AU2020100312A4 - A blockchain system for holding the provenance of valuable items including artworks and identifying original art and artists. The system includes Unique Identifiers using ARTIFICIAL INTELLIGENCE and a proprietary blockchain trading platform. - Google Patents

Abstract

INNOVATION PATENT SPECIFICATION - First Nations BlockchainTM has developed a highly secure, distributed proprietary blockchain technology for the Indigenous visual art industry to ensure supply of original authentic Indigenous artwork. Artificial Intelligence software is deployed to integrate the Unique Identifier of the tangible artwork with the intangible Indigenous cultural knowledge of the artwork into a decentralised blockchain platform. This platform provides digital provenance to the artwork, allowing buyers to verify and trace the artwork's authenticity to its origin. Its Smart Contracts possess conditions that promote ethical and fair trading with Indigenous artists or Art Centres, protecting Indigenous Cultural and Intellectual Property Rights of artists and ensuring them maximum economic returns. © First Nations Blockchain Pty Ltd User Securely Login to FNB Mobile Application User push artwork image and relevant details tomobile server Extract foreground object, compute hash and store It locally. Securely push details to blockchain ledger Figure 2: First Nations BlockchainTM Technology Flow Diagram © First Nations Blockchain Pty Ltd

Description

INNOVATION PATENT SPECIFICATION - DESCRIPTION © All Rights Reserved First Nations Blockchain Pty Ltd

BACKGROUND OF INNOVATION [0001] The present innovation relates generally to the integration of blockchain with both tangible and non-tangible assets, within the context of the Indigenous art market.

[0002] There are a number of issues in the Indigenous art market that have resulted in serious harm to the culture of the Indigenous communities and artists that participate in the industry. Indigenous art contributes significantly to the Australian economy, so many people have capitalised on this and exploited Indigenous Australians in the pursuit of profit. Unethical trading has undermined Indigenous intellectual property rights and has seen significant amounts of profits in the industry directed away from the artists and communities which produce the art, into the hands of Anglo-Australian secondary market actors. Many Indigenous Australians are living in poverty, unable to sustain an adequate lifestyle. The visual arts industry provides an essential opportunity for these communities to escape this poverty, however this opportunity is being hindered by other non-Indigenous participants in the market.

[0003] Currently, no technological solutions exist which seek to protect Indigenous artists’ rights and direct more revenue back to the primary art market, away from the secondary market. Certain non-technological solutions do exist, however, these solutions have so far been unsuccessful in reducing unethical trading and increasing profit to Indigenous artists, as the economic position of Indigenous artists has largely remained unchanged.

[0004] Technological solutions will undoubtedly be utilised to achieve the goal of an ethical market that gives maximum benefits back to Indigenous communities. For example, there are current attempts to develop QR codes to be utilised in the digital labelling of Indigenous artwork. This technology, however, does not utilise blockchain to ensure security and provenance, as well as to embed the Indigenous cultural knowledge within the technology.

2020100312 04 Mar 2020 [0005] The unique value of Indigenous artwork derives from its cultural significance to the community from which it originates. A core issue faced by any technology developed to be used with Indigenous art is how to encapsulate this culture so as not to lose the value of the artwork. The non-tangible asset - the culture - must be integrated with the tangible asset the artwork - in order for the technology to be effective in the market. Blockchain represents a new solution capable of achieving this integration. Artificial Intelligence software will be used to link the Unique Identifier (UI) of each piece of artwork to a blockchain platform, with the UI including detailed information that encapsulates the cultural significance of the artwork in question.

SUMMARY OF INNOVATION

The Problem [0006] The Indigenous visual arts market has been valued at around $300 million annually, with the Indigenous fine art market accounting for roughly a third of that. Figure 1 contains a breakdown of the economics of the fine art market.

[0007] Of particular issue is the fact that the secondary market is worth significantly more than the primary market. In the period between 2001 and 2013, auction houses alone made 110% of the revenue generated by the whole primary market. Combined with the revenue generated by galleries in artwork resales, the secondary market is significantly larger than the primary market. As secondary market actors generally have no direct relationship with the artists and/or art centres, then none of this money filters back into the primary market, staying within the secondary market.

