Technologies associated with blockchains have raised many novel issues of law. One of the issues is whether copyright is capable of subsisting in file formats used in the Bitcoin System. This issue was raised in the recent U.K. case, Wright & Ors v BTC Core & Ors [2023] EWHC 222 (Ch) (07 February 2023). In what can only be described as a technical question of copyright law, Justice Mellor concluded that copyright did not exist in the file format because the fixation requirement for copyright subsistence was not met. I have to say, the reasons for the decision left me scratching my head.
Background to the BTC Core case
The action was brought by Dr Wright (who claims to be Satoshi Nakamoto), the creator of the original Bitcoin code and the author of the White Paper, Bitcoin: A Peer-to-Peer Electronic Cash System, which essentially describes the Bitcoin System. The action is one of four actions in which there is a common issue as to whether Dr Wright was or is Satoshi Nakamoto.
The action at issue arose from Dr Wright’s application for permission to serve a claim out of the U.K. jurisdiction. The issue concerned the claim of subsistence and infringement of copyright in the alleged literary work referred to as the Bitcoin File Format. To succeed, Mr Wright had to prove there was a serious issue to be tried.
Dr Wright claimed to be the owner of certain database rights in three databases, namely (i) the Bitcoin Blockchain, (ii) the Bitcoin Blockchain (as it stood on 1 August 2017 at 14.11 – up to and including block 478,558) and (iii) another part of the Bitcoin Blockchain made in another period. Dr Wright also claimed he owns the copyright in the White Paper and the Bitcoin File Format.
He brought the claim because he objected to two ‘Airdrops’, each of which he claimed effected significant changes to the Bitcoin System and which deviated from the principles and protocols he had created and specified. The first Airdrop resulted in the BTC Network. The second, created the P2P BCH Network.
Dr Wright alleged infringement of database rights (a right that exists in the EU and under the U.K. Copyright, Designs, and Patents Act, but which does not exist in Canada) and copyright to prevent the further operation of the BTC Blockchain and the BCH Blockchain without his consent.
Both the BTC Blockchain and the BCH Blockchain contain the Bitcoin Blockchain up to and including block 478,558. Dr Wright claimed that the operation of the BTC Blockchain and the BCH Blockchain resulted in the extraction and/or re-utilisation of all or substantial parts of the databases in which he owns database right. He also alleged that the White Paper (a literary work) is included in block 230,009 of the Bitcoin Blockchain and therefore use of the BTC Blockchain and the BCH Blockchain entailed a reproduction of block 230,009 and reproduction of the entire White Paper, all done, so Dr Wright alleged, without the consent of him as the copyright owner.
Justice Mellor was satisfied that the claims in database right and of infringement of copyright in the White Paper raised serious issues to be tried and therefore service out of the jurisdiction of those claims should be permitted.
However, Justice Mellor concluded that there was no serious issue to be tried regarding the allegations concerning the Bitcoin File Format. In his view, there was no evidence that the file format met the copyright fixation requirement under U.K. law. This requirement, which is similar to the fixation requirement for subsistence of copyright under Canadian law, requires the subject matter protected by copyright to be expressed in a manner which makes it identifiable with sufficient precision for a period of time, though it does not need to be in a permanent form.
Summary of the evidence and reasons for decision
Dr Wright filed several witness statements concerning the creation and characteristics of the Bitcoin File Format.
He stated that he “devised and created the Bitcoin File Format in the course of writing the code for the Bitcoin System. When the software runs and the hashing problem is solved, the software creates blocks in the Bitcoin File Format which are added to the Bitcoin Blockchain file.”
He explained that the first block in the Bitcoin Blockchain is a special block known as the “Genesis Block”. He stated that he ran the Bitcoin Software and created the Genesis Block, an anchor value which is unique to Bitcoin.
He also provided a statement as to what the Bitcoin File Format is. The judge accepted it stating:
There is no doubt as to what the Bitcoin File Format is. It is described in Schedule 2 to the Particulars of Claim. The overall structure of a block comprises three parts: 1) a block header of 80 bytes; (2) the vtx number, of 1-9 bytes, which records the number of transactions in a variable VarInt; and (3) the transactions recorded in the block, of variable size.
However, after reviewing the evidence he was not satisfied it addressed the fixation issue:
All this evidence says is that blocks were written to file in the Bitcoin File Format, i.e. the data in a block was stored according to the structure explained in Schedule 2 to the Particulars of Claim (see further below). It does not address the issue of fixation: where was this structure fixed in a material form.
Justice Mellor’s decision on the fixation issue is a long and technical one. His conclusion is reached after reviewing prior CJEU and U.K. authorities on the protection of file formats including the decisions in SAS Institute Inc v World Programming Ltd, [2010] EWHC 1829 (Ch) (‘SAS No.1’); Case C-406/10, [2012] RPC 31. (‘SAS No.2’); and CJEU ruling: [2013] EWHC 69 (Ch) (‘SAS No.3’); Case C-393/09, Bezpec?nostni´ softwarova´ asociace—Svaz softwarove´ ochrany v Ministerstvo kultury [2010] ECR I-13971; Technomed Ltd v Bluecrest Health Screening Ltd [2017] EWHC 2142; and Software Solutions Ltd v 365 Health and Wellbeing Ltd [2021] EWHC 237 IPEC.
