- LawDocs Team
BLOCKCHAIN AND IT’S IMPACT ON LEGAL INDUSTRY
What is Blockchain Technology?
Blockchain Technology is the next-generation technology ensuring the most secure way of data collection and storage. In the real world we have lockers for security purposes similarly in the digital world we have cryptography for security needs. Blockchain is nothing but one of the cryptographic technology. Blockchain technology is a distributed ledger system that records, stores, and tracks digital transactions in the form of blocks which when connected via the distributed network of computers store the blocks forming a blockchain in a secure and reliable way.[i] What distinguishes it from other electronic storage is its immutable character that can neither be deleted nor altered. Blockchains are decentralized, they are not controlled by the government or a private entity. Because of this, it is regarded as one of the most secure and reliable methods of transferring data.
Application of Blockchain in Law:
Blockchain Technology has the potential to revolutionize the law industry across the world. Legal professionals will be able to document and resolve a variety of legal issues because of the blockchain's transparent, immutable, and secure nature. Ledger-based activities in the legal sector can range from property records to court records, chains of custody, financial transfers, legal opinions, and contracts.[ii]
1. Contracts and Smart Contracts
Currently, Legal Contracts are in physical form, which are written and signed by the parties. It takes a lot of time to complete a legally valid agreement and also legal paperwork is susceptible to human error as it is processed manually. Blockchain could put an end to this by making legal contracts more accessible and transparent.
Smart Contract is a computer program that is designed to automatically execute and enforce the term of the contract. It eliminates the need for intermediaries such as lawyers and brokers as the terms of the agreement are self-executing[iii].
Who is involved in binding the Legal Documents in Blockchain?
How are smart contracts created on Blockchain?
Users like parties, lawyers, and signing authorities register to the platform with the government-approved ID-Card.
Lawyers are required to sign-up to the blockchain network with information like ID proof and proof of legal experience
Similarly, signing authorities are also required to register themselves to the blockchain platform with information like ID proof and a government-approved license as signing authority.
After getting approved by the community of admins, an authorized signatory is onboard to the blockchain-based platform.
Parties to the legal issue draft a digital contract with terms and agreements. After the contract is finalized, lawyers get a notification to validate the contract. Lawyers ensure that the terms and conditions adhere to the law of the land and are not arbitrary.
The contract after being validated by the lawyer, is then sent back to the parties for approval and ask if any change is needed. After approval by the parties, the signing authority finalized the contract by signing it.
Once signing the Contract by signing authorities, it is transformed into a smart contract and deployed on the blockchain. Smart Contracts can automate legal operations and minimize the involvement of lawyers. Unlike traditional contracts, they need not be maintained in a bundle of papers and minimize human intervention. Smart contracts would trigger the rules to execute the legal agreement after the specified conditions are met.
2. Intellectual Property
With the help of blockchain technology, user can store their copyrighted works on the blockchain network by providing evidence of ownership and proof of existence. Blockchain can enable secure licensing and distribution of digital content, ensuring accurate attribution and fair compensation for the creators.[iv]
Due to the long time-consuming process, it is difficult to register IP and examine who created the IP first. Blockchain can bring disruption to the handling of patents and trademarks by reducing approval wait times and required resources.
Who is involved in Blockchain-based solutions for IP Management
How the blockchain-based solution for IP management could work
Creators who want to get their work patented, have to sign up for the blockchain-based platform by providing information like name, contact, address, and designation.
Since the data will be on the blockchain, there will be no chance of data disclosure.
After signing up on the network, the next step is to upload the IP for which the patent application needs to be filed. The content creator can upload information related to IP on the blockchain platform.
For uploading the IP, the creator needs to provide the information like Title, Name of the Author, Name of the Owner, Classification, Keywords, etc.
After providing the information, the creator can upload their intellectual property. Saving it on the blockchain enables traceability and auditability to prevent data from manipulation and delicacy. Once it is uploaded, it will be visible to all the owners without the possibility of altering the content.
The consumer who is willing to utilize the content has to register himself to the platform for accessing it. They also would sign-up in the same manner as the content creator did.
The consumer would make a request to the creator to consume its content, if the creator agrees to the request then the smart contract will be formed between them. The contract will store on the blockchain to ensure that they agree on the terms and conditions.
Imagine that a line from a poem has been taken and used without the author's permission as a new company slogan. A sentence from the poem was found in an advertisement that the author reads a few months later. He then makes the decision to contact that company.
The content creator may consult a lawyer if the organization asserts that the line is their original idea.
In place of scheduling a meeting with a lawyer, they may give lawyers access to the authentic publication that is kept on the blockchain.
The ability of blockchain to store time-stamped, auditable documents means that a lawyer can quickly establish the fact that whether or not the company has stolen the line.
