High Court finds no copyright protection in bitcoin file format

High Court finds no copyright protection in bitcoin file format

Introduction
Facts
Background
Decision
Comment

Introduction

The recent High Court judgment in Wright & Ors v BTC Core & Ors(1) considered whether copyright could subsist in what was termed in the proceedings as the “bitcoin file format” (ie, the file format used to create blocks on the bitcoin blockchain). A key focus for the English courts when assessing whether copyright subsists in file formats has been the requirement of “fixation” of the work. It is clear from existing authorities that this means that the file format needs to be recorded so as to contain sufficient content and not just the structure.

This judgment arose from an application made “on the papers” for permission to serve copyright and database right infringement proceedings out of the jurisdiction on defendants not located in the United Kingdom. The Court was required to consider whether there was a “serious issue to be tried on the merits of the claim” in deciding whether to grant permission. The Court was not persuaded by the evidence submitted on the papers that literary copyright subsisted in the bitcoin file format. Therefore, a hearing was requested. The resulting judgment considered in detail:

  • the subsistence of copyright in literary works (and particularly the fixation requirement);
  • the anatomy of the bitcoin file format; and
  • whether and how the bitcoin file format falls outside of the protection afforded to literary works in section 3 of the Copyright Designs and Patents Act (CDPA) 1988 due to the lack of fixation.

Facts

The first claimant in the proceedings – Dr Craig Steven Wright – claimed to be the creator of the bitcoin system. Crypto enthusiasts will be familiar with the White Paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System, published by Satoshi Nakamoto on 31 October 2008. Wright claims that “Satoshi Nakamoto” was a pseudonym used by him when publishing the White Paper. Wright will be required to prove this at trial.

The defendants developed the BTC Network and BCH Network – two offshoots of the original bitcoin digital cash system running in parallel. Both of these offshoots used the bitcoin blockchain up to and including block 478,558. In the substantive claim (which is still ongoing), the claimants are asserting infringement of their:

  • database rights in three databases including the bitcoin blockchain up to and including block 478,558;
  • copyright in the White Paper; and
  • copyright in the “bitcoin file format”.

Having satisfied the relevant legal test, permission was given to serve proceedings out of the jurisdiction in respect of the asserted database rights and copyright in the White Paper. This judgment concerns only whether copyright subsists in the bitcoin file format, which is linked to the issue of service out. The defendants were not present or represented at the hearing.

Technology and need for fixation
In the particulars of claim, the bitcoin file format is described as a block comprising three parts:

  • a block header of 80 bytes;
  • the vtx number, which records the number of transactions in a variable VarInt; and
  • the transactions recorded in the block, of variable size.

As the judge understood the position, “each block simply comprises a long list of hex characters”.(2) In essence, the structure of the format is derived from what the software is instructed to read and process when it reads a block. For example, the first four bytes are read to comprise the “nVersion” data field.

The copyright claimed to subsist in the bitcoin file format relies on the format being a “literary work” under section 3 of the CDPA 1988:

  • section 3(1) of the CDPA 1988 sets out that a “‘literary work’ means any work, other than a dramatic or musical work, which is written, spoken or sung, and accordingly includes— (a) a table or compilation and (b) a computer program”; and
  • section 3(2) of the CDPA 1988 adds that “[c]opyright does not subsist in a literary . . . work unless and until it is recorded, in writing or otherwise”.

The Court assumed for the purpose of considering this application that the bitcoin file format was Wright’s own intellectual creation and qualified as a literary work. The judgment focused on whether the bitcoin file format was “fixed” such that it had sufficiently identifiability.

