Cryptocurrencies and IP rights

The intellectual property that crypto companies use and own – or use and don’t own – is often essential to their business.

The role of patented technology in crypto is obvious. But have you considered that other areas of intellectual property, particularly copyright and trade marks, can be more important than many players in the market realise.

Trademarks

"The role of patented technology in the crypto world is obvious, but how about other issues like trademarking of currencies?"

Enforcement

While there have probably to date been more such cases involving NFTs than crypto, no household name business wants to find its name attached to a cryptocurrency with which it isn’t involved – potentially by unscrupulous actors seeking to scam customers – and a trade mark is usually the simplest and strongest defence against that kind of activity. It makes any takedown request to a platform or a web host relatively straightforward.

Identifying infringement

Having a robust IP portfolio is important, but it’s of limited value if you can’t identify infringements when they occur.

An increasing number of businesses now use service providers that can monitor the web and report potential infringements. You can then file takedown requests to specific websites that are using your trade mark through that platform, which is another way of saving cost.

Alternatives, like relying on a claim for passing off, can be more uncertain and more challenging. A passing off claim is likely to be evidence-intensive, requiring a lot of work required to bring a case.

International

The international nature of crypto can pose practical differences for trade mark protection. For the biggest names, there may be no real alternative to a worldwide trade mark filing campaign. Smaller crypto players may opt to focus on the jurisdictions where they expect the most consumers to buy their coin, use their exchange or otherwise do business with them.

However, problems can arise here too. Even if you have a trade mark in a particular jurisdiction, you will have to prove that any infringer is targeting consumers in that jurisdiction. And in the frequently anonymised world of Web 3.0, it can be quite difficult to determine where consumers are, or where publicity is targeted. It’s still not wholly clear what considerations various courts are likely to take into account, although some – such as the UK courts – will basically apply a ‘common sense’ approach.

Web3 domains

A growing concern for some businesses is the arrival of Web3 (aka Web 3.0) domain names. Unlike the domain names with which the internet grew up, these are based on the blockchain and are thus decentralised. They use new extensions, such as .crypto, .blockchain and .nft.

Many businesses assumed that these domain names had very limited utility and consequently did not secure some that use their brand. But Web3 addresses are now being linked to websites too – so many Web3 addresses that incorporate major brand names are now owned by anonymous users, who in some cases will have acquired large portfolios of them for relatively little outlay.

For a deeper dive into this topic, and the solutions available to businesses wishing to protect their IP, see our Brand page.

Crypto company rights

How should crypto companies protect the rights in their businesses?

If a business has an app or crypto exchange, ideally it probably has a trade mark or a series of trade marks for the name and for any specific tools or functionalities. But it has other intellectual property too, including underlying code that is protected by copyright.

Code

One thing many companies – particularly startups – get wrong is that they use an external team of coders (who may even be based in and working from a different jurisdiction) without an agreement to ensure that the coders’ work belongs to the business.

In this situation, the coding team actually owns the intellectual property rights in the code, with the commissioning business granted an implied license (under common law) to use it for specific purposes. A business can work with this, but it is obviously an unsatisfactory position. Putting in place assignment agreements and ensuring an appropriate chain of title is a much better approach.

Look and feel

In something like an app, look and feel can sometimes be protected. In the UK, if your app is too similar to someone else’s, you might be on the receiving end of a claim for passing off. In some EU jurisdictions, there’s an unfair competition tort.

Data

Companies like crypto exchanges may also have things like database rights, which don’t protect the data itself but do protect the way data is arranged and selected. Any wholesale extrapolation of the data, or of an essential part of it, could lead to a liability for database infringement.

Employees

Where an employee moves from one app provider or one crypto provider to another and takes ideas with them – which is not uncommon – there is clearly potential for a breach of contract. In the UK, there may also be grounds to claim a breach of confidence. There is also a trade secrets regime, in both the EU and the UK, which could be used against ex-employees who take a business’s ideas to their new employer.

Key contacts

Ben Hitchens

Partner

London

T +44 20 7367 2429

Jack Rigelsford

Associate

London

T +44 20 7367 2368

Expertise

TMT - Technology, Media & Telecommunications Technology Digital Assets & Web3