The Court of Appeal in London has allowed an appeal against a decision of the High Court. The High Court rejected a claim that literary copyright subsisted in a file format used in the Bitcoin system. The question arose when the court was asked for permission to serve the claim outside of the jurisdiction, that being the UK. The court had to consider whether “a serious issue was to be tried on the merits” regarding the litigation brought by Dr Craig Wright. Dr Wright claimed he was the identity behind the pseudonym, Satoshi Nakamoto, the inventor of Bitcoin. In the High Court’s view, there was no real prospect of success for Dr Wright as the Bitcoin File Format did not meet the fixation requirement under copyright law. This brings into sharp focus the requirements necessary for a work to be considered copyright protectable.
The fixation requirement
The concept of fixation is referred to in Section 3(2) of the Copyright Designs and Patents Act 1988 which provides that copyright does not subsist in a literary work unless and until it is recorded, in writing or otherwise. Under Irish law the equivalent provision is section 18(1) of the Copyright and Related Rights Act 2000. This similarly states that “Copyright shall not subsist in a literary, dramatic or musical work or an original database until that work is recorded in writing or otherwise by or with the consent of the author”.
The Bitcoin file format
The subject matter of the claim involved a blockchain. The Court described a blockchain as “a distributed ledger in which transactions are verified in blocks. Each new block is then linked to the previous verified block. Transactions are verified by a process called "mining", which can be carried out by anyone with a sufficiently powerful computer, in exchange for a reward in Bitcoin. "Mining" is a form of "proof of work", which essentially involves solving cryptographic puzzles, in order to achieve consensus (rather than depending upon validation by a central authority). Each new block must be in the correct format. This format is referred to as the Bitcoin File Format.”
Dr Wright in his claim defined the Bitcoin file format as the work "consisting of the structure of each block of the Bitcoin Blockchain as described in Schedule 2" to the Particulars of Claim. The overall structure of a block consists of three parts:
- A block header of 80 bytes.
- The vtx number, of 1-9 bytes, which records the number of transactions in a variable VarInt,
- The transactions recorded in the block, of variable size. The block header consists of six different fields.
Schedule 2 went on to describe the transactions part of the block which comprise two types: normal and "coinbase" transactions. Further paragraphs in Schedule 2 explained the general structure of a transaction, the structure of an input and an output in a normal transaction, which differ. In addition, Schedule 2 discussed the structure of the input in a coinbase transaction, this included that the output has the same structure.
High Court judgment
In the High Court, it was accepted that the Dr Wright had put much work into creating the Bitcoin File Format which he created while writing the code for Bitcoin. The court also agreed that there was no reason why two different works could not be created in the same process.
However, the court found that it was not correct to say that the creation of a block in the Bitcoin File Format was sufficient to meet the fixation requirement. This was for two main reasons:
- Dr Wright had not identified a “work” which contained content that defined the structure of the Bitcoin File Format, and
- No evidence had been presented which explained the content of the Bitcoin File Format rather than its mere structure. It was made clear that in order for a work to be protected by copyright, both content and structure needed to be identifiable.
Court of Appeal overturns
In its judgment, the Court of Appeal highlighted five flaws which were present in the High Court judgment:
- The statement that no relevant work had been identified confused the work and the fixation: the Bitcoin File Format was clearly identified as the work and the question for the court is how and when it was fixed.
- That statement presumes that for fixation to exist, there is a requirement that there is content that defines the structure of the Bitcoin File Format. This, the Court of Appeal ruled, is not necessarily correct. All that is required is that the structure be completely and unambiguously recorded.
- The correct test was not applied. That test was whether the Bitcoin File Format was identifiable with sufficient precision and objectivity?
- The rationale for the requirement of fixation, which serves both to demonstrate the existence of the work and to delimit the scope of protection was not considered.
- The Court of Appeal also indicated that it is not necessary to show a causative chain between the alleged copyright work and the alleged infringements.
In addition, sufficient weight had not been given to evidence provided by Dr Wright in the proceedings. His evidence showed that third parties could in fact deduce the structure of the Bitcoin File Format which supported his case.
In conclusion, Dr Wright now has permission to proceed with his claim.
In terms of wider relevance, this case, while being a decision of the UK courts, will have a persuasive effect in an Irish context. It also highlights two conditions which must be met to qualify for copyright protection:
- The subject matter of the work must be original in that it is the author’s own intellectual creation, and
- The work must be expressed in a manner which makes it identifiable with sufficient precision and objectivity.
This test seems standard from the CJEU’s perspective and has in the past meant that purported works such as taste cannot qualify for copyright protection. However, in the case of works capable of being represented in writing such as in the present Bitcoin context, it is easier to establish such precision and objectivity.
This case will also be important when considering copyright protection for those dealing with software and more technical works deserving of protection.
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  EWCA Civ 868