July 16, 2018Blog

One Blockchain Trademark Ledger to Rule Them All!

Scenario 1: Every trademark litigator knows the drill, a company in a remote geographic market sends the client located hundreds or thousands of miles away a cease and desist letter. There is no market conflict and perhaps never will be, but the remote user obtained a federal trademark registration and desires to assert its constructive federal registration rights.

Scenario 2: Pacifico Co. and Atlantic Inc. start in remote markets from each other in the same industry, innocently using the same or closely related marks. Both companies prosper over the decades. As their respective markets proceed from local, to regional to semi-national, their markets and marks collide causing marketplace confusion. A common law trademark infringement lawsuit proves difficult and costly as each company tries to prove their respective priority of use across wide trade areas.

Scenario 3: Detroit LLC enjoys rapid growth in its industry and obtains a federal trademark registration for its successful service mark. Copycat Co. begins conducting sales in Toronto offering the same services under an identical mark prior to Detroit LLC first offering its services in Canada. Detroit LLC has been deprived of its mark in a nearby market where its arrival in the market was reasonably predictable, but its U.S. registration has no effect in Canada.

Scenario 4: Homegrown Success Story Inc. moves manufacturing to a foreign market to support Homegrown’s domestic U.S. marketplace demand. Counterfeiters in foreign market register Homegrown’s marks in foreign market and start selling counterfeits throughout the world to include shipping them into the USA where Counterfeiter has no assets that would be subject to a U.S. judgment and where an injunction is ineffective.

Over at Blockchain + The Law, my colleague Anne Canfield makes the case in the latest edition of The Disruption Report that blockchain will reach into every aspect of life as the 4th wave of disruptive change in the digital era. Blockchain disrupts central brokers whose primary function in transactions has been security, trust and verifiability, e.g. banks, treasuries and stock registries. Through agreed upon algorithms or smart contracts, blockchain participants agree to share transactions across a distributed and secure network of computers and where the transactions are effectively permanent and immutable once complete.

Blockchain technology could also solve the inefficiencies found in the current trademark registry system. Current registries are presently defined by political boundaries, while the majority of commercial markets do not typically fit neatly into and/or they transcend political boundaries. Since the inception of the Lanham Act in 1946, markets, consumers and trademark uses have become ever more fluid and transnational in part due to the growth of the internet, e-commerce and social media as well as the opening and normalization of international trade and migration over the past 100 years.

Blockchain technology is being implemented to more efficiently and transparently maintain shareholder transactions and corporate records, to track the sourcing and distribution of agricultural and pharmaceutical supplies, land title registries, academic and certification registries and real time global payment. The GSA has launched an initiative to evaluate how blockchain might be used to improve transparency, efficiency and trust in federal agencies.

A trademark blockchain registry could securely and permanently record when and where brand goods have been manufactured, distributed, marketed and sold. This would create a permanent record of trademark use. A blockchain trademark registry could also record the extent of commercial use, channels of distribution and the facilities of sale.  Brand ledger technology could be extended to record social media usage. As we move to an AI Web 3.0, a trademark ledger could in theory implement a smart algorithm to calculate the rate of geographic expansion and project reasonable zones of expansion based on that rate of market growth. A Madrid protocol for the 21st Century could involve countries agreeing to use a common blockchain ledger for purposes of evaluating and enforcing trademark claims.

Because blockchain is transparent, the data regarding mark usage would be public so long as the information in the ledger is not restricted from public viewing. The ledger could provide the same public notice function as the current federal trademark registry, and in fact could provide advance warnings of impending trademark conflict. The ledger would create a permanent and reliable record of actual mark usage. With such a ledger in place, trademark rights could be more efficiently and accurately defined by actual areas of use and reasonable zones of expansion, instead of presumptive rights over large political areas. Some form of constructive trademark rights should also be afforded where branded goods are manufactured, if the goods are not also sold there as well.  Infringement jurisprudence would have to develop regarding what would constitute remote, good faith use versus adopting a mark that one should reasonably anticipate to conflict with a preexisting senior user given the senior user’s pattern and rate of marketplace expansion. With a Madrid style treaty for the 21st Century in place, the ledger need not be confined by political boundaries nor would rights be artificially expanded to political boundaries where there is no commercial basis for doing so. Nations and tribunals worldwide could share an international trademark ledger that reflects trademark usage in real time.

With such a blockchain trademark registry in place, the client in Scenario 1 would not have an apparent infringement problem, unless the client’s adoption of the mark was not reasonable given the remote senior user’s demonstrated market growth prior to the client’s adoption of the conflicting mark.

In Scenario 2, Pacifico Co. and Atlantic Inc. would be able to see on the ledger the impending marketplace collision before it occurred, and hopefully the parties would seek to find a solution prior to conflict. If they instead proceeded into marketplace conflict, the ledger would provide indelible evidence of who was the first user in each conflicting market.

In Scenario 3, assuming Canada adopted the blockchain trademark ledger, Detroit LLC could take legal action in Canada for Copycat’s adoption of a nearby and rapidly expanding mark.

Scenario 4, again assuming the foreign market adopted the ledger and treated branded manufacturing as a constructive use, Homegrown could pursue Counterfeiter in Counterfeiter’s jurisdiction where equitable relief would be effective and a monetary award could be collected. Further, if the ledger were closely integrated with transportation and POS systems worldwide, the extent of Counterfeiter’s infringing activities would be readily and easily ascertainable. Such a real time ledger could also be used to confirm that branded goods originate from the brand owner or approved source and thus be used to combat counterfeiting.

We can and should improve our 1946 era registry. As we head into a blockchain and AI Web 3.0, it is time to start developing Trademark Registry 2.0.

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