The Application of Blockchain in the Legal Industry.

Written by Elizabeth Layeni

January 27, 2021

As the role of technology gradually takes over the world, the question of how and in what ways it can be best used within the legal industry arises. There is one type of technology that frequently makes its way to the top of trending conversations – Blockchain – the breakthrough technology that has started to alter most industries and will continue to do so in the coming years.

Blockchain is a distributed database existing on multiple computers at the same time. It is constantly growing as new sets of recordings, or ‘blocks’ (digital information) are added/stored in a public database (the ‘chain’). Each block contains a timestamp and a link to the previous block, so they actually form a chain. The database is not managed by any particular body; instead, everyone in the network gets a copy of the new ones added to the ledger irreversibly, making it impossible to manipulate by faking documents, transactions and other information. All blocks are encrypted in a special key, so everyone can have access to all the information but only a user who owns a special cryptographic key is able to add a new block to a particular chain. Although many people still associate blockchain with its first big application – cryptocurrencies such as Bitcoin, this technology is being considered to help automate day-to-day operations as it is poised to make rapid inroads into all types of industries. 

Okay, Back to the Legal Industry

In legal practice, Blockchain can be applied to streamlining and simplifying transactional work, digitally sign and store legal agreements. It can also be applied in automating administrative tasks, in the area of smart contracts, intellectual property, land registries and property deeds, financial transactions, and digital signatures.

Smart contracts.

Currently, most lawyers are buried under the mountain of excessive paperwork. Legal contracts are written with wet signatures, and this requires a significant amount of time to accomplish for a binding agreement. Smart contracts are blockchain’s version of traditional contracts. They are self-executing, with the terms being written in code. With smart contracts, many of the intermediary services of contract implementation are no longer needed. They are run via Ethereum, which is an open software platform that is based on the blockchain technology.

The individuals usually involved in a smart contract are the Signing Authority who approves the contracts defined by a Lawyer, Lawyers, and the parties. Parties involved draft a digital contract with specific terms and conditions, the Lawyer ensures that such agreement adheres to the dictates of the law, after which it is sent to the Signing Authority. Once the Signing Authority signs the legal agreement, it is transformed into a smart contract and deployed on the blockchain. Smart contracts would trigger the rules to execute the legal agreement after the specified conditions are met.

Intellectual Property.

Intellectual Property (IP) filings have to undergo a manual review which is a long-tail and time-consuming process and it becomes difficult to register new IP, transfer ownership and update filings. Due to the lengthy approval process, it becomes challenging to examine who created the IP first. With blockchain, there is reduced patent approval time and a quick resolution of copyright disputes. Creators of a product or piece of content can upload, register, and time-stamp their original work on a public ledger to create an undeniable proof of ownership. From there, a blockchain-based IP enforcement system could help creators monitor exactly how and by whom their creations are being used. 

Usually, content creators such as authors, software developers, and designers, content consumers, and copyright entities (Lawyers) are the Personas involved in the blockchain based solutions for IP Management. Content creators who want to have their creative work patented would sign up on the blockchain platform and upload their intellectual property on the blockchain. Once the IP is added to the blockchain, it can be made visible to all other members of the network, without the possibility of alteration. Content consumers willing to utilize the digital content would also have to register on the blockchain platform. Content consumers would have to pay fees in specific tokens or fiat money to consume the entire original information published by the content creator. After the creator approves the request, a Non-disclosure agreement is signed between the content creator and the content consumer. The agreement is then stored on the blockchain to ensure that the content consumer adheres to the terms of the agreement and also eliminates the need for maintaining paper files. Whether a user wants to establish proof of authorship, transfer IP rights, or decides to make a defensive publication, copyright entities can help solve various types of disputes with the help of the blockchain.

Chain of Custody.

Collecting evidence lies at the crux of any investigation process. Chain of custody is the process of handling evidence from the time it is collected until the time it is presented in a court of law as evidence. Chain of custody provides information about the collection, storage, transportation and handling of evidence. Evidence exchanges hands numerous times; interested parties log evidence in and out if storage, physically sign forms that creates a paper trail to record its movements. Unfortunately, this process creates several opportunities for ill-intentioned actors to taint the evidence. It also opens the doors for lawyers to claim the evidence has been tampered with. In utilizing blockchain technology, one could generate and track a unique evidence token for every item of data collected and received – stored and auditable in a blockchain.

Evidence collector/crime scene specialist, digital forensic specialist, and the evidence custodian are the personas involved in the blockchain implementation of the chain of custody. The Evidence Collector gathers the evidence and uploads it to the blockchain network, adding information about the type of evidence, where it was collected, how it was collected, and when it was found. Information about the evidence can be distributed across every node in the network to remove the possibility of the single point of failure. After this information has been uploaded on the blockchain, digital forensic experts analyse the evidence provided and accordingly prepare reports which help in solving the legal issues. This is then saved on the blockchain. Evidence custodian can directly query the blockchain to gather information. So, blockchain can strengthen the credibility of forensic practice areas which are currently emphasized on paper-based evidence logs and handwritten notes.

Litigation and Settlements.

Similar to other legal processes, litigation is also a time-consuming process and involves a lot of paper documentation work. Moving litigation to the blockchain can help reduce the time and bring and bring more transparency to the system. User personas involved in the blockchain implementation of litigation includes; a claimant who files a case or initiates a court action to seek redress, a defendant who responds to the lawsuit or is charged with the commission of an offence, Lawyers who support claimants and defendants to get justice, and the Jury or Judge (Court) who makes the verdict after listening to submissions from both ends.

Lawyers sign up to the blockchain platform with relevant information including professional license number, experience certificate, specialization area, and contact details. A plaintiff signs up to the platform with personal information including ID proof, address, and occupation. When a plaintiff starts looking for lawyers through the search API, smart contracts will trigger the rules to fetch the required information from the blockchain. After a lawyer is chosen, the plaintiff would have to file a complaint including facts of the disputed matter, damages caused by the opposing party and pertinent legal claims on the blockchain. A lawyer selected by the plaintiff can be notified and he can either reject or accept the legal case request based on the received facts.  The defendant gets notified and responds to the filed complaint. Once a complaint has been filed against a defendant, the defendant can be notified through email to respond to the allegations. A defendant would need to sign up to the blockchain platform to be able to access the complaint file. Defendants would also search for Lawyers. They would then submit the answer (pleadings) to prove the allegations made in the complaint wrong or fake.

The Judge or Jury can make a verdict through information stored on the blockchain. The Judge can submit the verdict on the blockchain which will be accessed by all members of the network. If in any case, the old legal issue reopens and the court has a new judge, the information stored on the blockchain would reduce the time to gather all essential documents over again. It would also eradicate the need for maintaining long-tail paper logs. 

The integration of blockchain in the legal industry will provide more time for the industry to focus on important things instead of mundane things. The benefits that will flow from such integration include accessibility, transparency, cost savings, automation, and data integrity. It is beneficial for both clients and lawyers alike to learn as much about the technology as possible.

Related Articles

The Role of the Chief Innovation Officer in a Law Firm

The legal industry is evolving from a system that dwelt heavily on traditionalism and conservative ways to one that is being propelled by technological advancement and innovation.  Innovation in law firms takes many forms, both internally and externally. A good...

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Sign up to get the latest news on legal technology in Africa.

Follow Us!

Unrivaled content on law, tech and the future of law on our social media handles.