How might blockchain technologies affect trademark law and practice?
Full disclosure time: I am not an engineer, an economist, or a technologist. At this writing, I own and have owned no cryptocurrencies (e.g. Bitcoin). This is not the blog post to go to if you’re looking for highly technical information about blockchain technology. This post will definitely contain simplifications, and may contain errors – if you spot the latter, please point them out to me and I’m happy to edit as needed.
OK. I suppose we have to start with what the heck is a blockchain?
My description follows, but here’s a video I found that does a pretty good job of explaining the concept.
A blockchain has been described as a distributed ledger. That didn’t make much sense to me when I first heard it, so think of it this way: it’s like a list of transactions that lives in the cloud. Imagine an Excel spreadsheet or your bankbook (are there still bankbooks? You get the idea.) Blockchains are maintained by a large number of independent computers spread around the world, so there’s no one central authority who validates the information contained in the ledger. And, in theory, the information contained in a blockchain can’t be compromised or hacked. It’s set in stone for anyone to verify at any future point.
The absence of a central authority is an essential element of blockchain technology’s value proposition. The types of authorities that may, in whole or in part, become antiquated as a result of blockchain adoptions include central banks (like the U.S. Federal Reserve), credit agencies, commercial banks, merchant service providers, and, as seen below, national trademark registries. But now we’re getting very speculative.
Still not clear on the whole blockchain concept? Let’s try a thought experiment. Imagine I create a blockchain ledger to record each day’s Major League Baseball scores. I add the day’s scores to that day’s “block,” and a bunch of computers around the world check to see if it seems accurate to them. If the majority of those computers say yes, then that block is fixed. Repeat this practice the next day, and those two blocks begin to form a “chain”. You could go back through the chain and see if the Padres won on such and such a date, even if MLB took its own site down. (In this thought experiment, MLB is like a central bank or other validating third-party institution.)
But doesn’t this blockchain business have something to do with Bitcoin?
Yes…and although that doesn’t really relate to the trademark topics, which are what I really want to discuss, here’s the deal with Bitcoin. One of the uses of blockchain technology is the issuance of digital tokens or “coins”. They’re also known as “cryptocurrency” due to the use of Cryptography to secure the transactions in the ledger. They’re probably also known by other names that I’m not aware of. Look, this is all kind of new, and we’re still figuring out the language around this stuff.
These tokens serve as rewards for all of those computers I described above who maintain and validate the blockchain. Because these tokens are scarce, and because (in theory) a blockchain is a secure record of who possesses each token, these tokens can serve the same functions that are served by physical money. They can act as a medium of exchange (meaning, you can use a token to buy goods or services), a store of value (like gold or real estate), and/or a unit of account (measuring the value of things like income and debts). Bitcoin is the original and most well-known cryptocurrency. Invest at your own risk.
On to the Trademark Topics
This blog post started out with “How might blockchain technologies affect trademark law and practice?” and now we’re finally there. Here are a few potential use cases for blockchain technology in the trademark world. Each of these use cases includes complexities and challenges that I’m handwaving away for the purpose of this blog post – these are just blue sky concepts.
Proof of Use
In the U.S., and in many other jurisdictions, trademark rights go to the “Senior User” of a mark – the person or entity who first used the trademark in commerce in connection with specific goods or services.
For example, let’s say you started a car-sharing service called Uber before the company that we know as Uber (Uber Technologies Inc.) went into that business. If that were true, you would potentially be able to bring a huge trademark infringement claim Uber Technologies Inc. But how would you prove that you were the Senior User? Well, you might be able to provide receipts and invoices, screen shots from your website or social media presences, testimony from customers and drivers, and other types of proof. All of this “proof” would be subject to federal or state rules of evidence, and you can be sure that Uber Technologies Inc. would do everything they could to challenge the validity of that evidence. The result would be a long and costly legal battle.
On the other hand, if there was data recorded on a blockchain showing the time, date, and circumstances of your first use, a court may accept that as proof of use. You can see how a blockchain-based international trademark use record could solve a lot of problems, including greatly reducing the cost, time, and uncertainty around these types of legal disputes.
Self-executing contracts, also known as “Smart Contracts”, are one of the most commonly touted applications of blockchain technology. The idea is that these types of contracts can be fulfilled automatically, without any intervention by an individual person, based on publicly available data.
For example, let’s say we have a contract whereby I will exercise a stock option once the stock hits a certain price. If the stock price data is recorded on a blockchain, then nobody needs to personally say, “OK, the stock has hit this price, now it’s time to execute the option” – it happens automatically. Of course, this is a very simple example, and the advantages really come into play when you have a contract that has a lot of variables that are hard for an individual to track or validate.
Several states have passed laws that recognize the validity of smart contracts; however, whether those laws will actually support the adoption of this technology is an open question.
The principles underlying self-executing contracts could be applied to trademark license agreements. Imagine I license my brand name (trademark) to appear in your video game, and instead of a fixed license fee, you pay me for each time the brand appears on a game player’s screen. As long as I trust that the data is being properly encoded on the blockchain (thanks to all the neutral third-party validators described above), I don’t have to do anything except sit back and watch the license fees roll in. This would eliminate a lot of auditing, bookkeeping, and legal fees. And it would allow for more such license agreements to be entered into in the first place, because the transaction costs would be lower. The result could be greater revenue for trademark owners.
Trademark owners whose marks are used on physical products are often challenged by counterfeiting. Logos, UPC codes, and similar markers of authenticity are better than nothing, but counterfeiters continue to find innovative ways to rip off desirable brands. Blockchain technology may help to solve this problem. If each item – whether it be a designer handbag or a bottle of medicine – was labeled with a unique identifier that was tied into a record on a blockchain ledger, it would be much simpler for distributors, governments, retailers, and consumers to confirm that the product they’re holding is the real thing.
Replacing Countries’ Trademark Registers
This ties back to the Proof of Use concept outlined above. Currently, almost all countries have their own trademark registers. In addition, there’s another layer of international trademark registers created by treaties (e.g. the European Union Intellectual Property Office). Clients often ask me how they can protect their brands worldwide, and the answer is that you can’t – instead, we have to deal with many different countries’ fees, deadlines, and filing requirements. A single blockchain-based distributed ledger of trademarks may not put all of these countries’ registries out of business, but it could certainly simplify the filing process, function on an international scale, and greatly reduce costs.
Of course, it’s not quite that simple. The United States Patent and Trademark Office, which is the national trademark agency that I interface with most often, employs many Examining Attorneys to review and validate claims in trademark applications. The law doesn’t always draw perfectly clear boundaries between parties’ trademark rights, so there’s an art as well as a science to this, which is why it’ll be a long time before the blockchain replaces the USPTO (or trademark attorneys) entirely. But just as the Internet allowed trademark owners to file their applications much more quickly and at much less cost, so could blockchain technology be applied to reduce some of the cost and friction in the system.
I’m sure lots of smart people will continue to come up with creative applications of this emerging technology, including in the intellectual property world. If you’re aware of other trademark-related uses of the blockchain, let me know.