[0008] Another point to note is that on average art centres are operating at an annual deficit (in 2019) of $2644. This figure must be understood with reference to the fact that the top 28% of Art Centres account for 70% of all sales, meaning the average deficit for the large majority of art centres is in fact much larger than $2644 as the disproportionate economic performance of the top outliers skews the average for the majority. This deficit is largely attributable to being regionally located, which reduces the ability for the broader market to engage with these art centres.

2020100312 04 Mar 2020 [0009] Between 2003 and 2012, more than 60,000 pieces of art remained unsold. This represents a substantial loss in potential revenue by the primary market. If the average price of a painting is $400, then this equates to $24 million which could have contributed to the primary market economy. The large number of unsold works is due to an overproduction of Indigenous artwork in regional locations with insufficient market connections to attract prospective purchasers. Artists are producing artwork more frequently, naturally leading to the average value of the art decreasing. The supply has exceeded demand, and coupled with lower returns to artists for each painting, this has been detrimental to the market.

[0010] This data shows that despite the Indigenous art market contributing a significant amount to the Australian economy, the Indigenous stakeholders who actually produce the art are not getting fair financial benefits. This is due to several key issues with the supply chain.

Unethical trading [0011] Many remote indigenous communities suffer from economic hardship and societal marginalisation, leading to an inferior bargaining position when undertaking commercial transactions. The bargaining power enjoyed by prospective purchasers is often exploited, leading to deals which are extremely unfavourable to the artist. Unethical trading includes instances where dealers pay artists a small fee for an artwork, then on-sell that same artwork for a comparatively inflated price. Whilst not illegal, the artist is being deprived of the fair profits they deserve from the artwork.

[0012] Other unethical trading practices include not obtaining the fully informed consent of artists before entering into agreements with them. Many Indigenous artists either do not speak English or have a limited grasp of the English language. Where dealers enter into agreements directly with artists, some exploit this language barrier to include terms in the agreement that, had the artist fully understood, they would not have been agreed upon. Even if this exploitation is not conscious, dealing with artists in this manner gives the dealer disproportionately superior bargaining power which in many circumstances naturally leads to a biased agreement.

2020100312 04 Mar 2020

Inauthentic artwork [0013] Some artworks sold in the Indigenous art market are in fact not authentic. Much of the value of indigenous artwork derives from its cultural significance to the artists and communities from which it originates. The presence of inauthentic artwork in the market therefore undermines indigenous culture. It also decreases consumer confidence in the market, as consumers find it hard to differentiate between the authentic and inauthentic.

[0014] Currently, certificates of authenticity or other authenticating documents are often provided with the artwork upon sale to ensure provenance. This documentation is primarily provided in the secondary market, where the seller, usually a gallery, has no direct relationship with the artist. As there is no pre-existing relationship, then the documentation is often an internal document created by the gallery itself, and not provided by the artist or art centre. This is a problem as the documentation may be inaccurate or incorrect. For example, in the case of ACCC v Australian Dreamtime Creations Pty Ltd (2009) 263 ALR 487 an art retailer was found to have provided certificates of authenticity for work that was claimed to be a product of an Indigenous artist but was in fact painted by a non-Indigenous person. Research conducted by Tim Acker in 2013 provided that 45% of purchasers had little confidence in current authenticating measures, deeming them not reliable and not providing enough information. It therefore appears that current methods of authenticating are not adequate, and further, are abused to promote and sell fake art.

Resale Royalties [0015] In 2010, the Resale Royalties scheme was introduced. In short, the scheme mandated that for every commercial resale of a particular artwork, the artist was to be paid 5% of the purchase price as a royalty. This applies to all artwork that is resold for over $1000. Currently, the scheme has generated $5.2 million in royalties to 1440 artists in Australia, 63% of them being Indigenous. Despite this however, there are several issues faced by Indigenous artists that mean they do not obtain the full benefit of the scheme.

[0016] Firstly, there are issues with attribution. Auction houses and galleries that operate in the secondary market often have no relationship with the original artist, and in many

2020100312 04 Mar 2020 circumstances do not even know who the artist is. As there is no attribution, then the Indigenous artist will not get any resale royalties, even despite the artwork potentially being sold for a price many times more than what the artist originally received. In some circumstances, multiple artists contribute to a single painting. If only one artist is attributed by a gallery or secondary market seller, then all other contributing artists will not benefit from the resale royalty scheme.

