralized form of digital cash, called Bitcoin. Bitcoin was the first production of the Blockchain system. It was followed by others like Ripple and Ethereum which facilitates cross border transactions and smart contracts respectively. 

In simple terms Blockchain is a chain of blocks that contains information. It is a decentralized system that is near to impossible to modify or be tampered with. Imagine you own a grocery store. As the owner you keep a ledger containing records of all the goods you've purchased or sold, from whom you’ve received goods, and to who you've sold. Blockchain is exactly like that ledger, and each record is a single block. 

Each Block has 3 types of information. Firstly, the relevant information, if we take the example of Bitcoin the relevant information would be transactions, public addresses, etc. Secondly, based on the information stored inside a block, a unique code is generated i.e hash. Lastly, the previous hash. The hash of the previous block is stored in the hash of the subsequent one, and so on. In this way a chain is formed. This not only makes it easy to track information but also keeps it unique, which in turn makes it difficult to tamper with the information. The security of a block chain comes from its creative use of hashing and its proof of work or stake mechanisms¹.


Scope in the legal field


Smart Contracts

The term smart contract was first used in 1997 by Nick Szabo who wanted to use a smart ledger to store contracts. They are similar to the contracts of the real world, the only difference being that they are digital. It is a tiny computer program stored inside a Blockchain. The main feature of smart contracts is that they are immutable and distributed. Once a smart contract is created it can never be changed again. This decreases the risk of it being tampered and ensures that no one can go behind your back to tamper with the code of your contract. 

Smart contracts are self-managing in the sense that they are triggered by an event such as the passing of a simple event like when payment has been authorized, a shipment delivered and so on. Business teams usually work with developers to describe their requirements for the desired behavior of the smart contract in response to various events or circumstances ².

Intellectual Property rights

Blockchain can be used as an IP registry where owners can keep digital certificates of their IP, as well as collect royalties from those intending to use their creations or inventions with the help of smart contracts. Registration and authorization of patents is tedious and time-consuming. The approval time from the relevant agencies and other regulatory bodies is slow-moving. This obstructs the path for many inventors who need to act fast in order to safeguard their inventions and stay on top of their game. By placing the current centralized system with a decentralized one, the process of registration, and transfer of ownership becomes efficient and trouble-free. 

Using Blockchain authors can obtain tamper-proof evidence of copyright ownership. As discussed above a Blockchain transaction is immutable, so once a work has been registered to a Blockchain, that information cannot be lost or changed. Further, it can help in establishing the complete chain of ownership including licenses, sub licenses and agreements. There is a platform called Binded that is based on Blockchain. It allows authors to register their works, and helps them to keep a track of how and where their work is used. This platform in integration with the US Copyright Office, Instagram, and Twitter monitors how copyrighted images are used. Registering any work on the platform provides the owner with a digital ownership certificate. 

Elections

Blockchain can enable secure and fair elections. One of the major fears faced by democratic countries is alteration or manipulation of votes. There is a concern among citizens that their vote could be altered, discharged, or replaced after they cast it and before it is tabulated. An electronic voting system backed by the technology of Blockchain can keep voter fraud and manipulation in check. Voter records could be updated and maintained in a more secure manner. Further, Blockchain based voting also solves the problem of voting accessibility especially for marginalised or disabled people, or for those living in rural areas. It can encourage participation in the electoral process ³.

Some countries have already taken a step towards integrating Blockchain with elections. The South-Korean government has approved a pilot of a Blockchain-based voting system through the National Election Commission that can be used by more than 10 million people. The government of India has also considered using Blockchain based elections for remote areas, and have announced mock trials this year. 

Chain of Custody

Chain of custody is the forensic chain of evidence, from the time it is collected to the time it is presented in court. In this process the evidence is passed from one hand to another logging it in and out for the purpose of inspection, analysis, and so on. Each and every movement of the evidence from one hand to another must be recorded. This can lead to tampering and tainting of evidence, which gives an opportunity for defence lawyers to raise the question of its credibility. It is essential that the chain of evidence has integrity, traceability, authentication, verifiability, and security ⁴.

Blockchain can help to mitigate the risks related with handling evidence. It can help to examine the historical chain of custody. Anybody who needs to interact with the evidence has their information immutably recorded in the block. The chain of blocks also makes authenticity and verifiability evident. As Blockchain is a decentralized system, it makes the chain of custody block tamper proof.  

Arbitration

Arbitration is the foremost alternate dispute mechanism parties choose when a dispute arises. It is a clause independent to the contract, and is triggered when the parties agree to submit the dispute to arbitration. Adding Blockchain to the current system of arbitration has many benefits. In an automated environment the arbitration clause would activate once a certain event like non-delivery of goods or non-payment has been breached. It will make processes like submissions of claims, counter claims, evidence easier. Further, it can help in the enforcement of an arbitral award. The awards could be drafted in such a way that they automatically become enforceable once certain conditions have been met. This can strengthen the reliability of these awards as well as lower the cost of the arbitration process ⁵.

Conclusion

The Blockchain offers many potential world changing opportunities in the legal field. To most people this technology is relatively new, and its integration with law will take some time. Nevertheless, as discussed many companies in different parts of the world have already begun using Blockchain to mingle it with law and have already acquired some desired results. There may be some reluctance in the beginning for the adoption of a new technology due to fear or apprehension. But in the near future we are certainly going to witness a greater utilization of Blockchain in the legal field.

References

¹ Kevin Werbach, Trust, but Verify: Why the Blockchain Needs the Law, 33 BERKELEY TECH. L.J. 487 (2018).

² https://www.mondaq.com/turkey/fin-tech/967452/Blockchain-smart-contracts-and-arbitration

³ https://www.automation.com/en-us/articles/january-2021/the-future-of-Blockchain-in-intellectual-property

⁴ https://consensys.net/Blockchain-use-cases/law/

⁵ https://www.mondaq.com/turkey/fin-tech/967452/Blockchain-smart-contracts-and-arbitration

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