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Collective Trademarks in Blockchain Communities?

by Charles AdjovuFebruary 14th, 2019

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<em>My oh my, I’ve touched upon an interesting topic.</em>

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When the ™law™ empowers those who need it most.

My oh my, I’ve touched upon an interesting topic.

Hi, my name is Charles, and I am an avid cyberspace and intellectual property law enthusiast who believes blockchain and other emerging technologies will have a large impact on our society and economy.

For this article, I wanted to discuss an interesting situation that occurred in the NIFTY community, a sub community within the greater Ethereum community, in August 2018, and why trademark ownership needs to be discussed as early as practicable for blockchain communities [1].

NIFTY Trademark

In mid-2018, Dapper Labs Inc., a subsidiary of Axiom Zen, and the venture studio that created CryptoKitties, a decentralized application (dApp) where users can collect digital pets on the Ethereum blockchain (think Neopets or Tamagotchi, but on a blockchain), filed a federal trademark application with the United States Patent and Trademark Office (USPTO) for “NIFTY,” a term created within the NIFTY subcommunity to describe non-fungible tokens [1][2].

Non-fungible tokens are unique tokens, often based on the ERC-721 standard, that have a “name, a description, and a URI, which usually points to an image” [11].

The NIFTY trademark, granted in 2018, covers goods and services associated with:

International Class (IC) 009. US 021 023 026 036 038. G & S: downloadable computer software to enable consumers and businesses to interact with other software, digital assets, digital apparel, cryptocurrency, online services, and databases; computer application software for mobile phones, portable media players, and computers that is used to enable users to hold cryptocurrency via electronic wallets; computer software to create and manage electronic wallets for holding cryptocurrency; application software, namely, software for sending, receiving, buying, selling and storing cryptocurrency; software for use in accessing, reading, tracking, and using blockchain technology, cryptocurrency, digital assets, and digital apparel; software for facilitating a cryptocurrency transaction

IC 014. US 002 027 028 050. G & S: promotional items

IC 025. US 022 039. G & S: promotional apparel, namely, hats, t-shirts, sweatshirts, jackets

IC 035. US 100 101 102. G & S: consultation services, namely, professional services, software development, and educational services to third parties

IC 041. US 100 101 107. G & S: providing an online website enabling users to interact with computer games and other content over a global communication network

IC 042. US 100 101. G & S: providing temporary use of on-line non-downloadable software and applications for use in accessing, reading, tracking, and using blockchain technology; providing on-line non-downloadable computer software for use in blockchain technology and computation; computer software design services, namely, design, development, and implementation of software solutions for digital currency security for blockchain and cryptocurrency transactions; computer programming and computer software design services, namely, design, development, and implementation of software for hierarchical deterministic multisignature (hdm) wallets and third party verification services for blockchain and cryptocurrency transactions; providing a website featuring technology that enables users to engage in cryptocurrency mining and verification services for cryptocurrency; platform as a service (paas) featuring computer software platforms for providing design, testing, deployment, and management of blockchain systems; platform as a service (paas) featuring computer software platforms for the deployment, transfer, and management of fiat and cryptocurrency; software as a service (saas) [9].

As you could guess, this did not sit well with the NIFTY subcommunity, one that prides itself on working together to grow the NIFTY market and solidify technical standards [1][12].

Matt Condon [10], a prominent figure in the NIFTY subcommunity, was appalled by the action, and made a scathing comment (and pardon the language) on Twitter:

In response to multiple tweets from Matt and many others protesting the action, Roham, AxiomZen’s Founder/CEO, tweeted:

The whole twitter thread may be found by clicking here.

However, given the broad classification, and pertinently highlighted by Yalda Mousavinia, what is expected to happen when a community member trademarks a community term, especially when other existing platforms are already using the trademarked term as trade names such as NIFTYGallery, now renamed as CryptoGoods Gallery [1][3][4].

Though, Dapper Labs has released the open-source NFT license 2.0 to govern the use of NFTs based on the ERC-721 standard to help other companies in the subcommunity to protect their works [13].

This may be one sign that Roham really meant what he said , but the lack of reference to the NIFTY trademark, or even an open-source trademark license, speaks volumes that Dapper Labs insistence to help other companies is merely an affront to imposing their own will on the subcommunity [13].