Following an exegesis of those cases, Justice Mellor expressed the view that copyright could subsist in a file format such as the XML Format because it contains content and not just structure. In such a case the fixation requirement is made out. However, seemed to indicate that a file format that is limited to structure cannot be protected, but he did not decide the leave motion on this basis.
Justice Mellor conceded that Dr Wright expended substantial skill and judgement in creating the Bitcoin File Format and thus would have met the originality/intellectual creativity requirement for copyright to subsist.
However, he ruled that the Bitcoin File Format could not be protected because it did not meet copyright’s fixation requirement. He would not accept Dr Wright’s contention that the fixation requirement was met when the program was run, a contention backed up by his witness statement (accepted by the judge) “that when the software runs and the hashing problem is solved, a block is created in the Bitcoin File Format”. Nor would the judge accept that the fixation requirement was met because third parties had divined the structure of a block in the Bitcoin Blockchain. The judge summed up his opinion stating:
It remains the case that no relevant ‘work’ has been identified containing content which defines the structure of the Bitcoin File Format…
It is most revealing that, despite all these opportunities, the Claimants have not filed any evidence to the effect that a block contains content indicating the structure, as opposed to simply reflecting it. By ‘content indicating the structure’, I mean, by way of a crude example, a flag or symbol in the block which signals ‘this is the start of the header’ or ‘this is the end of the header’, or an equivalent of the sort of content which is found in an XML file format. 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…
I am driven to the conclusion there are no overt signs in a block which indicate the structure as described in Schedule 2 to the Particulars of Claim… there is no evidence that the Bitcoin File Format is set out in any part of the software or early blocks written to the Bitcoin Blockchain, as opposed to the Bitcoin Software simply reading and writing files in that format.
Comments on the BTC Core case
The decision of Justice Mellor is a head scratcher.
First, his decision is premised on Dr Wright not meeting copyright’s fixation requirement. That requires that the work is expressed in a manner which makes it identifiable with sufficient precision and objectivity. This is to ensure that the public is “able to identify, clearly and precisely, what is the subject matter of protection”.
Yet, the authorities he relied on dealt principally with whether file formats are eligible subject matter. That is, are they a literary, artistic or other type of work and are they ineligible for protection such as because they are merely functional artifacts which copyright does not protect. These authorities do not address how the fixation requirement applies to file formats.
Second, the fixation requirement is largely a judge made rule designed to ensure the public is capable of identifying the work that is alleged to be protected. Accordingly, probative evidence that a work is expressed in any material form from which it can be produced or reproduced by or with the aid of a machine or device should be enough to satisfy the requirement. However, the judge rejected as probative that the Bitcoin software creates blocks in the Bitcoin File Format. He did not explain why the blocks that were created in the Bitcoin File Format were not a material form from which the file format structure could be identified. If the Bitcoin software reads and writes files in that format, why are the resulting blocks not a fixation of the structure, or at least a fixation from which people can identify the structure? The judge did not accept as relevant that third parties had been able to determine the Bitcoin File Format. Shouldn’t these facts have been sufficient to at least create a serious issue to be tried?
The judge’s opinion rests on his conclusion “that a block contains content indicating the structure, as opposed to simply reflecting it” and that each block is only “an instance or manifestation” of that structure. But since the file format structure can be derived or identified from the blocks, isn’t there at least a serious issue as to whether the structure of Bitcoin File Format was fixed in a copyright sense in a material form in any of those blocks?
There are many works that do not exist, in the first instance, in print or in writing in a conventional sense. For example, when an artist records a new song, a musical work comes into existence once the song is fixed (recorded) in the sound recording. A separate copyright also arises in the sound recording. The copyright in the musical work can subsist even if the notes and lyrics are never written out on sheet music. But, one can derive the notes and structure (the arrangement and order of the parts) of the musical work and lyrics from listening to the sound recording. If a musical work can be fixed in a sound recording, why can’t a file format be fixed in a block?
The judge was so certain of his decision that he denied Dr Wright’s request for leave to appeal the decision to the Court of Appeal. He may yet seek leave to appeal from that court. In my view he should be granted leave to have this issue of first impression in the U.K. reviewed by a higher court. There is at least a serious issue to be tried as to whether the file format met copyright’s fixation requirement.
Of course, even if Dr Wright is able to obtain leave to pursue these claims, there would be many other questions for a court to decide. The judge never made a finding as to whether the file format could be protected as a literary work, whether is it unprotectable for other reasons such as because it is a functional article, or is a system or method. The defendants will argue, one way or another, that Dr Wright cannot use copyright to control the Bitcoin Blockchain and prevent the development of other software based upon or derived from it such as the BTC and BCH blockchains. There could be defenses to infringement such as express or implied licence, estoppel, or derogation from grant and exceptions under the U.K. copyright law could apply. But, unless leave is granted we may never know the answers to these more important questions.
