Home | Blog | How Blockchain Technology Can Resolve Legal Disputes
Ray Alvarez
Blockchain
Reading time: 5 min
Date: 29th Jun 2020

How Blockchain Technology Can Resolve Legal Disputes

The ways in which Blockchain technology is transforming different sectors of industry are vast and diverse. In this short two-part series we are looking at how blockchain is impacting two major parts of the legal process —resolving legal disputes in relation to copyright infringement in this article and how blockchain can improve policing and the admissibility of evidence in the upcoming one.

Today we are looking at how evidence stored and authenticated on a blockchain is giving courts and individuals the tools necessary to resolve legal issues.

Evidence authenticated on a blockchain offers a vast improvement to modern-day alternativesEvidence authenticated on a blockchain offers a vast improvement to modern-day alternatives

Imagine being able to use authenticated legal documents, trademarks and patents on the blockchain as evidence in a court proceeding. Even more so, imagine that evidence of this nature would be the focal point and determining factor in a case. Not only is this a reality, but some countries have already started using blockchain technology to settle legal disputes. China, for example, has settled over 3 million cases using evidence that has been authenticated on a blockchain. The figure above was collected over a 9 month period ending in October 2019.

To understand how this has been done in such a short time, it is important to understand the problems that paved the way for the preservation of evidence on the blockchain. The increasingly large amount of digital content being created on a daily basis in conjunction with rapidly rising digital economies has led to problems concerning piracy, copyright infringement and misappropriation of online goods. In China, legal disputes arising from this area have grown tremendously over the last decade. What is even more concerning is that evidence being presented in these cases, such as screenshots, are highly susceptible to tampering and alteration. Thus, what results is an elongated legal process with ineffective evidence that only serves to delay the outcome of legal proceedings and create problems for content owners. In the past, courts and content owners had to rely on notaries and third party organizations in order to verify ownership of content. However, in order to combat the growing number of cases and the rights of content owners, courts began to look towards blockchain technology as a way of preserving evidence.

On September 7, 2018 the Supreme People’s Court of China stated:

“Internet courts shall recognize digital data that are submitted as evidence if relevant parties collected and stored these data via blockchain with digital signatures, reliable timestamps and hash value verification or via a digital deposition platform, and can prove the authenticity of such technology used.”

This shift in policy came from an earlier ruling in Hangzhou where a plaintiff brought an action against a company that had published the plaintiff’s copyrighted material on their official website. During the case, the plaintiff presented evidence that was not usually presented in these types of cases. The plaintiff captured the website of the defendant on an earlier date as well as the source code of the website page in question and uploaded them to the Factom blockchain network. After the court in Hangzhou had concluded its fact-finding, the court maintained that this form of electronic data would be acceptable as a form of evidence in copyright infringement cases.

The court in Hangzhou was an ideal place for this ruling considering the number of copyright cases it hears and the amount of popular online writers who take up residence in Hangzhou. These writers have experienced problems with verifying ownership of their writings and can now turn to blockchain technology as a more reliable and cost-effective way of securing their work. Wang Jiangqiao, a judge in the Hangzhou court, stated that the use of blockchain technology would be highly beneficial to the aforementioned writers, citing the “tamper-proof nature” of blockchain and its ability to “track authorship, time of creation, content and evidence of an infringement.” While China is currently experiencing great success with the use of blockchain-authenticated evidence, can the U.S. utilize blockchain tech in order to expedite legal proceedings?

Regarding the Admissibility of Evidence and Blockchain-Authentication in the United States

While China has been establishing precedent and resolving legal issues via blockchain-based authentication, the U.S. has made some steps towards the same effect. States such as Vermont, Arizona, Ohio and Delaware have passed laws that allow for the inclusion of blockchain-authenticated evidence in legal proceedings. Vermont for example, passed legislation in 2016 which stated that blockchain receipts accompanied by a written declaration of a person attesting to the details of the transaction are admissible.

When discussing the admissibility of evidence in a judicial proceeding, we need to first examine the probative value of the evidence being offered. The probative value of a piece of evidence will be determined upon its relevancy. In essence, the evidence is relevant if it has any tendency to make a fact in a case more probable or less probable than it would be without the evidence. In addition, the evidence that is being offered must be related to a fact in the case that is vital, or of consequence, to its determination.

As a technical point, we need to touch upon how evidence can be excluded from a judicial proceeding. In the United States, for example, there are a variety of reasons for which a court may exclude evidence under the Federal Rules of Evidence (“FRE”). Evidence under the FRE can be excluded if its probative value is substantially outweighed by a danger of: (1) unfair prejudice; (2) confusing the issues; (3) misleading the jury; (4) undue delay; (5) wasting time; or (6) being needlessly cumulative.

While each case brings a different set of facts that must be applied to the law, the inclusion of blockchain-authenticated evidence in copyright disputes would likely pass the requirements listed above. An authenticated receipt on the blockchain which tracks the authorship, time and content of a copyrighted work would go to the very heart of the dispute to make it relevant in the determination of the case.

In addition, laws in some states have created a presumption that business records stored on the blockchain are considered to be self-authenticating. In states without a law that speaks directly to the inclusion of blockchain-authenticated records, the records may still be admissible under a different test. Under FRE 803(6) a record is admissible if it “*was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling” and “making the record was a regular practice of that activity*”.

Organizations and individuals in each state should nonetheless be prepared to explain how blockchain systems work and why they are considered to be tamper-proof and trustworthy due to its decentralized nature.

Additional Reading

If you would like to read more about this issue I recommend the article below:

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