On January 9th, Kodak announced its intention to enter the cryptocurrency craze by developing a blockchain-based service that presumably allow participating photographers to get paid each time their licensed work is used on the Internet without their prior consent. As described on the company’s website, the digital platform, currently referred to as KODAKOne, will “provide continual web crawling to monitor and protect the [intellectual property] of images registered in the KODAKOne system.” Upon detection of an unlicensed use, Kodak will manage the post-licensing process and (i) have the picture removed, or (ii) compensate the participating photographer in the company’s own currency, referred to as KodakCoin. By December 11th, the company’s stock had more than tripled.
While digital photo licensing is a concept as old as the first website, and entire businesses are built around assisting photographers in the collection of royalties, KODAKOne’s innovation seems to be in its attempt to leverage blockchain’s strengths against traditional photo licensing’s weaknesses in securing compensation for unauthorized online uses. For example, in order to be compensated for an unlicensed use of a photograph, a photographer (or its representative) would have to own the the copyright, detect an unlicensed use, contact the unlicensed user (if possible), engage in a discussion regarding compensation and agreeing on compensation, and wait to be compensated by the unlicensed user or initiate a DMCA process to have the unlicensed picture removed or bring a copyright action. Here, blockchain technology (a digital ledger in which transactions are recorded publically) allows the KODAKOne platform to automate all of the foregoing by simultaneously serving as a database of rights, detecting an unlicensed use across the entire Internet and seamlessly compensating a participating photographer in its ecosystem’s own currency. In addition, “accredited investors” can buy KodakCoins and purchase the rights to license a picture registered with KODAKOne.
That being said, there are several potential issues with Kodak’s premise, first of which is whether photographers will even want to be compensated in KodakCoins. Yet, according to a Kodak spokesperson, “KodakCoins can be exchanged for U.S. dollars and the exchange will be announced in the coming weeks.” So, provided that the margins of the exchange rate (even if not the best) are commercially reasonable, KODAKOne may provide a way for photographers to recoup some profits from unlicensed uses that would have otherwise provided none.
From here, it is not difficult to see where Kodak may hope its idea grows: if KODAKOne successfully manages, markets and monetizes the rights to digital pictures, Kodak may eventually attempt to add IP rights to digital videos and digital music on their platform, becoming an entire marketplace for digital art and entertainment. But, nonetheless, it is an idea fraught with historical failures: over the years, the music industry has wasted millions of dollars attempting to build a central music rights database, such as Global Database Repertoire (GRD). In GRD’s case, a collection of organizations attempted to build a joint database that, like KODAKONE, would have primarily allowed for a rights holder to (i) register their work once with GRD, instead of numerous times in different countries, (ii) track royalties and guarantee the rights holder was paid promptly and fairly, and (iii) initiate cease and desist actions against unauthorized users. But, in 2014 and after more than 12 million dollars was spent developing the database, the effort to build GRD was abandoned as organizations pulled out over concerns regarding control and the potential loss of revenue from an efficient GRD. In Kodak’s case, and because the company will control the entire platform from the outset, KODAKOne may not be beleaguered by same set of problems that shelved GRD.
Yet, there are still remaining legal questions that must be answered before KODAKOne is declared an industry salve, and many industry experts are skeptical about Kodak’s entire endeavor, some suggesting it is at best doomed to fail and a worst a final trick from historically troubled company. A question, for example, is whether Kodak will request that unlicensed users pay for their infringement (as the mechanism to compensate participating photographers) and, if so, what will be the amount that Kodak requests an unlicensed user to pay? In current practice, depending on the copyright status of the picture at issue, the appropriate fee would either be the reasonable licensing fee or a multiplier of the licensing fee. If KODAKOne does not, at a minimum, collect a reasonable licensing fee, many photographers may choose to not register with the platform and instead to hire a third parties to crawl the Internet for unlicensed uses and negotiate for a much higher settlement. Another example of an outstanding legal question is what language the KODAKOne Terms and Conditions will have around “exclusivity”—that is, whether KODAKOne has an exclusive right to manage the rights of a given picture. If KODAKOne does have an exclusive right, the platform may indirectly create an incentive for photographers to not put their best work on the platform and, as of the result of that, buyers may be disincentived from using KODAKOne as a primary resource for licensable pictures.
Notwithstanding the many open questions, Kodak has taken a creative step forward for itself and the discussion of rights management has a further addition into the exciting cryptocurrency space. But, as with all new areas, right holders should consult a lawyer before participating.