Trade mark protection for blockchain and other crypto projects

Germany

This article highlights the specific features and advantages of trade mark protection for blockchain and crypto projects, both for application in physical and in immersive, virtual reality environments (in particular metaverse) and explains how trade mark protection can be obtained in practice.

Aura Blockchain Consortium published a press release on the introduction of "Aura SaaS". A cloud-based solution is intended to enable luxury brand proprietors and luxury product manufacturers to incorporate blockchain into their routine business processes, such as supply chains, customer service, marketing, manufacturing, sustainability, procurement, and logistics.

Aura SaaS is designed to allow manufacturers of brand-name products to access the Aura blockchain via APIs (Application Programming Interfaces) and connect it to their own IT systems and applications. For this purpose, the Aura Blockchain Consortium has filed applications with several national trade mark offices for various "Aura" word marks as well as an Aura figurative mark, predominantly in classes 9, 35, 36, 38 and 42 of the Nice Classification (the classes of the Nice Classification determine the goods and services for which a trade mark is protected, for example, class 9, among other things, for "computer software", class 35, among other things, for "advertising", or class 42 for "design and development of computer hardware and software" as well as "software-as-a-service").

On this basis, the specifics of trade mark protection for blockchain and other crypto projects, both for application in a physical and in immersive, virtual reality environments (in particular metaverse), are addressed in this article.

Relevant protection phases and areas for blockchain projects and projects based on similar technologies

Against the background of the rapidly growing blockchain ecosystem, relevant phases and areas of trade mark protection for blockchain projects and projects based on similar technologies ("blockchain projects" or "Web3 projects") are outlined below. In this context, trade mark protection is also of interest to DAOs (Decentralised Autonomous Organisations), for which the option of being bearers of rights and obligations has yet to be determined in many legal systems or is only just being introduced.

Project planning and development phase

In the planning and development phase of a blockchain project, the protection of a trade mark can be considered as soon as the planned sign and the basic product details have been determined. By registering them, the often carefully selected signs can be protected against use in trade by third parties.

Its entry in the trade mark register gives the trade mark a five-year grace period for use, which means that the trade mark does not have to be used within the first five years so as to effectively enforce the rights associated with it. Within a priority period of six months, a sign applied for, for example as a German trade mark ("basic trade mark"), can also be applied for in other countries whilst retaining priority (for example by way of an "International Registration" or by way of national trade marks).

The extension of a trade mark as an International Registration to other countries is governed by the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol). The advantage of the priority period rule is that the application date of the basic trade mark also applies to the trade mark extension to other countries. The basic trade mark effectively gives you a buffer of six months, which can be used to displace signs applied for in other countries in the meantime if the application is more recent than that of the basic trade mark.

Blockchain protocol, blockchain explorer and wallets

A blockchain protocol may already contain signs that are or may in the future be subject to trade mark protection, for example for the currency of such blockchain (native coins). Thus, "Ether" is protected, amongst other things, as an EU trade mark for goods and services in classes 9, 36, and 42. Depending on the programming, trade marks included in this way are openly visible to everyone via the respective blockchain explorer and are displayed in the users' wallet (for example, Metamask, MEW or Solflare).

The aim of trade mark protection is not to prevent lawful use of signs (for example, the display of a token in the wallet), but unlawful copying and imitating of the trade mark by third parties. Sufficient trade mark protection makes it possible to prohibit copying of a trade mark or producing a confusingly similar sign, for example, if someone imitates an NFT collection or offers staking services using the same sign or name.

The possibility of using, for example, certain tokens or other offers as a trade mark is the decisive factor in determining whether trade mark protection makes sense: Is the sign used in trade as an indication of the origin from a specific blockchain operator, company or other holder of rights, i.e. is it visible beyond the internal programming? In the perception of the relevant public, is there a provider at all? This depends on the concrete design in the inpidual case.

Smart contracts

Trade marks can also be used via smart contracts. For example, a trade mark can be entered or linked as a word or figurative mark in the metadata of a non-fungible token (NFT) smart contract (via the Uniform Resource Identifier (URI)). This trade mark is then displayed in the blockchain explorer and the wallet of the respective token proprietor as programmed. Particular attention should be paid here to the use of trade marks via media linked to an NFT.

One of the first court disputes on NFTs and trade mark rights is the "MetaBirkins" case. In this case, products and signs of a luxury brand are being used by a third party as an NFT collection, including through the medium linked to the NFT. The proprietor of the trade mark is now taking legal action against this.

Website, social media, other (virtual) appearances and advertising measures

In general, any use of a sign in the course of trade can be relevant from the perspective of trade mark law. The use is relevant for the proprietor of the trade mark itself, namely as a rights-preserving use. Unlawful use by third parties in turn gives rise to claims for injunctive relief and compensation on the part of the proprietor of the trade mark.

