With cryptocurrencies gradually gaining mainstream acceptance, the law is now grappling with how old legal concepts can be used to protect and control this relatively new technology. Currently, Bitcoin is the subject of several cases before the courts of the United Kingdom and other countries.
Previously, Dr. Craig Wright, an Australian computer scientist, claimed that he wrote an article about Bitcoin under the pseudonym "Satoshi Nakamoto" and should own various intellectual property rights as the author of the original source of Bitcoin**.
According to Craig Wright's statement, there are currently four IP cases pending, all involving Wright and its Bitcoin-related claims. In the UK, these cases involve intellectual property issues such as copyright, database rights and counterfeiting, while also considering defamation.
Since the beginning of 2023, all four IP cases have now been submitted to Judge Mellor. It is positive to see the court take such a proactive approach to case management, which, while the factual context and legal arguments differ, may result in consistent claims and judgments. We have seen parties from different cases apply for joint hearings and judgments related to multiple claims or selected defendant claimants in Wright's litigation portfolio.
Despite the different backgrounds and different reliance on different IP legal structures, these cases share some key issues. The most crucial thing is whether Wright is really Satoshi Nakamoto (the so-called "identity issue"). On July 25, 2023, in the case of Crypto Open Patent Alliance v Wright, the parties agreed that the issue of Wright's identity would be dealt with once in a trial in January 2024, while other cases would be subject to the outcome of that trial.
Considering the number of lawsuits Wright is busy handling, the cost guarantees have been raised in several of these cases. In the Coinbase and Kraken cases (discussed further below), Wright was required to pay a significant amount of security fees.
As mentioned above, there are four active IP-related cases.
The fastest-moving intellectual property claim is known as a "COPA claim" and has filed a claim against Wright by the Crypto Open Patent Alliance ("COPA"). COPA's main claim is a declaration of non-infringement, and the claim consists of three aspects: (1) Dr. Wright is not the author of a 2008 article entitled "Bitcoin: A Peer-to-Peer Electronic Cash System" (i.e., "**;(2) Mr. Wright is not the copyright owner of ***;and (3) any use of *** by COPA will not infringe any (potential) copyrights owned by Dr. Wright.
In the other two cases, Wright sought to assert ownership of its alleged intellectual property. The Coinbase and Kraken lawsuits were filed by Wright on the same day. Coinbase and Kraken are both platforms for buying, transferring, and storing cryptocurrencies, including Bitcoin. Both cases involved claims based on the ownership of Bitcoin goodwill based on Wright as an individual and his company, Wright International Investments Ltd, as co-claimants.
The last case, known as "BTC Core", concerns Wright's assertion of copyright and database rights in the Bitcoin format, as well as the blocking of the operation of two parallel blockchain networks, the BTC Network and the BCH Network*** There are 26 defendants in the case, some of whom are outside UK jurisdiction.
Wright has also been embroiled in defamation proceedings in English courts.
The most recent decision of the English Court concerned an appeal on whether damages for defamation could be appropriately reduced to reflect the claimant's fraudulent description of the claim (Wright v McCormack [2023] EWCA CIV 892).
The UK High Court previously ruled that Twitter should be liable to Wright for damages due to Twitter's questioning of Wright's claim to be Satoshi Nakamoto and the creator of Bitcoin, and that Wright was ** (Wright v McCormack[2022]EWHC 2068(QB)). However, despite winning the case, Wright came under fire for his conduct in the lawsuit, which was deliberately inflating the severity of the injuries to deceive the court. As a result, the court only awarded a judgment of symbolic damages.
Wright appealed the decision, but the Court of Appeals upheld the previous decision. Because defamation protects dishonest attacks, Wright's own dishonesty in this case was a relevant consideration in determining appropriate damages.
By the way, some readers may wonder how the court decides a defamation case when Wright's identity is still in doubt. Mr. McCormack dropped his defense of the truth (i.e., Wright was not Satoshi Nakamoto), arguing that defense would lead to a lengthy trial and that he could not afford these legal costs. Therefore, the issue of identity is not among the issues that the court needs to determine, but it remains a key point in the January 2024 COPA trial.
The last case covered in this article concerned Wright's allegation of copyright infringement, which was never considered because the defendant refused to identify himself.
In Wright v Persons Unknown [2022] EWHC 2982 (SCCO), Wright obtained a claim against Bitcoinorg's verdict, which issued a copy of ***. Wright claimed that this was done without his consent and therefore infringed his copyright. In the absence of any acknowledgment of service of claim, Wright filed for default judgment. When it comes to fees, the defendant continues to refuse to identify himself.
The judgement found that it was necessary for the accused to identify himself in order to be able to participate appropriately in the detailed assessment process. There are various authorities that allow unknown but identifiable parties to defend claims, but the names of the parties are required unless there is a clear and justifiable reason for departing from the principle of open justice.
In the words of Judge Smith in the Court of Appeal, "the court cannot entertain the situation" because the defendant wants neither the public, the plaintiff nor the court to know his true identity. According to the judge, this raises many concerns and will hamper the court's power to supervise and control the proceedings and conduct the proceedings fairly. In the absence of proof of identity, Wright is entitled to proof of default costs.
While many positive issues and decisions have been disseminated rapidly in various cases, two points are of particular interest.
The first question is the question of fact raised by the identity question described above. The COPA claim trial is scheduled for January 2024. If the court finds that Dr. Wright is not Satoshi Nakamoto, then (based on an appeal against the decision) the Coinbase, Kraken, and BTC Core lawsuits will end at that time. In contrast, if the court finds Dr. Wright to be Satoshi Nakamoto, then all three lawsuits will go through in full.
Second, the BTC Core claim is about to address a key issue in copyright law. Under UK copyright law, a work needs to be "fixed" in order for it to exist. In February 2023, the High Court held that Dr. Wright had not genuinely established the existence of copyright in the Bitcoin File Format ("BFF") because it was not "documented in writing or otherwise" under section 3(2) of the Copyright, Designs and Patents Act 1988 ("CDPA 1988").
However, on 20 July 2023, the Court of Appeal overturned an earlier decision (Wright v BTC Core [2023] EWCA CIV 868). After considering the merits of BTC Core's claim, the Court of Appeal found that there was a serious issue to be heard and ruled that Wright may indeed have copyright in the BFF. As a result, this element of the claim is now moving forward and has allowed Wright to serve the defendant outside of its jurisdiction.
Going forward, if copyright exists in BFF, this could have serious consequences for the future use of Bitcoin and other cryptocurrencies.
Wright isn't just busy in the UK courts. There are also many cases in other jurisdictions such as the United States and Norway. We will track the consistency of decision-making across jurisdictions and how the interplay between different cases affects Wright's litigation strategy.
The next substantial development seems likely to be the trial of the COPA case in January 2024. Knowing whether there is copyright in databases and computer programs is essential for businesses in the tech sector to protect their assets. This judgment will also affect three other IP cases, as Wright's claim against Satoshi Nakamoto will be adjudicated, which will have a significant impact on other claims.
Regardless of the outcome, these cases will have an impact on the cryptocurrency industry and the use of copyright and database rights in computer software.