[0017] The second issue relating to the resale royalty scheme is that it only applies to artwork over $1000. 87% of Indigenous artwork is sold for under this threshold, with the mean price being $400. Therefore, the resale royalty scheme does not benefit the large majority of Indigenous artists due to this high threshold.

Solution to problem [0018] First Nations Blockchain™ is a chain of timestamped, secure and immutable ledgers that are distributed to different disintegrated units in the supply chain, namely artists, art centres, art galleries and all subsequent buyers. This allows buyers and artists to interact on a secure platform, facilitating a transaction where legal title over an artwork is transferred to the buyer in exchange for monetary consideration.

[0019] Figure 2 provides an overview of the process of linking a physical artwork with the blockchain, which then is able to be sold to the global market. Artificial Intelligence software provides the capability of object detection and identification using a photograph of the physical artwork. The photograph is captured by a smartphone camera whilst the User is logged in to the FNB Mobile Application (1). The User (otherwise known as the artist/owner of the copyright) is then able to manually input the Indigenous cultural knowledge underlying the artwork into the FNB Mobile Application, which along with the photograph is then uploaded to the FNB mobile server (2). Artificial Intelligence software identifies the artwork from the photograph and the image hash algorithm generates a Unique Identifier (UI) (3). Then, the UI along with the manually inputted cultural knowledge is stored in a ledger database that provides a transparent, immutable and cryptographically verifiable data (4).

[0020] Figure 3 shows the first stage of the process mentioned in the immediately preceding paragraph. The FNB Mobile Application provides an authenticated user and registered artists

2020100312 04 Mar 2020 with access to secure their artwork and Indigenous cultural knowledge on the FNB blockchain network. The FNB Mobile Application has enhanced security mechanisms such as secured Single Sign-on and Multifactor Authentication (1) and log-off capabilities (2). The cross platform mobile application is compatible with prominent mobile OS like IOS and Android which gives the artists/copyright owners the access to easily upload the artwork’s details with a single push of a button from their own mobile device using HTTP post request (3).

[0021] The second stage of the process mentioned in paragraph [0019] above is to extract the foreground object from the image itself. The necessary step in this process is that there should only be a single object within the artwork so that it is known with certainty that it is the relevant artwork that needs to be placed on the blockchain network. This is achieved using Artificial Intelligent libraries like OpenCV and Artificial Neural Network libraries like TensorFlow.

[0022] The third stage of the process mentioned in paragraph [0019] above is the computation of unique identifier for each artwork. Popular encryption techniques like md5 or sha-1 encryption techniques cannot be used for this purpose because a slight change in the image would change the hash of the picture. In case of the image hashing, it is necessary to have similar input image to have the similar hashing every time. The image hashing techniques that are most accurate, even after a change in certain variables to the original image such as a change in size of the image or color schemes, are perceptive hash, gradient hash, and wavelet hash. In this process we set up a cut-off similarity index boundary to improve verification of the already existing images in the transient database.

[0023] The fourth stage of the process mentioned in paragraph [0019] above is the storage of the UI and cultural knowledge into a transient database. From there, this information is pushed to a cryptographically verifiable database; a blockchain network. This database domain is public and is available to be viewed on the secured FNB Mobile Application.

[0024] Figure 4 shows the different information recorded in each block in the blockchain’s network. First there is the Unique Identifier (6) generated by the Artificial Intelligence software encapsulated in the hash of the individual block, together with the index, timestamp, and hash code of the previous block in the chain. This information records the tangible

2020100312 04 Mar 2020 artwork into the block. Then the different cultural knowledge encapsulated within the artwork is recorded in the block, which was input into the blockchain through the First Nations Blockchain™ Interface in Figure 2. The individual cultural knowledge of the artist (7) includes the cultural meaning of the artwork to the individual artist, and the story the artist wishes to convey through the artwork. The communal knowledge (8) may also input into the block, representing the cultural significance of the artwork to the broader Indigenous community which the artist is a part of. Artwork as a form of cultural expression holds significance not only to the artist but also to the community, and represents a story shared amongst members of the community, rather than one which is the product of the individual artist. Who may share this story, or how this story may be shared, is governed by Indigenous customary law. By allowing the copyright owner, its nominee or the authorized Art Centre as a representative body of the community, to control the information input into the block about the artwork, the platform allows the technology to be sensitive and accommodating to Indigenous customary law. The block will also store transaction knowledge of the artwork (9). The provenance of the artwork and who holds title will be securely recorded in this part of the block, allowing users of First Nations Blockchain™ to see this.