Background

It is a necessary element of section 3(2) of the CDPA 1988 that for copyright to subsist in it a work needs to be fixed – that is, it needs to be identifiable with sufficient precision and objectivity, even though its expression is not necessarily in a permanent form. Not all file formats satisfy this requirement of fixation. In considering whether copyright can subsist in a file format, it is important to look at whether the file format contains sufficient content indicating the structure of the format and not just structure reflecting it. Mellor J stated that “whether an individual file format is protectible depends on the facts”.(3)

The extensible markup language (XML) format is an example of where copyright has been found to subsist in a file format. This was considered in the case of Technomed Ltd v Bluecrest Health Screening Ltd.(4) In that case, the Court noted that Technomed was claiming rights in data formats written in the XML language, rather than the XML language itself. It held that the XML file format exhibited the personal stamp of its author and that it contained “content and not just structure”.(5)

Decision

It was submitted in this case that the requirement for fixation was automatically satisfied when the bitcoin blockchain software was run and that two works could be created in parallel with one another in the same creative process. However, Mr Justice Mellor did not accept this submission. Refusing permission to serve the claim for copyright infringement in the bitcoin file format out of the jurisdiction, Mellor J held as follows:

  • No relevant “work” had been identified containing content which defined the structure of the bitcoin file format. It was true that Schedule 2 of the particulars of claim did contain content which defined the structure of the bitcoin file format, but that had been created for the purposes of these proceedings and did not form part of the causative chain between the creation devised by Wright, the need for an identifiable work and the alleged infringements by the defendants.
  • Having been given various opportunities to do so, the claimants had failed to explain what was in the bitcoin file format, as expressed in the block itself, which comprised content and not just structure.
  • There was no evidence that a block in the bitcoin blockchain contained content indicating the structure of the file format as opposed to simply reflecting that structure. The judge distinguished the bitcoin file format from the XML file format, holding:

Whilst I entirely accept that each block conforms to the structure described in Schedule 2 to the Particulars of Claim and is an instance or manifestation of that structure, the absence of such evidence confirms my initial view that, whether one considers the point at which the first, second or subsequent block(s) were written embodying the structure of the file format, nowhere was the structure of Bitcoin File Format fixed in a copyright sense in a material form in any of those blocks.(6)

Mellor J also observed that it is not surprising that a block did not contain content indicating structure – this would be “unnecessary” and “a very inefficient use of memory”.(7)

Comment

The claimants’ assertion that the concept of “fixation” is merely a formality to avoid any argument later as to what the copyright work is was resoundingly rejected by the judge in this case. Copyright law, as it stands, requires all literary works to meet the formality of being sufficiently identifiable with precision and objectivity. While the claimants were able to show in the particulars of claim what actually made up the bitcoin file format, they could not show this in any contemporaneous recording, despite being afforded five opportunities to submit evidence to support their case, including at the hearing itself. There was no clear or identifiable recording of the work prior to the date on which the infringements were alleged to have taken place.

In an illustration of the flexibility of UK procedure, the judge gave the claimant various opportunities to explain their case ahead of the hearing. As Mellor J admits in the judgment, the claimants were perhaps unlucky in this case that their application happened to come before a judge with knowledge and understanding of the technology in question. There is perhaps an acknowledgment or hint to the fact that a judge less familiar with this technology may have granted permission to serve the claim on the papers. However, this would have only deferred the issue until the trial of the substantive claim.

Nonetheless, this judgment shines a spotlight on whether current copyright law – enacted some 35 years ago – remains fit for purpose as digital technologies continue to advance. It is reasonably foreseeable that new technologies may emerge, aspects of which are not able to benefit from copyright protection. Mellor J was emphatic that the current law as stated and understood would not allow for copyright protection of subject matter that is not fixed or expressed anywhere. It is not surprising, therefore, that he refused permission for the claimants to appeal. However, it remains to be seen whether the claimants will seek permission to appeal directly from the Court of Appeal itself. This judgment might not yet be the end of this tricky issue and it is expected that other software developers will revisit it in future cases.

For further information on this topic please contact Ben Buray, Mark Marfé or Gill Dennis at Pinsent Masons by telephone (+44 20 7418 8250) or email ([email protected], [email protected] or [email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.

Endnotes

(1) [2023] EWHC 222 (Ch).

(2) Id, paragraph 10.

(3) Id, paragraph 38.

(4) [2017] EWHC 2142.

(5) Wright v BTC Core, paragraph 43.

(6) Id, paragraph 57.

(7) Id, paragraph 59.

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