Will the proposed changes to copyright law in respect of text and data mining have an impact on cryptocurrency?

Wednesday 23rd November, 2022

This summer, the government announced changes to copyright law which created a new exemption for commercial text and data mining. The proposed change to the law follows the UK Intellectual Property Office’s (“UKIPO”) consultation on intellectual property (“IP”) and artificial intelligence (“AI”).

Background

Text and data mining (“TDM”) is a process by which computational techniques are used to analyse existing digital works containing large quantities of data and to extract information about the data set. This might be to discover trends, anomalies or highlight certain information.

Before “mining”, the data typically undergoes a pre-processing where it is cleaned and interpreted into its mining format. Data mining, therefore, typically requires copying of the underlying digital work as a first step. Copying is one of the restricted acts reserved for the copyright owner.

Current legal position

Currently, under UK law, TDM can only be carried out on copyright materials for non-commercial purposes, unless the consent of the copyright owner has been obtained. If a miner wanted to undertake the TDM exercise for commercial purposes, they would need to reach out to the copyright owner and enter a copyright licence. This could be time-consuming, difficult, and costly and is, therefore, potentially restrictive to researchers who want to mine large volumes of data.

During the government consultation, it came to light that users of copyright and database material experienced difficulties and high costs associated with obtaining licences, especially where there are many rights holders involved.

Proposed legal position

Under the proposed changes to the law, a copyright exemption would be put in place for the copying of data sets, allowing TDM for any purpose; commercial or non-commercial.

This would mean that users wishing to use copyright material for TDM would not need to obtain a licence, provided that they access the material lawfully. It is also intended to make it easier for users of copyright and database materials to collate the data sets needed in order to facilitate more TDM. The aims of this are to encourage and facilitate technological innovation.

There is still, however, a requirement that the copyright material is accessed lawfully. This gives rightsholders an opportunity to monetize access to the material

The UK is not the first

The UK is not the first jurisdiction to realise the obstacle that copyright laws can pose to innovation in AI. Japan has a copyright exemption in respect of TDM and in the United States TDM may constitute ‘fair use’. Making TDM more accessible and affordable to researchers can have a material impact on growth within the sector. Tortoise Media (online newsroom) ranks countries by their level of AI development: the US leads at number one, Japan is ranked number five, while the UK is dragging behind at eleventh place.

Japan has been described by research firm ESI ThoughtLab as a “leader in AI adoption”. This AI landscape supports a competitive number of start-ups using TDM to innovate and improve a myriad of industries, from automotive to financial services.

Permissive copyright laws can increase the potential for innovation. By adopting the proposed reforms to relax copyright law in respect of TDM, the UK can begin to tap into this potential for innovation to catch up to the leaders of the AI race.

Impacts of the proposed changes

An exception for commercial TDM has potential benefits to a wide range of stakeholders including researchers, AI developers, small businesses, cultural heritage institutions, journalists, and engaged citizens. The insight resulting from TDM might allow for more targeted products and services. There may be benefits in the world of research, for example, by supporting research and innovation in public health. The creative industries might also use TDM and AI to better understand their market or create new works.

Another possible impact of the proposed changes to the law could be felt in the cryptocurrency space. The changes would make it easier for researchers to access databases for the purposes of TDM. If access is easier, there is likely to be an increase in the level of mining and analysis activity and, therefore, a greater level of scrutiny.  In the context of cryptocurrency blockchains, this could make it a less appealing space to commit fraud, bearing in mind that all transactions are traceable.

TDM has potential to be used to detect anomalies on the blockchain or identify potentially suspicious usage of the technology, such as fraud or money laundering. The general copyright exception removes a significant barrier to entry because if TDM is a more accessible exercise, it could potentially lead to more commercial miners coming to market. This in turn would mean that blockchain data will be analysed more frequently and thoroughly, thereby increasing scrutiny. Many would argue that, in light of the recent collapse of FTX, greater scrutiny of the cryptocurrency sector would be welcome.

However, by the same token (no pun intended), cryptocurrency may also lose some of its attraction for legitimate users, part of the appeal historically having been the pseudo-anonymity which it provides. As this reform could make analysis of blockchain more accessible, increased TDM is likely to decrease the mystery of blockchain and, to some extent, reduce anonymity for users. Therefore, legitimate users could be discouraged.

Business support

As with any changes to the law, multiple stakeholders will need advice and guidance. Rightsholders may need guidance on how best to balance enforcing their rights whilst benefitting from commercially exploiting their data.

Researchers hoping to use copyrighted material in order to perform TDM will need guidance on compliance and ensuring that they are accessing data lawfully and that their intended plans fall within the TDM exemption.

Thought must also be given to how best to “control” decentralised ledgers so that users can trust them, whilst balancing the fundamental premise of a lack of centralised control.

Conclusions

It seems inevitable that TDM will have an ever-increasing role in blockchain technology and cryptocurrency transactions. The proposed changes to copyright law will likely go some way towards increasing scrutiny of the blockchain and may help to increase trust, transparency and uptake in the technology. Alternatively, these very impacts may also be detrimental to uptake. Time will tell.

 

Articles by Josh Little