Specifically, these two tweets by Roham below show signs of inconsistency between his position, and the actual events as they occurred:

“ TMs are a standard part of our process — we shipped NiftyLicense and our general counsel jumped on the filing generic words can never be TM’d — our interest is only in protecting products and services from copy-cats that mislead users we absolutely will shield the community”

“ third and most important: we’re committed to supporting the community we know we’re at the earliest stages of a major shift, from centralized to peer-to-peer, from digital rental to true ownership, from feudalism to freedom to go mainstream, we need sustainable business models”

These two tweets in particular led Matt Condon and other commentators to poignantly mention that Dapper Labs could have filed specifically for “NIFTY + [an additional word]” to prevent the community term NIFTY from being trademarked (or at least talked to his General Counsel to cancel the filing) [1][5].

Given this usurp of the communal ownership of NIFTY, blockchain communities should be worried about a community member surreptitiously or inconspicuously filing a federal trademark application on community-created terms and designs [1].

The most important lesson to be learned from this incident is that as capitalist as Roham’s statements may seem, you should file a federal trademark application as soon as possible (ASAP) to protect the term and help consumers associate the term with the community [1][5].

However, I do not propose blockchain/decentralized communities file traditional trademarks, as most know them, rather, I suggest communities file what is known as a collective trademark/service mark or collective membership mark [6][7].

Before diving into the collective type of trademarks, I shall provide a short introduction to collectives, trademarks and service marks, and trademark infringement because they apply to collective trademarks [14].

Collective

Collectives, as defined by Dictionary.com, are “a business, farm, etc., jointly owned and operated by the members of a group” [16].

A collective sounds very similar to a cooperative, but the two differ concerning the organization’s structure [15]. In cooperatives, the structure is regarding ownership (e.g., equal ownership in the enterprise), while in collectives, the structure is concerning _management (e._g., no hierarchical management system)[15].

Trademarks and Service marks

Federally Registered Trademark Symbol

A trademark is any mark (word, design, color, sound, symbol, device, etc.) used in commerce to distinguish a seller’s goods from other sellers, and to indicate the origin of the goods [16].

A service mark is any mark used in commerce to distinguish a provider’s services from other providers, and to indicate the origin of the service [16].

Both require use in commerce as defined in Section 45 of the Trademark Act, 15 U.S.C. §1127, i.e., the goods or services associated with the mark are used in connection with the proliferation of the goods (e.g., placing the mark on the goods or the packaging) or services (e.g., using the mark in the advertising of the service) in interstate commerce (e.g., over the internet) [17][18].

A trademark or service mark is infringed, under the Lanham Act, when there is a likelihood of confusion, i.e., that consumers will confuse the registered owner’s trademark or service mark with that of another person’s or entity’s trademark [19].

To show likelihood of confusion, the federal courts have relied on the DuPont factors (slight changes depending on the federal circuit):

(1) The similarity or dissimilarity of the marks in their entireties as to appearance, sound, connotation and commercial impression.

(2) The similarity or dissimilarity and nature of the goods or services as described in an application or registration or in connection with which a prior mark is in use.

(3) The similarity or dissimilarity of established, likely-to-continue trade channels.

(4) The conditions under which and buyers to whom sales are made, i. e. “impulse” vs. careful, sophisticated purchasing.

(5) The fame of the prior mark (sales, advertising, length of use).

(6) The number and nature of similar marks in use on similar goods.

(7) The nature and extent of any actual confusion.

(8) The length of time during and conditions under which there has been concurrent use without evidence of actual confusion.

(9) The variety of goods on which a mark is or is not used (house mark, “family” mark, product mark).

(10) The market interface between applicant and the owner of a prior mark:

…

(11) The extent to which applicant has a right to exclude others from use of its mark on its goods.

(12) The extent of potential confusion, i. e., whether de minimis or substantial.

(13) Any other established fact probative of the effect of use [19].

Collective Marks

Melinda Consortium collective mark.**

Collective marks are marks made for collective entities, such as associations, cooperatives, unions and the like [6][7]. In this context, the mark is owned by the collective entity, not by its’ individual members [6][7][8].

