December 2021

The invention of blockchain distributed ledger technology has sparked a technological boom that has unceremoniously thrust the legal system square into the middle of a new and rapidly evolving digital landscape. One field at the forefront of these massive changes is intellectual property, where the legal community is grappling with the unenviable task of outlining whether the names and logos associated with blockchain technologies, and the ever-growing network of cryptocurrencies that can be built off of such programs, serve source-identifying functions such that they are eligible for trademark protection. The United States Patent and Trademark Office (USPTO) has boiled this determination down to assessing (1) whether the proposed mark is associated with an actual good or service, and (2) whether the name or design functions to identify its source.

While the debate over whether blockchains and associated cryptocurrencies indeed qualify as protected goods and services rages onward, another battle over a proposed mark’s ability to show source has also presented a rather complex dilemma. Blockchains are digitally distributed ledgers which share bits of information among multiple computers. The pool of data creates “blocks” of information, which are cryptographically secured and authenticated before a new block of information can be added to the “chain”. The network of computers maintains a secured digital record of each transaction, and the computational work for validating such a transaction (often called “mining”) is then automatically compensated with newly-created currency. It is important to note that while different “types” of blockchain designs are now emerging, these core components will generally remain the same.

With that being said, at some point, all budding blockchain companies will have to ask themselves whether the intention is to build a network that is centralized or decentralized, which beyond security considerations, also has prominent implications when attempting to establish “source” for trademark purposes. The designation of “centralized” vs. “decentralized” has nothing to do with the distributed nature of any blockchain, as any such system will always involve some level of distributed ledger technology, but instead comes down to defining which parties have the ability to participate in mining functions and the rights of those who can transact. In the case of decentralized currencies like Bitcoin, anyone can transact on the ledger (provided that they provide “proof of work”), and thus the computational work can be completed by anyone the computing power to do so. Conversely, centralized networks only permit known and approved parties (usually owned by or associated with a specific company) to transact on the ledger, and because the parties are identified, the transactions can also be audited. In highly regulated industries, like finance, many prefer the security of knowing what entities are conducting transactions so that if anything deemed invalid does indeed occur, then the parties responsible can be identified. Centralized networks prioritize the ability to identify any attempts to corrupt the system through detailed inspections over the open anonymity native to decentralized chains.

Most cryptocurrency exchanges have embraced centralized blockchain networks, where companies operate as third parties to process the transactions between buyer and seller. In this instance in particular, companies are inuring themselves to the benefit of more reliability over more security. While this decision should not be made lightly, as there are horror stories like Mt. Gox, a centralized blockchain company which was hacked in 2014 in an attack that led to over $460 million in customer funds being stolen, it does tend to make the process of determining source for intellectual property purposes much simpler. Trusted centralized exchanges like Coinbase, Binance, and Kraken have all successfully registered trademarks in their associated companies’ respective names. In this sense, guidance from the USPTO tends to suggest that the more blockchain networks function in a standard way (i.e. as close to traditional banking as possible), then the clearer the path towards registration.

Given the complex considerations that must be made when determining the optimal way to structure and protect a blockchain company, it is important to speak with a dedicated trademark attorney to help find a strategy that works for your business. At McCoy Russell LLP, our trademark and branding team have the technical knowledge and experience that it takes to assist in traversing through these new and exciting times in law and technology. And on the patent side, McCoy Russell attorneys are highly skilled in protecting the underlying technological innovations.

In what many consider to be one of the largest technological leaps since the invention of the internet, the emergence of blockchain technology has ushered in a new frontier across a multitude of fields. The implications of these secured digital ledgers is clear in the world of finance, where cryptocurrencies have gained global prominence, but the outlook for intellectual property has thus-far been a bit murkier. An interesting philosophical debate is now waging around some of the key tenets of trademark law. A major point of contention lies in the fact that trademark rights are only granted to those who can demonstrate that their mark is associated with a good or service in such a way that it functions as a source-identifier for the products offered. The concept of using a mark to identify the singular source of goods or services does not necessarily lend itself to a technology whose very ethos is based in a rejection of the very principles of centralization.

For those a bit confused on what exactly a blockchain is, welcome to the club. You are in very good company. In the most basic sense, blockchains are digitally distributed ledgers which share bits of data among multiple computers, as opposed to the typical process of having all data backed by a central server. This information creates “blocks” of data, which are cryptographically secured and authenticated before a new block of information can be added to the “chain”. In the case of decentralized cryptocurrencies, unlike with a government currency where a central authority controls printing and minting, there is no central authority tasked with performing these currency-producing functions. Instead, the network of computers maintains a cryptographically secured digital record of each transaction, and the computational work is then automatically compensated with newly-created currency. Given the recent rise in data hacks among major commercial and financial leaders, this idea of decentralization is particularly appealing to a public becoming increasingly mindful of cyber security.

With that being said, from an intellectual property perspective, the decentralized nature of these currencies calls into question some of the core doctrines of trademark law. As technology continues to change in new and often unforeseen ways, the USPTO has been forced to grapple with its interpretation of how to identify “source” in an increasingly digital world. The question at play is whether or not a system which by definition does not have a singular source, can still serve as a source identifier.

The USPTO’s focus is on determining (1) whether the proposed mark is associated with an actual good or service, and (2) whether the name or logo functions to identify its source (even if the actual source technically remains unknown). If a cryptocurrency is simply viewed as a store of value, or medium of exchange, then like a traditional currency, it may not be deemed to be a product or service, and if consumers view the mark as associated with a general currency, then much like Bitcoin, it runs the risk of being deemed generic. This creates a highly nuanced tightrope for applicants to traverse.

Given the general uncertainty over whether a cryptocurrency using decentralized blockchain technology can function to identify the source of a good or product, whether or not a mark is deemed acceptable for registration will largely come down to drafting a creative description of the goods and services offered. Our trademark and branding team at McCoy Russell LLP work to make sure that our clients get the most out of their intellectual property rights, and are here to assist in navigating this new and exciting landscape.