Self-proclaimed creator of Bitcoin can proceed with claim that Bitcoin branch networks breach his intellectual property rights

Dr Craig Wright claims to be the inventor of Bitcoin and to have authored the Bitcoin White Paper in 2008, created the Bitcoin File Format and mined the inaugural block in the Bitcoin Blockchain – the ‘Genesis Block’.  Despite the Bitcoin White Paper having promoted de-centralisation, Dr Wright is now seeking to prevent others from using his alleged intellectual property.

A recent decision of the English High Court, Wright v BTC Core [2023] EWHC 222 (Ch), means that Dr Wright can continue his claims in relation to his alleged database rights over the Bitcoin blockchain and copyright in the Bitcoin White Paper and can serve proceedings on the defendants out of the jurisdiction. The court concluded that – assuming the facts are as alleged by Dr Wright – those two claims are arguable. However, it dismissed a claim for copyright in the Bitcoin File Format as unarguable. [EDIT: Dr Wright successfully appealed this aspect of the decision – see the Court of Appeal’s decision of 23 July 2023, outlined on our Intellectual Property Notes blog.]

It remains to be seen what the outcome of this case will be (including whether this decision will be appealed to the Court of Appeal) and what implications (if any) it will have for the continued operation of the Bitcoin branch networks, BTC and BCH.

In another claim brought by a company of Dr Wright’s, Tulip Trading Ltd v van der Laan [2023] EWCA Civ 83, the Court of Appeal recently overturned a decision of the High Court that there was no arguable claim that developers of a blockchain network owe users a fiduciary duty. Our analysis of Tulip can be accessed here. Continue reading

Is the decentralised governance of Bitcoin a myth? Court of Appeal finds real issue to be tried as to whether developers owe fiduciary duties to Bitcoin owners

In the latest development in a line of cases involving Dr Craig Wright, who claims to be the creator of the Bitcoin system, the Court of Appeal has held that there is a realistic argument that Bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property, which could include taking active steps to introduce code so that an individual owner’s Bitcoin can be transferred to safety: Tulip Trading Limited v Wladimir van der Laan and ors [2023] EWCA Civ 83.

While the effect of the judgment is not to decide whether such a duty exists, in general or in this specific instance, it means that the question will need to be determined at trial, once the relevant facts have been established. If a duty is found to exist, it would in the words of Lord Justice Birss “involve a significant development of the common law on fiduciary duties”.

At the heart of the judgment is a debate about the true nature of decentralisation in the context of the blockchain and, particularly, how the role of software developers fits into that. The Court of Appeal identified the key factual question of whether software developers should be considered a large and shifting class who cannot impose changes to the software, because those could be rejected by miners who would refuse to run them, potentially leading to a fork in the blockchain. In its obiter comments, the court suggested that, if the decentralised governance of Bitcoin really is a myth, then there is much to be said for the argument that Bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property. Continue reading

High Court finds developers did not owe duty to cryptoasset owners to enable access to lost cryptoassets

The High Court has held that cryptoasset systems and software developers did not owe a duty to cryptoasset owners to permit or enable access to the assets where the owners had lost control over the assets following a hack. The court set aside an order permitting service of the proceedings on the developers out of the jurisdiction, as the owners had not established a serious issue to be tried on the merits: Tulip Trading Limited v Bitcoin Association for BSV [2022] EWHC 667 (Ch).

This is an important judgment for cryptoasset owners and developers, and is the latest in a series of significant rulings from the English courts in relation to cryptoassets. It suggests that an owner of cryptoassets has no recourse against the developers of the relevant cryptoasset systems if they lose control of their cryptoassets, either accidentally or due to an event such as a hacking incident. It does not, however, altogether close off arguments that the developers or controllers of cryptoasset systems might owe fiduciary duties or a tortious duty of care in other circumstances, for example where they have introduced a bug by means of a software update or otherwise created a risk to users.

The present decision follows an earlier interim order in the same case (discussed in our previous blog post) where the court refused to allow security for costs to be paid in cryptocurrency as that would not result in protection equal to a payment into court or first class guarantee. Continue reading