[0025] Art Centres and artists are predominantly located in regional areas of Australia, and therefore struggle to connect to buyers nationally as well as internationally. This was the core reason for artists failing to sell 60,000 pieces of art between 2003 and 2012, representing a significant loss in potential revenue by artists. Figure 5 shows how the disintegrated units in the blockchain will be connected to the national and international market to facilitate greater sales. The different disintegrated units in the chain (10) are connected through the First Nations Blockchain™ Connection Centre (11) by a backend application program interface (API) integrated with the First Nation Blockchain™ Distributed Ledger (12). The First Nations Blockchain™ Connection Centre exposes the REST API service to prospective buyers, facilitating a greater connection between the buyers and the artists indiscriminate of geographical location.

[0026] Linking the tangible and non-tangible assets to the blockchain with Artificial Intelligence software provides a solution to the aforementioned problems in the following ways.

Unethical Trading

2020100312 04 Mar 2020 [0027] Blockchain is inherently secure, with immutable data, so users of the technology have confidence that all artwork on the platform is authentic and ethically obtained. First Nations Blockchain™ smart Contracts will embed fair terms that the prospective purchaser must accept or reject, with no room for negotiation. This will give power to the artist to determine the appropriate valuation of the artwork and ensure that the transaction is fair and beneficial to them.

[0028] The terms of the Smart Contract will set commission rates allowing for the fair distribution of the sale price between the artists and the art centres. They will also preserve the intellectual property of the artists and deny unscrupulous buyers the ability to obtain any such rights over the work. These terms will be formulated in collaboration with members of the Indigenous community, as well as expert intellectual property lawyers so as to ensure that there is no room for unethical trading. Artists’ interests will be protected, and the contracts will be provided in the correct language so as to provide for fully informed consent.

[0029] Ethical trading is further achieved through embedding the non-tangible asset of culture into the technology. Empowering the artist with the ability to share the cultural significance of the artwork ensures that their culture and traditions are preserved and celebrated. Furthermore, as the value of Indigenous art largely derives from its story, then this may provide for increased valuations of art in the market, giving more financial returns to the artists and communities. Embedding the story also gives consumers the ability to make informed decisions about purchasing artwork. Having informed consumers promotes ethical trade standards as it holds galleries and dealers responsible for dealing ethically with the artists through the transparency of how the artwork was acquired.

Inauthentic Artwork [0030] The Artificial Intelligence software will connect the artwork to the blockchain platform. Once connected, the provenance of the artwork will be visible on the distributed ledger network. All parties to the transaction will be able to access detailed information about the artwork, its transaction history, and provenance, ensuring the authenticity of the work. Blockchain is inherently secure, so cannot be tampered with by third parties attempting to sell inauthentic artwork through First Nations Blockchain’s™ platform. This eliminates the need

2020100312 04 Mar 2020 for certificates of authenticity to be provided with the work, providing a more secure and trustworthy assurance of authenticity to consumers.

[0031] Ensuring provenance will increase consumer confidence in the Indigenous art market. This will attract more buyers, leading to a greater demand for production by artists. Coupled with the Smart Contract technology ensuring ethical trade practices, this will see significant financial benefits to artists and art centres.

Resale Royalties [0032] The blockchain will provide a transparent ledger including information regarding provenance and artist attribution. It will be clear to all subsequent purchasers who contributed to the artwork, even in the secondary market where dealers are not immediately connected with the artists. This information will ensure proper distribution of resale royalties, allowing for a more effective enforcement of the scheme.

Advantageous effects of innovation [0033] The First Nations Blockchain™ Connection Centre will integrate the decentralised market and link rural community art centres and artists with the world. It will not only bring together the national market but also link art centres and artists with international purchasers based on buyers’ due diligence for security. This will be essential in allowing the smaller and less profitable art centres, which comprise 72% of all art centres in Australia, to flourish and reduce the annual deficit. Being regionally located is no longer an obstacle as they will be connected to a global marketplace. This integration with the global market increases the demand for artwork, increasing revenue to artists and art centres.

