The Court of Appeal has granted permission for Craig Wright, who has publicly claimed to be 'Sakoshi Nakamoto', the inventor of Bitcoin, to serve a claim out of the jurisdiction, overturning the decision of the High Court on this point. Dr Wright argues that copyright subsists in the Bitcoin file format (essentially the structure of a Bitcoin block on the Bitcoin blockchain). The Court disagreed with the High Court decision which had ruled that Dr Craig Wright had no real prospect of showing that copyright subsists in the Bitcoin file format, more specifically that the Bitcoin file format satisfies the 'fixation' requirement for copyright protection.
The key lessons from the Court of Appeal's decision are that:
- whether a creation constitutes a work and whether that work is 'fixed' for the purposes of copyright law are different questions; and
- copyright protects a work as ‘an intangible abstraction’, not the particular tangible medium in which it is fixed.
Background and High Court decision
Dr Wright argues that he invented the Bitcoin cryptocurrency and says he is ‘Satoshi Nakamoto’, the pseudonym used by the founder of Bitcoin. Dr Wright claims he owns copyrights in various aspects of the Bitcoin currency including the format of Bitcoin files, or ‘blocks’, on the Bitcoin blockchain – the Bitcoin file format – essentially the structure of a block on the Bitcoin blockchain.
Dr Wright has brought claims against various parties (some of which are located overseas) operating two parallel blockchains, alleging that they infringe the copyright he asserts in aspects of the Bitcoin blockchain.
To serve a claim on a party located outside the jurisdiction, Dr Wright needed permission from the English courts, which required the court to be satisfied that his claim has a real prospect of success in relation to each cause of action asserted in the case.
The High Court found this criterion was satisfied in relation to some parts of Dr Wright's claim, but not others. Specifically, the High Court ruled that Dr Wright did not have a real prospect of showing copyright subsisted in the Bitcoin file format because the 'fixation' requirement for copyright to subsist in a work was not satisfied in relation to the Bitcoin file format.
The fixation requirement for copyright subsistence is found in s.3(2) of the Copyright, Designs and Patents Act 1988 (CDPA) which provides:
Copyright does not subsist in a literary, dramatic or musical work unless and until it is recorded, in writing or otherwise; and references in this Part to the time at which such a work is made are to the time at which it is so recorded.
Dr Wright argues that the Bitcoin file format does satisfy the fixation requirement on the basis that the format, or file structure, was fixed when the first block in the Bitcoin blockchain was written on 3 January 2009.
The High Court ruled against Dr Wright because, for the Bitcoin file format to be fixed, the Judge considered there had to be "content defining (or describing or indicating) the structure" present, which he concluded there was not.
The Court of Appeal decision
Dr Wright's appeal succeeded. The Court of Appeal held that Dr Wright did have a real prospect of succeeding in his argument that the Bitcoin file format is fixed and may, therefore, attract copyright protection.
The Court of Appeal said that for the structure/file format to be fixed for the purposes of copyright law, the structure simply had to be completely and unambiguously recorded. There did not however need to be ‘content defining (or describing or indicating) the structure'.
The judgment (the leading judgment is given by Arnold LJ) contains a helpful discussion of the conditions necessary for copyright to subsist in English law, including that the Bitcoin file format must constitute a 'work', it must be 'fixed' and it must be original. Interestingly, Arnold LJ refers to the requirement that the Bitcoin file format should fall within one of the categories of works listed in the CDPA. This approach has been called into question following a series of decisions of the Court of Justice of the European Union (CJEU) in recent years, posing questions that the English courts are still grappling with.
The Court of Appeal decision does not mean that copyright subsists in the Bitcoin file format or that Dr Wright will succeed in his claim for infringement. These are of course issues that will need to be resolved should this matter proceed to a substantive trial on the merits.
As well as providing an insightful discussion on key aspects of copyright subsistence, the judgment contains two important reminders:
The first is that (1) whether a creation constitutes a work and (2) whether that work is 'fixed' for the purposes of copyright law are different. There are two cumulative conditions for something to constitute a ‘work’: (1) it must be original in the sense it is the author's own intellectual creation and (2) it must be identifiable with sufficient precision and objectivity. Whether that work is fixed is a different question. The Court of Appeal noted that Article. 2(2) of the Berne Convention makes clear a work can exist before it is fixed.
The second is that copyright protects a work as ‘an intangible abstraction’, not the particular tangible medium in which it is fixed. To succeed, a claimant does not need to show the particular fixation has been copied. Arnold LJ gives a helpful example scenario in the judgment:
- Author (A) extemporises an original literary work orally before an audience.
- B digitally records the work (whether with or without A's consent).
- C is in the audience and memorises the work. C later transcribes the work from memory and publishes it without A’s consent.
In this scenario, B’s recording fixes the work and A can rely on B’s fixation to bring a claim against C for infringing A's copyright. So, copyright does not just protect the medium (a digital recording) in which the work has been fixed. Fixations do not have to be permanent – the recording could have been destroyed shortly afterwards.
This will not be the final chapter in the various pieces of litigation in which Dr Wright is involved and nor, no doubt, will it be the final case dealing with IP rights in the context of cryptocurrency and blockchain technology.