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Determining the meaning and value of the cryptocurrency

By Kurt Leyendecker

I am confused. Very confused. You see, I had a silly idea to write an article about the trademark rights associated with BITCOIN. I think I have less of an understanding of all things Bitcoin now than I did before I began my research. The problem at its core is that money and currency in any form is very complicated that almost all of us take for granted. We go about our lives blissfully, never thinking about the deeper constructs of money. Currency is an abstract, intangible idea. It can be represented in the form of paper or coinage, but much of it is transferred back and forth daily among people, companies, banks and governments, simply by changes of notation in ledgers. We trust currency is worth what it says it is worth, understanding that the currency is backed by the full faith and credit of the issuing government. With some extreme exceptions, as long as the United States exists, the U.S. dollar isn’t going to fail – though, its value may fluctuate.

Virtual, or cryptocurrencies, such as Bitcoin, are different than so-called fiat currencies; virtual currencies are not backed by any government. In fact, they are not backed by any one entity at all.

So, how are they backed?

The value of a Bitcoin is derived simply by the amount of money a person is willing to pay for it. What do you get when you acquire a Bitcoin? You receive a cryptographic, presumably alphanumeric key representing a Bitcoin that is recorded by many redundant electronic ledgers located on thousands – if not hundreds of thousands – of computing devices all over the globe. As the bearer of this key, you can exchange it for other currencies or at least theoretically buy something with it. Think of it this way: If money and fiat currencies are intangible, then Bitcoin and other virtual currencies are intangible intangibles or intangible squared.

Confused yet?

While pondering the whole Bitcoin phenomenon, and lamenting the fact that I did not buy a few dozen five or so years ago when each was worth a mere $20, I wondered whether anyone had registered the trademark BITCOIN, particularly in the U.S. Since no one entity owns Bitcoin and because the software (which creates Bitcoins through a process referred to as mining, and simultaneously maintains the ledgers) is open source, there really is no one to own or claim trademark rights in BITCOIN. More simply stated, trademarks exist to identify the source of goods or services in commerce, and since the source of Bitcoins and the systems surrounding them are open, there is no single identifiable source.

I checked the records at the Trademark Office and found 105 applications for marks that included the term BITCOIN had been filed in the last few years, including my favorite, WINKLEVOSS BLENDED BITCOIN INDEX. Even after being kicked to the curb by Mark Zuckerberg when he stole their idea to create Facebook, the Winklevoss twins dusted themselves off, crewed their way to a 6th place finish in the Beijing Olympics, and thereafter managed to acquire 1 percent of the all the Bitcoins in existence as of 2013.

But I digress.

Of the 105 applications, only 52 are live, of which only 21 have resulted in issued trademarks. Of the issued trademarks, none are for the term BITCOIN alone and most disclaim the exclusive right to the term BITCOIN aside from the mark as presented. A brief review of the Trademark Office actions requiring the BITCOIN disclaimer indicates the Office often found the term to be either merely descriptive or generic for a type of digital currency. Similarly, for the couple of applications for BITCOIN alone pertaining to financial services or products, the office also found the term to be generic or merely descriptive.

The uptake of all of this is that at least in the eyes of the U.S. Patent and Trademark Office, the term BITCOIN as it pertains to financial services, and especially crypto currencies, does not operate as a trademark. While the foregoing does not preclude the U.S. courts from reaching a different conclusion pertaining to an entity asserting common law trademark rights to BITCOIN, the courts are likely to grant great deference to the Office’s findings.

What does all of this mean to us in the world of Bitcoin?

Well, since no one can hold a trademark to the term, it follows that someone or anyone could offer new cryptocurrencies under the name BITCOIN as well. This new bitcoin might not have any relationship to the currency otherwise known as Bitcoin, which could cause great confusion (beyond that which I am already imparting.)

Nevertheless, I am not sure those offering these new bitcoin currencies would be legally found to be counterfeiting the established Bitcoin currency since the term is likely generic and no one owns it. I suppose if you have a hankering to drop thousands and buy a Bitcoin, you will want to make sure it is an original Bitcoin and not a new bitcoin that, although it shares the name, is not the same.

As I stated earlier, I am confused, but I do know this: I am not buying any Bitcoins from anyone anytime soon.

The March 2017 passage of the Consumer Review Fairness Act protects people’s ability to share their honest opinions about a business’ products, services or conduct.

By Peter Lemire

There’s no doubt in today’s electronically driven economy, online reviews are an important part of business. Tools such as Google, Yelp, Facebook and others provide platforms for consumers to share experiences and opinions before, during and after their transactions. An increase of just a single star on a restaurant’s Yelp profile can correspond to an increase in sales by 5 percent to 9 percent. However, the converse is also true – 60 percent of people in another survey stated that negative reviews deter them from patronizing a listed business.

