- What’s in a Name? Trademark Strength in the Blockchain Space
- April 16, 2018 | Authors: Michael B. Dvoren; Aaron Haar
- Law Firm: Jaburg Wilk - Phoenix Office
Following the recent investment frenzy in cryptocurrencies, blockchain technology has seemingly reached mainstream status. Many different uses for this technology have emerged and are disrupting public and private-sector industries across the globe. Hundreds of new businesses are created in this space annually, and blockchain related trademark filings in the U.S. are increasing. Despite the increasing quantity, however, the quality of the applied-for trademarks varies.
Selecting and adopting trademarks that are both memorable and protectable presents a classic marketing quandary, regardless of industry. The strongest marks often tell the market little or nothing about the specific products or services sold under them. As such, selecting an appropriate trademark requires a balancing of competing priorities of which every entrepreneur and trademark owner should be aware.
Trademark law in the United States is designed primarily to protect consumers by allowing them to identify and distinguish the source of a product or service from other sources. To achieve this, the law protects trademark owners to ensure they can distinguish their products and services from those of others. With this focus, the law recognizes varying levels of trademark strength based on the level of distinctiveness—i.e., a trademark's ability to set itself apart from other marks. The more distinctive the trademark, the greater the legal protection it can enjoy.
Distinctiveness is viewed on a spectrum: In ascending order from weakest (least distinctive) to strongest (most distinctive), marks are classified as generic, descriptive, suggestive, arbitrary, or fanciful. Generic and descriptive terms are generally not protectable as trademarks—meaning that a user cannot preclude others from using them. Suggestive, arbitrary, and fanciful marks are "inherently distinctive" and are entitled to protection upon use, assuming they are not confusingly similar to other marks already in use (among other considerations).
Generic terms are the weakest on the trademark strength spectrum. These terms, such as the word SMARTPHONE, merely identify a particular item or type of product or service. As such, they can never serve as a trademark because the law recognizes the need to identify and describe products and services by common names. Additionally, a trademarked term can become generic if the term is used often enough by the consuming public to reference a product or service rather than the source. In that case, trademark protection can be lost in a process called "genericide" (in reference to the killing of a brand). For instance, ASPIRIN, CELLOPHANE, ESCALATOR, and TRAMPOLINE were all once privately owned trademarks that eventually became the common name for the products they represent.
Descriptive terms are the second weakest on the trademark strength spectrum. These identify characteristics of a product or service without requiring much imagination to connect the mark with them. For example, the term COMFY in relation to shoes is merely descriptive of shoes that are comfortable. Generally, descriptive marks are not entitled to protection unless they have "acquired distinctiveness." This means the mark has been used so prominently and exclusively that relevant consumers recognize the mark as identifying the source of the product or service, as opposed to merely describing them. AMERICAN AIRLINES is a good example of a descriptive mark that has acquired distinctiveness.
Recent Treatment of Descriptive Blockchain Trademarks
Although the law is not yet fully developed in the blockchain space, the United States Patent and Trademark Office ("USPTO")—the federal agency that oversees U.S. trademark registrations—appears to be taking the position that names of certain decentralized P2P digital currencies and the underlying protocols are descriptive. Specifically, the USPTO has determined the terms BITCOIN, BLOCKCHAIN, and LITECOIN[i] are merely descriptive and therefore not protectable. In rejecting an early attempt to register the mark BLOCKCHAIN, the USPTO refused registration on grounds consumers "would immediately know [the term] was referring to the openly shared transaction database used to keep track of the virtual currency."[ii] The USPTO recounted that "[t]he term BLOCKCHAIN is not a source identifier for a particular entity; rather . . ., the term BLOCKCHAIN, along with terms such as BITCOINS, MINING, WALLET, etc., are in the public realm to be used by all who participate in cryptocurrency. It is not a term that can be trademarked by one entity."[iii]
Similarly, in rejecting an attempt to register the mark BITCOIN, the USPTO determined that the term is descriptive of a type of decentralized cryptocurrency, emphasizing that there is no responsible central authority and noting the term may even be generic.[iv] The USPTO remarked that BITCOIN is often used in the description of goods and services covered by a particular mark to identify how the goods/services relate to the cryptocurrency.[v] More recently, trademark applicants have been required to disclaim the term BITCOIN as descriptive when the term is included as part of a larger, composite mark.[vi] As such, the trademark owners cannot claim infringement against others simply because the term BITCOIN is included in their marks.
Thus, the terms BITCOIN and BLOCKCHAIN are not protectable and can currently be used by anyone. Nevertheless, many companies have included the generic/descriptive terms as part of their trademarks in a descriptive manner—e.g., AMERICAN BITCOIN EXCHANGE, BITCOIN MAGAZINE, and BLOCKCHAIN MEDIA. However, because the marks are descriptive, they will not receive the full benefits of a registered trademark until the mark has acquired distinctiveness. Until then, any protection these names may be entitled to is limited because descriptive marks are relatively weak.