The management of evidence from the time it is collected until it is submitted as evidence in a court of law is known as the chain of custody. Chain of custody tells who has collected the evidence, who has handled it, and who analyzed and transferred the evidence. [v] In addition to physical evidence, digital evidence has increasingly become significant in today's court processes because of technological advancements. Text messages, pictures, videos, data on hard drives, internet history, and a lot more are examples of digital evidence.
Evidence is transferred many times; interested parties record the entry and exit of evidence from storage and physically sign documents that leave a paper trail of the evidence's movements. Unfortunately, this approach offers a number of chances for dishonest individuals to contaminate the evidence. Additionally, it gives defense lawyers more room to argue that the evidence has been tampered with.
With the use of blockchain technology, it is possible to create and keep track of a distinct evidence token for each piece of data that is gathered and received, which is then recorded and auditable on a public/private blockchain.
How could a blockchain-based chain of custody platform work?
The evidence collector collects the evidence and stores the related information on the blockchain. While uploading the proof of evidence, the collector has to upload the following data
Unlike the traditional way to store data in a single location, here the information can be distributed across every node in the network to remove the possibility of a single point of failure. Due to its immutable characteristic, it is impossible to alter the ledger. Therefore storing information for a long time cannot affect the historical records.
Once the evidence collector updates the information on the blockchain, digital forensic specialists are notified to work on the evidence.
Forensic experts then analyze the evidence and prepare reports accordingly. After coming up with the conclusion and further information, they save the forensic report on the blockchain.
Every member within the network has access to the report without altering or modifying it.
Every custodian would no longer have to wait for the evidence collector or forensic scientist to provide information. With blockchain, the time to prepare the documentation will be reduced. So blockchain can strengthen the credibility of forensic practice areas which are currently emphasized on paper-based evidence logs and handwritten notes
Legal Issues for blockchain technology in India
As a decentralized ledger, the blockchain's nodes can be found in numerous places all over the world. This implies that every transaction recorded on the blockchain may potentially be subject to the laws of every single state where a node of the network is located, thereby subjecting the blockchain network to an unmanageable amount of laws and regulations, therefore making it difficult to determine which jurisdiction is applicable when it comes to resolving disputes or enforcing contracts.
Another important issue that needs to be addressed is data privacy. Since blockchain is immutable, it is difficult to ensure that personal data is a way that it conforms with the privacy laws. This risk is bound to increase over time due to the permanence of transaction history on the blockchain.
Smart contract governance is another issue that needs to be addressed. Since smart contracts are self-executing and do not require human intervention. The contract's clauses are broken down into "if" and "else" events. These blockchain-based contracts automatically carry out when the required conditions are satisfied; a third party is not required to confirm the transaction. This calls into question whether such contracts can actually be enforced in court. There isn't much room for discussion because everything is automated. It may also be necessary to take into account the elements of an offer, a genuine acceptance, a consensus, deliberation, etc. It is difficult to make changes to the code once it has been deployed.
Although blockchain technology is thought to be extremely safe and "tamper-proof," this benefit is lost if the data that is stored on the blockchain is compromised in the first place. Cybercriminals attack the data entry points rather than the ledger itself, which results in the storage of inaccurate or misleading information.
From the above, we can conclude that blockchain can revolutionize the legal sector if it is utilized properly. Blockchain will also reduce costs in the legal industry as most of the manual tasks can be automated which not only decreased the hours but also the cost. It will make the legal industry more efficient and productive. It will also bring data integrity and transparency though optimizing the decentralized and distributes ledger. It is also evident that there are many pertinent risks in managing these blockchains, but the key is to identify the risks and legal issues accurately to mitigate them as possible. The advantages of blockchain technology has outweigh the potential risks associated with it and the legal industry should take its advantage.
[i] Adam Hayes, Blockchain Facts: What is it, How it works, and How it can be used, Investopedia ( July 27 2023 7:00 PM), https://www.investopedia.com/terms/b/blockchain.asp
[ii] Legal Insights Europe, https://legalsolutions.thomsonreuters.co.uk/blog/2019/01/04/the-application-of-blockchain-in-the-legal-sector/ (last visited July 7 2023, 7:30 PM)
[iii] Jake Frankenfield, What are Smart Contract on the Blockchain and How they Work, Investopedia (July 27 2023 7:40 PM), https://www.investopedia.com/terms/s/smart-contracts.asp#:~:text=Smart%20contracts%20are%20code%20written,parties%20to%20trust%20each%20other.
[iv] Dr Ravi Chamria, Blockchain for protecting Intellectual Property, ZEEVE ( July 7 2023, 8:30 PM), https://www.zeeve.io/blog/blockchain-for-protecting-intellectual-property/
[v] Priyal Jain, Chain of Custody, IPleaders (July 7 2023, 8:00 PM), https://blog.ipleaders.in/chain-of-custody/