Advantages of trade mark registration

Trade mark registration offers the following advantages in particular:

  • In contrast to other IP rights, trade mark protection can exist for an unlimited period of time provided that the fees are paid to the trade mark office and a rights-preserving use is made.
  • In addition to traditional company signs, it is also possible to protect product or project names (for example, for a wallet, certain tokens, or a DAO). In this respect, entry in the register has a strong defensive function for the protected sign because the existence of trade mark protection is examined by the respective office not only from a formal but also from a substantive point of view.
  • Both the identical copying of trade marks and the use of confusingly similar signs in trade may be prohibited (Section 14 (2) no. 2 German Trade Mark Act (MarkenG) or Article 9 (2) (b) EUTMR).
  • Public recognition can override a sign's lack of distinctiveness or descriptive character. For this purpose, the trade mark must have acquired distinctiveness for the goods or services in question as a result of its use (Section 8 (3) German Trade Mark Act (MarkenG) or Article 7 (3) EUTMR); however, the prerequisites for this are relatively strict.
  • Finally, in the case of good trade mark management, the mere exploitation of a good reputation may also be protected by using the trade mark (Section 14 (2) no. 3 German Trade Mark Act (MarkenG) or Article 9 (2) (c) EUTMR) if the trade mark is a sufficiently well-known one.

How is trade mark protection obtained?Trade mark protection is primarily obtained by registering the sign with the respective trade mark offices. In addition to word marks (for example "Ethereum", registered as an EU trade mark in classes 35, 38 and 42), word-figurative marks or purely figurative marks can be considered. Furthermore, depending on the respective national trade mark law, motion marks, sound marks or 3D marks may also be protected.

In addition to registration, in Germany, for example, a sign may obtain trade mark protection without registration if it has acquired a certain degree of brand awareness (public recognition) through its use ("trade mark acquired by use"), see Section 4 no. 2 German Trade Mark Act (MarkenG). Moreover, in Germany there is also sign protection for commercial designations. Specifically, both company signs and titles of works can be protected (Section 5 German Trade Mark Act (MarkenG).

Considerations when applying for a trade mark

In order to obtain trade mark protection, a trade mark (such as a name, logo or motion sign, for example in the form of a short video sequence) must be applied for in the trade mark register. For this purpose, the goods and services for which the sign is to be protected must be specified. In this respect, it is advisable to think in terms of the future and, where appropriate, include segments which may become relevant only in a few years because a trade mark, once applied for, cannot be subsequently extended or amended.

Furthermore, it must not be a sign that needs to be kept free for public use. In the case of blockchain projects, such a need to keep a sign free for public use is likely to exist for purely descriptive terms such as "token" or "blockchain" or "metaverse".

When applying for the trade mark, a specific list of goods and services referring to the respective blockchain, crypto assets or virtual reality products/services is required. The challange here is that crypto assets and related services are currently still largely "uncharted territory". There is, for example in TMClass (a harmonised database (HDB) listing terms of goods and services accepted and implemented by all EU trade mark offices) only one entry in class 9 with a doubtful blockchain reference ("security tokens [encryption devices]"). Many blockchain trade marks are increasingly focusing on services in class 42 (for example "data storage via blockchain" or "certification of data via blockchain"). Nevertheless, new developments are planned in this area such as the incorporation of the term downloadable digital files authenticated by non-fungible tokens in Class 9 in the 12th Edition of the Nice Classification.

Lawful use of a protected trade mark and trade mark searches

The proprietor of a trade mark may prohibit third parties from using such a trade mark (see Section 14 German Trade Mark Act (MarkenG) or Article 9 EUTMR). If the use of a protected trade mark is planned, the consent of the trade mark proprietor must usually be obtained. In practice, separate licence agreements are concluded for this purpose. Such licence agreements have to take into account specific features of blockchain, crypto and metaverse projects, for example the specific form of exploitation.

A trade mark search prior to a trade mark application can help obtain a precise overview of identical or similar trade marks already applied for or entered in a trade mark register. A trade mark search identifies trade marks which may be infringed when applying for a new trade mark which is not yet protected. The risk of an overlap with an already existing trade mark ("collision") and a possible legal dispute can thus be better assessed and controlled. This is because even a likelihood of confusion with an older sign can lead to a prohibition of the younger sign.

Points to consider for effective trade mark protection of blockchain and other Web3 projects

The following must be considered for Web3 applications, whether they are inside or outside a virtual reality environment (metaverse): It has been proven that projects and companies that protect their IP rights in good time have a greater chance of success in establishing themselves on the market. Increasingly, not only the traditional word and figurative marks are playing a role but also new forms of trade marks such as motion and sound marks.

With regard to the list of goods and services, further new terms will certainly become established by the offices in the future considering the enormous growth in the market for blockchain applications, crypto assets and metaverse projects in the last year. It would also make sense to update the Nice class headings accordingly. This is particularly true in the light of the fact that blockchain projects and crypto assets have already established themselves on the market to such an extent that the question is no longer "whether or not" but "how" to design the applications. This is evident not least from the increasing number of crypto-specific laws and legislative proposals.