[0034] This integration will also streamline the market to increase the economic strength of the primary market relative to the secondary market. More purchasers will be connected directly to the source of the artwork production, being the artists and the art centres themselves. Instead of having to purchase artwork through auction houses or galleries, international and national buyers will be able to easily access art centres and artists to purchase straight from them. Buyers will be incentivised to purchase through the primary

2020100312 04 Mar 2020 market as the technology certifies the works’ authenticity. Currently, auction houses have a relatively insecure mode of authenticating the Indigenous artwork, which often undermines consumer confidence. For example, a recent work painted by a well-known Indigenous artist sold at auction for $14,640. The provenance of the artwork was merely described as “gifted to the vendor by a friend whilst living in Western Australia in 1970”. No further information was given certifying the provenance of the particular work. In contrast, when using the blockchain platform, purchasers will full access to all relevant information about the artwork in question, allowing them to have confidence that the artwork they are purchasing is authentic.

[0035] In effect, this will redirect secondary market revenue into the primary market. In the last five years, sales from auctions of Indigenous artwork have generated almost $50 million. If even 20% of that was redirected into the primary market, then art centres would collectively have had an extra $10 million in revenue to distribute to the artists and throughout the community. This would be sufficient to lift most, if not all, art centres out of deficit and have them earning a modest profit. More ambitiously, if the blockchain platform could streamline the market so that 40-50% of the secondary market income was redirected to the primary market, then art centres would become significantly more profitable.

[0036] Furthermore, by connecting artists to the global market through the First Nations Blockchain™ Connection Centre, this will decrease the overproduction of artwork. With more artwork being sold, sales will meet demand, and less work will go unsold. This will increase the mean value of each artwork from $400 as higher quality products will be produced, and in turn qualify more artworks for the resale royalty scheme. The current 87% of artwork that does not attract the benefit of the scheme will be reduced, allowing more money to flow from the secondary market back into the primary market.

[0037] This, combined with the economic benefits of uniform fair trading across the market would substantially benefit the Indigenous stakeholders in the market. The 54.9% of Indigenous artists who earn less than $400 a week will enjoy an increased standard of living, and art centres will be able to continually develop and become less dependent on government funds to be commercially viable.

Claims (4)

1. There are two pages of claims only

   2020100312 04 Mar 2020

   INNOVATION PATENT SPECIFICATION - CLAIMS

   1. A system for upholding the provenance of a particular artwork and identifying the original arts or artists, or their nominee, said system including:

   • a smartphone device, and • an Artificial Intelligence software, and • a mobile application; and • a blockchain, and • a blockchain interface, and • a database, wherein the Artificial Intelligence software provides unique identification information relating to the particular artwork of which a photograph has been taken using the smartphone device that has been uploaded to the mobile application, and wherein the Artificial Intelligence software is capable of linking the unique identification information to the blockchain, and wherein the original artist or artists, or their nominee, is capable of adding salient provenance, artwork medium and cultural story into the database via the blockchain interface, and wherein the mobile application and the database record are linked via the blockchain.
2. 2. A method of integrating the tangible asset of artwork with the intangible asset of Indigenous cultural knowledge on a decentralised blockchain platform, the method comprising the following steps:

   a. Uploading a photograph of a particular artwork onto the mobile application whereby the Artificial Intelligence software is capable of generating unique identifiers and linking the unique identifier to the blockchain; and

   b. Enabling the primary artist, or their nominee to manually input salient details about the artwork including provenance, medium and cultural story of the particular artwork for which the Artificial Intelligence software has generated a unique identifier, onto the blockchain platform though an approved blockchain interface, and

   c. Linking the provenance, medium and cultural story and information to the photograph of the relevant artwork which is searchable and viewable on the mobile application.

   2020100312 04 Mar 2020
3. 3. The method as defined in claim 1 including the additional steps of:

   d. Using a computerised management system to connect the disintegrated units of the Blockchain through a backend application program interface (API), and

   e. Enabling the buyer of the artwork to deposit funds by way of bank transfer into a bank account nominated by the artist, or their nominee, which thereby executes a smart contract on the blockchain platform which simultaneously effects a transfer of ownership of the artwork to the buyer, upon receipt of the money by the artist, recorded in the blockchain database.
4. 4. The method as defined in claim 2 including the additional step of:

   a. Enabling auction houses and other artwork resale facilities to identify the original artist, or their nominee, or in the case where the artist has become deceased, the estate of the artist, so that the appropriate royalty is able to be paid upon the resale of the artwork under the Resale Royalty Scheme.