English courts: is there a copyright on Bitcoin File Format, and who is Satoshi Nakamoto?

16.10.2023

• High Court judgement*
• Judgement of the Court of Appeal***
• Useful findings

Businessman Dr Craig Wright, known as "self-proclaimed" Satoshi Nakamoto, has been claiming to be the creator of the Bitcoin system. 

From media statements, this story has now moved to the jurisdiction of the English courts as Craig Wright has filed a lawsuit against 26 companies, including several Coinbase group companies, for infringement of:

1. Bitcoin File Format ("BFF") copyright; 
2. White Paper copyright;
3. database rights, including Bitcoin blockchain.

As many of the 26 defendants operating the BTC and BCH networks are located outside the UK, the claimant must obtain specific authorisation from the court and convince the court that the claimant has a strong case on the merits of the dispute (serious issue to be tried on the merits). 

In February 2023, the High Court of England and Wales dismissed the relevant part of the claimant's claims, but in July this year an appeal tribunal (led by one of the most prominent IP disputes judges, Lord Justice Arnold) overturned the original decision and agreed with Craig Wright's position.

High Court judgement*

In simplified form, in order to prove the existence of copyright in such infringement disputes, the claimant had to prove the following elements:

1. The BFF is a "work", 
2. This work falls within one of the categories of the UK Copyright, Designs and Patents Act 1988 (Copyright, Designs and Patents Act),
3. The work is "fixed." 
4. The work is "original",
5. The work is qualified as protected under the 1988 Act.

The High Court presumed the correctness of the claimant's arguments such as that the BFF has a sufficient level of originality and that Craig Wright put substantial effort and skill into the creation of the BFF, being the developer and author of the BFF created in the process of writing the code for the bitcoin system.

However, the claim was dismissed on the basis of failure to comply with the "fixation" requirement (paragraph 3 above). Pursuant to s. 3.2 of the 1988 Act**,

" Copyright does not subsist in a literary, dramatic or musical work unless and until it is recorded, in writing or otherwise []."

The court scrutinised the technical aspects of the blockchain and the subject of the dispute, but ultimately concluded that the claim lacks merits, since the BFF was not properly recorded in writing or otherwise. Because of this, in court’s opinion it was impossible to identify the very copyrighted work infringed. 

The Court separately pointed out that the mere fact that the bitcoin system works and the software allows the creation of new blocks in the bitcoin system does not mean that the original BFF was properly fixed. 

Claimant has only provided the Court with document dated 2022 purportedly reflecting the "structure" of the BFF, which is insufficient to fix a work created in 2009.

Judgement of the Court of Appeal***

The higher court disagreed with the findings of the High Court and granted the claimant's appeal.

In the Court of Appeal's view, the legal test in the Levola case is applied, according to which the "fixation" of the work must enable the BFF to be identified with sufficient precision and objectivity. The court considered that the first block in the bitcoin blockchain, created on 3 January 2009, and the fact that subsequent blocks were created by third parties could indeed confirm the existence of the BFF and allow the scope of legal protection to be determined.
The Court of Appeal pointed out that since claimant was seeking copyright protection in respect of a distinctive "structure", it was not necessary that there be some other material defining or identifying the structure (content defining or identifying the structure), as, for example, in other cited disputes concerning the XML format.

The judgement also emphasises that the fixation of a work has no need to be permanent. The court gave a vivid example - if the author reproduces the work aloud in front of an audience and it is recorded by a third party, the recording in this case satisfies the requirement of fixation. The possible deletion or loss of the recording after its creation does not affect fixation.

Useful findings

The present case is resonant and will be considered in its various parts for some time to come. The current position of the courts is just the beginning of a potentially long legal story that touches on the most interesting legal foundations of blockchain and bitcoin. But only the final judgement (if there is one) will settle the question of who is the creator of bitcoin and whether there is any copyright protection.

Nevertheless, it is already apparent at this stage how the English courts are approaching contentious issues in blockchain technology. For example, there is no question that such software can be copyrighted as literary works. The jurisprudence, in fact, has already developed certain criteria and tests for determining the protectability of items such as software code and the corresponding building blocks of bitcoin. The rest is a matter of assessing the facts of each individual case and presenting them properly before the courts. Stay tuned!
 

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