With so much at stake, it is tempting for businesses to try to exert more control over customer reviews, especially bad reviews. In the past, some creative companies have taken steps to limit the possibility of bad reviews by writing so called “gag” clauses into their contracts, restricting the other side’s ability to post a negative review. If the patron posted a negative review, the company could sue for breach of contract. Other companies have attempted to control the copyrights of customer reviews to dictate whether a review was made public and where it was displayed.

However, the rules all changed in March 2017, with the passage of the Consumer Review Fairness Act (CRFA). The item was passed with little fanfare and many are still unaware of its existence. Although the CRFA may not have made headlines, it is important for businesses to be aware of and for companies to conduct a review of their contracts to make sure they are not in violation of the new law.

What does the CRFA do?

As stated by the Federal Trade Commission (the administrative agency charged with enforcing the law), the CRFA protects people’s ability to share their honest opinions about a business’ products, services or conduct in any forum, including social media. To that end, the CRFA makes it illegal for a company to use any contractual provision that:

• Bars or restricts the ability of a person who is a party to that contract to review a company’s products, services or conduct;
• Imposes a penalty or fee against someone who gives a review; or
• Requires people to give up their intellectual property rights in the content of the review.

The CRFA does not leave companies completely powerless, but instead allows businesses to prohibit or remove reviews that:

• Contain confidential or private information (e.g. a person’s financial, medical or personnel file information or a company’s trade secrets);
• Are libelous, harassing, abusive, obscene, vulgar, sexually explicit or  are inappropriate with respect to race, gender, sexuality, ethnicity, or other intrinsic characteristics;
• Are unrelated to the company’s products or services; or
• Are clearly false or misleading

Before businesses set their sights on that last point, it should be noted that the FTC strongly cautions that, “It’s unlikely that a consumer’s assessment or opinion with which you disagree meets the ‘clearly false or misleading’ standard.” Any company found to violate the CRFA will be treated as if they violated the FTC rules regarding an unfair or deceptive act or practice and will be subject to financial penalties (up to $40,000 per violation), as well as a federal court order prohibiting the illegal conduct.

In light of the new law, there are actions that businesses should take now to make sure they are in compliance.

1. Companies should review all customer/client contracts, including any terms of service (TOS) for their website, as well as any e-commerce terms. One common term in standard website TOS’s is that the company owns the content of any inquiries or other communications submitted to the company. These provisions need to be examined to see if they fall within the purview of the statute
2. Companies should take steps to remove any provisions that could be interpreted as restricting a person’s right from sharing an honest review, penalize someone for a bad review, or claim copyright over the content of peoples’ reviews. This would apply even if you have never enforced such a provision nor intend to do so in the future. Liability under the CRFA is due to the mere existence of these provisions, not their actual enforcement.
3. Lastly, what should a business do if they get a bad review? Even before the passage of the CRFA, many on-line reputation experts would caution companies from taking any action against bad reviews.This is due to what is known as the Streisand Effect, in which attempts to hide, remove, or censor a piece of information usually has the unintended (and often negative) consequence of actually disseminating the information to a wider audience than it would have originally been exposed to if no action was taken.

Truly the best way to combat negative reviews is to provide goods and services that generate more positive reviews than bad.

How can you be proactive when founding a new company or branding a new product to avoid trademark infringement disputes

By Kurt Leyendecker

Recently, the management at Colorado’s own SmashBurger decided to name its new burger the Triple Double, ostensibly because the burger has three slices of cheese and two beef patties. It could also be a play on the rare achievement of a basketball player accumulating a double digit score in three statistical categories. In rolling out this massive sandwich, SmashBurger initiated a significant marketing campaign.

At some point, the powers that be at California’s In-N-Out Burger became aware of the Triple Double and were not pleased. They believed the Triple Double name is too close and confusingly similar to one or both of the company’s registered trademarks, Double Double and Triple Triple, both also names for burgers. A lawsuit was filed and delivered to SmashBurger.

I find it hard to believe that when the folks at SmashBurger came up with the name, Triple Double they were concerned about a lawsuit from In-N-Out. I suppose it is possible SmashBurger chose the name to goad In-N-Out, thinking the publicity from any dispute would enhance name recognition. More likely, they either thought their burger’s name was sufficiently different, or perhaps they didn’t even know of In-N-Out’s marks. Very few, if any, companies relish the idea of being sued for trademark infringement and possibly face hundreds of thousands of dollars in litigation costs and damages to the other party on top of that. Perhaps worst of all, a loss would mean ceasing use of the infringing mark and effectively forfeiting the name recognition and goodwill built up after a costly marketing campaign.

My colleague, Peter Lemire, and I both agree that the lawsuit is a toss-up.

On the one hand, In-N-Out has held Federal trademark registration in their Triple Triple and Double Double marks for a very long time, which weighs in its favor. On the other hand, the marks are very descriptive and SmashBurger’s Triple Double is different from both, weighing against a finding of infringement. Descriptive marks are typically given less protective breadth and scope than arbitrary or fanciful marks. Should the case go to trial, consumer surveys polling the relevant public will weigh heavily on the outcome. Ultimately, I believe this case will settle before seeing the inside of a courtroom and this skirmish will be all but forgotten in a couple of years.

