EY + Microsoft Enter the Blockchain IP + Royalties Sector

Big Four firm EY and Microsoft have launched a blockchain solution for content rights and royalties management, joining a growing group of legal tech start-ups – which are operating at a much smaller scale – that have also developed similar blockchain-based IP solutions.

Other companies operating in this space include, NKOR from Israel and IPOCAMP from France, which Artificial Lawyer has covered in recent months.

EY and Microsoft will test out the system first in the computer gaming sector, with a focus on securing royalty payments for those parties that are owed them in what is a very complex, multi-party, fast-changing and global market.

Explaining the project, the two companies said: ‘[We] designed the solution to serve any industry where intellectual property or assets are licensed to other parties and where the creators are paid royalties based on royalty agreements. Within this value chain – which can include authors, song writers, production houses, developers and more – the intellectual property generates millions of transactions aggregating to billions of dollars per month in royalties to be paid.’

It pointed out that the royalty calculations along the value chain are currently mostly manual and generally managed via offline data sources – and that is the key point, i.e. the blockchain itself is not the exciting part, it’s just a way of storing data, what’s exciting is the way that this new way of gathering data can help then to automate transactions via smart contracts. 

Or in other words, EY and Microsoft are moving toward the automation of the global IP royalties sector – which is a massive industry. By one estimate, music-related royalties alone generated $25 billion, just in 2014. Anything that impacts this is going to be significant. How royalties get paid out will also need to be considered by the many IP lawyers who get dragged into disputes when their clients think they should have received more.

What’s exciting is the way this can help then to automate transactions via smart contracts. 

To that end the two companies said that the solution is ‘designed to enable increased trust and transparency between industry players, significantly reduce operational inefficiencies in the rights and royalties management process, and eliminate the need for costly manual reconciliation and partner reviews’.

It works like this: the embedded smart contract architecture is designed to enable accurate and real-time calculation of each participant’s royalty position, providing enhanced visibility for recording and reconciling of royalty transactions.

The underlying network is built using the Quorum blockchain protocol and Microsoft’s Azure cloud infrastructure and blockchain technologies, and implements confidentiality of agreements across entities.

Microsoft’s gaming partners participating on the network will get improved visibility to the transactions versus the legacy process, which could take up to 45 days or more, said the pair.

Ubisoft, one of the world’s leading game publishers and a Microsoft gaming partner, is testing the solution.

Paul Brody, EY Global Innovation Leader, Blockchain, said: ‘The scale, complexity and volume of digital rights and royalties transactions makes this a perfect application for blockchains. A blockchain can handle the unique nature of each contract between digital rights owners and licensors can be handled in a scalable, efficient manner with an audit trail for the participants.  By deploying this on Microsoft Azure, we believe this will be highly scalable across thousands of royalties and content partners.’