These marks are generally held by the collective entity exclusively for the benefit of the collective members [14]. Contrast this with the general trademark which is solely owned by an individual or entity, and benefit is for solely the owner[14].

Collective membership marks are marks meant to denote membership in a particular collective [6]. Collective membership marks do not indicate commercial origin of goods or services, nor are they indicative of any goods or services [6].

On the other hand, a collective trademark or service mark is a mark that indicates (1) commercial origin of goods or services and (2) that the provider of the goods or services has met the membership standards for admission to the collective [6][8][14][20].

With a collective trademark or service mark, as opposed to a collective membership mark, the members of the collective are using the mark to distinguish their goods or services from other providers, and to indicate the commercial origin of their goods or services [6][8][14][20].

In other words, collective marks can be used in the same manner as regular trademarks, even though the membership organization is not itself producing the goods and services [20].

A collective mark is not harder to acquire than a regular trademark, but the specimen (i.e., the mark) that forms the basis of the application is different [6]. The specimen for a collective trademark must show use of the mark by a member of the collective, while a regular trademark must show use by the owner [6].

The collective entity must show control of the mark (e.g., people entitled to use mark, relationship to collective entity, and how the collective entity controls the mark), which can be shown through the bylaws, brand guide, or other documents with a similar effect [28].

Additionally, the same standards of likelihood of confusion that apply to regular trademarks also applies to collective trademarks [6].

For communities that want to preserve a term for the community, a collective membership mark or collective trademark or service mark would be ideal in keeping the term within the community, and providing the exclusive legal right to use the term (which the community can enforce as needed in accordance with its own principles and values) [6][8][20].

Real-world Examples of Collective Marks

International Grocers Alliance “IGA” initial mark.**

Four real-world examples of collective marks are the New Hampshire Certified Public Accountants (CPAs) Society, Florists’ Transworld Delivery, International Growers Alliance, and the International Association of Privacy Professionals [need source].

The New Hampshire CPA Society owns a collective service mark for providing association services to promote the interests of CPAs and the local accounting industry in New Hampshire [21].

Florists’ Transworld Delivery (FTD) owns a collective service mark for providing services to florists in their operation of their businesses, help foster goods and services exchange between florists, and promoting the florist industry, and providing informational materials pertaining to the sale of gifts, flowers, plants, and floral arrangements [23].

International Growers Alliance (IGA) owns a collective service mark on the initials “IGA” in connection with rendering “[r]etail store services featuring grocery store items and gasoline, and retail pharmacy services” [24].

IGA’s main line of business is a franchise grocery store model through stores not owned by the brand,i.e., without the trademark included (collective service mark, thus no need for licensing), and the majority of the franchised stores are family owned, and located in small markets [25].

IGA is the largest set of independent grocery retailers in the world and operates in more than 30 countries [26].

The International Association of Privacy Professionals (IAPP) owns a collective service mark on the standard character mark of the organization’s name, in connection with rendering “[a]ssociation services, namely, promoting the interests of professionals in the fields of privacy, data protection and security, data management, data auditing, and legal compliance for the foregoing” [27].

The IAPP provides certification, training, conferences, and additional resources for people who are interested in privacy, or privacy professionals looking to see what is going on the industry.

Hypothetical Example

Here is a hypothetical example e of how a community would consider filing for a collective trademark.

A blockchain community or subcommunity, lets call them Quirkteam, will develop a trademark-eligible mark.

Quirkteam starts to see the potential for the trademark-eligible term or design to become a staple term or design to identify the community.

Quirkteam, realizing the potential for misuse and abuse of the trademark-eligible mark, decides to create a collective entity that will be the owner of the trademark-eligible mark.

Quirkteam will then file a federal trademark application with the USPTO for a collective mark (trademark, service mark, or membership mark).

If successful, the USPTO will issue Quirkteam,a federally registered collective mark.

Quirkteam can then manage the use of the collective mark by its members (e.g., through the collective entity’s bylaws or brand guide), thereby preserving the principles and values of the community’s usage of the mark.

Alternatives to Collective Mark

A blockchain community or subcommunity may also elect to dedicate community-created terms or designs to the public domain, free for anyone to use without any restrictions.

Additionally, a community may utilize a version of the creative commons license to protect copyright usage of the term or designs[29].