Other applicants have had similar marks rejected by the USPTO on grounds of descriptiveness or genericness. For instance, the Winklevoss twins, of Facebook notoriety, had the mark WINKLEVOSS BITCOIN TRUST refused, in part, because BITCOIN TRUST was deemed the generic term for a trust comprised of bitcoin.[vii] And the name BITCOIN CAFÉ was rejected as descriptive of a café that accepts bitcoin.[viii]
Conversely, oversight foundations for certain cryptocurrencies and their platforms have registered their relevant trademarks before the USPTO could conclude the marks had made their way into common parlance. For example, the mark ETHEREUM is owned by the Swiss foundation associated with its development and oversight of the distributed ledger technology.[ix] The foundation recently applied for the related ETHER mark.[x] Also, although the mark LITECOIN has been found descriptive by the USPTO, this cryptocurrency's founder recently established a foundation that applied to register the mark.[xi] It is yet unclear whether the application will achieve registration.
Companies that maintain a private platform are more likely to maintain rights in the names of their protocol and related cryptocurrency. For example, the now-registered trademarks RIPPLE and XRP are owned by the company that developed the payment protocol and related digital currency.[xii]Similarly, the mark ZCASH is owned by that protocol and virtual currency's creator.[xiii]
Suggestive marks are next on the trademark strength spectrum. This is the first level for marks that are inherently distinctive and therefore entitled to legal protection upon use (assuming, among other things, that they aren't confusingly similar to other marks already in use). Suggestive marks are, as their name indicates, suggestive of the nature of the product or service offered under the mark. Examples of suggestive marks include GREYHOUND for transportation services and U-HAUL for truck and automobile trailer rentals. Despite a mark's relation to the product or service, suggestive marks are inherently distinctive because they require some imagination in the minds of relevant consumers to identify the association between the mark and the product or service.
Many companies in the blockchain space often create catchy names by combining related words that suggest the nature of the products under the brand. One such example is COINBASE. The mark is suggestive because it requires an intellectual step to identify that the company provides a digital currency exchange and digital wallet services. The name ConsenSys, including the intentional misspelling, fits into this category because the mark suggests the nature of its offerings, i.e., building decentralized blockchain applications. The key to the decentralized nature of blockchain technology, of course, is "consensus" on the network.
Arbitrary and Fanciful Marks
Arbitrary and fanciful marks are the strongest on the trademark strength spectrum. Arbitrary marks utilize words that exist in the dictionary but ordinarily have no connection with the products or services offered under the mark. APPLE for computers, smartphones, and tablets is a more famous example. Arbitrary marks are strong because they normally have no association with any aspect of the trademarked product or service. APPLE, for example, makes a strong trademark because there is no natural association at all between fruit and computers, smartphones, or tablets.
An example of an arbitrary mark in the blockchain space is MONAX. It is a Native American word meaning "the digger," which term was used to refer to woodchucks or groundhogs. The name was eventually adopted as the species name for the animal—and, later still, as the name of a company providing blockchain and smart contract software solutions. Interestingly enough, Monax (the company) utilizes a groundhog as a logo and refers to its employees as Marmots, in reference to the animal's genus Marmota.
Unlike arbitrary marks, which are comprised of existing terms, fanciful marks employ made-up terms created for the sole purpose of acting as a trademark. Famous examples include EXXON for oil and KODAK for cameras. Fanciful marks are considered inherently distinctive because they have no meaning separate and apart from their use as a source identifier. These marks are afforded the most protection because there is no other reason anyone would use the made-up term.
The mark TIERION is a good example of a fanciful mark in the blockchain space. The word has no meaning in the English language. It is simply a made-up term used to identify the source of the company's blockchain applications.
Although fanciful marks are generally considered the strongest marks, they occupy the same location on the spectrum as arbitrary marks because there is often some interplay between fanciful/arbitrary and suggestive marks. This most often occurs where a mark comprises multiple words that remain somewhat suggestive—for example, the mark ACCENTURE for consulting services (a portmanteau of "accent on the future").
The blockchain space is saturated with names that sit on the cusp between suggestive and arbitrary/fanciful marks. Names like BITTYLICIOUS and FINTRICITY do not exist in the English language. Yet there remains an element of arbitrariness and suggestiveness in the marks. These marks enjoy a corresponding level of strength along the spectrum between suggestive and arbitrary/fanciful marks.
Whether or not they operate in the blockchain space, trademark owners considering potential marks for a new company or product line are faced with a dilemma. There is often a positive correlation between the strength of a trademark and the increased marketing efforts necessary to identify the company's offerings to the relevant consuming public. From a marketing perspective, a trademark that easily identifies the product or service by its characteristics or features has the obvious benefit of requiring little to no effort by consumers to recognize the associated product or service. However, such names may be generic or merely descriptive and are often not entitled to trademark protection under the law.Trademark owners should understand these competing priorities before incurring the time and expense of branding a new company or product line. Knowledge of how the law views trademark strength, based on distinctiveness, provides a good starting point to choosing the right mark.