Disputes like this occur regularly these days, as companies on different sides of the country, that only 25 years ago would have never heard of the other, can now easily find each other on the web. We are regularly hired to represent companies in these trademark disputes. The disputes are often resolved with one party (many times the smaller and less financially flush company) agreeing to stop using the disputed trademark. Rarely do these disputes go to court, as the costs are prohibitive to at least one of the parties. The effects of having to change a company or product name can be significant; not only is there the monetary cost of redesigning a website, changing signage and reprinting marketing materials, there is also the loss of any goodwill associated with the mark.

Often being proactive on the front end of founding a new company or branding a new product or product line can be helpful in avoiding trademark infringement disputes. A trademark clearance search and advice from a trademark attorney isn’t free, but it might save a company thousands of dollars in the future. If a new mark is cleared, federally registering it is often advisable. Registration might dissuade someone else from using a similar mark. When it comes to choosing trademarks the old maxim holds: An ounce of prevention is worth a pound of cure.

It is important to identify potential intellectual property protection early on

By Peter Lemire

One thing is for certain in the intellectual property world – no one likes the feeling that someone has stolen something. For business owners, not every similarity or perceived “theft” of an idea or concept is actionable under the law. This is especially true if technology is involved, since the law usually lags behind the latest technological advances. Businesses often are caught unaware in this IP no-man’s land without an effective strategy for dealing with other competitors entering the market place.

A recent story that has made headlines illustrates this unenviable position business owners can find themselves in.

Our story starts with a Pinterest-worthy confectionary creation called the snow globe cupcake. For those unfamiliar with the quirky treat, a snow globe is a cupcake that does in fact look like a snow globe.

Enter Sugarhero.com, our first character in the saga. SugarHero is the brainchild of Elizabeth Labau and is devoted to “sharing fun, creative and modern dessert recipes.”

Labau v. Television Food Network G.P., 2:17-cv-04077 at *3 (C.D. Cal. 2017). SugarHero claims it first published the cupcake recipe in 2014. The cupcakes were a hit and the recipe went viral in 2015 with a Facebook post that was shared more than 740,000 times in just a few days. Id. at *5. In December of 2016 SugarHero released a video demonstrating the process of making a snow globe cupcake. The video also caught fire and garnered 5.6 million views (https://www.sugarhero.com/snow-globe-cupcakes-gelatin-bubbles/).

As with most other content providers on the internet, SugarHero generates revenue through ad revenue based on the number of views its website and social media garner, as well as revenue from affiliate sales resulting from clicking links for ingredients and other items from Amazon.com. The more popular SugarHero’s content is, the more money SugarHero makes.

Enter Food Network, the alleged villain in SugarHero’s lawsuit.   Approximately three weeks after SugarHero launched its video, Food Network launched its own video illustrating the process to make a Snow Globe Cupcake (https://www.facebook.com/FoodNetwork/videos/10154060603151727/).

According to the lawsuit, as of the filing date of the complaint, Food Network’s video had received more than 11 million views. Unhappy with this, and presumably seeing its viewership stagnating, SugarHero filed suit in the Federal District Court for the Central District of California claiming copyright infringement of the video.

Now comes the part in the story where the limitations of intellectual property law come into play.

Unfortunately for SugarHero, the fact that its only claim is for copyright infringement likely doesn’t bode well. Copyrights protect creative works of authorship, and the two videos in question would qualify as a creative work and would be protected to a certain extent under copyright.

However, section 102 of the Copyright Act explicitly states that copyrights do not protect “in any idea, procedure, process, stem, method of operation, concept, principal, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied such work.” Therefore, the concept of the snow globe cupcake and/or the process used to make the treat is not protected by copyright law

Generally speaking, the inventions described in Section 102 are subject matter for patents. In order to be eligible for a patent, the invention must be useful, novel and non-obvious. Additionally, in the U.S., an inventor has one year from the date of first public disclosure to file for a patent, otherwise the invention is dedicated to the public domain.

Most likely the snow globe cupcakes were never patented. Therefore, anybody could make, use or sell the cupcakes and create their own “how-to” videos.

Additionally, since SugarHero’s videos are describing a particular procedure that generally is completed in certain sequential steps and in a certain manner, the copyright protection is going to be fairly thin since there are only a finite number of ways that one can express the concepts.

Reviewing both videos, I think there are sufficient differences in Food Network’s video that would make it non-infringing and I do not expect SugarHero’s suit to be successful.

So what can business owner’s take from all of this?

First, it is important to identify potential intellectual property protection early on. If SugarHero was eligible for and obtained patent protection on the concept and process of making the Snow Globe Cupcakes, LaBau would be in a much stronger position than she currently is.

Business owners also need to contemplate what business strategies they will use to fend off competitors in the marketplace. You must be prepared ahead of time to hit the market, make your impact and move on. First-to-market strategies can be successful if a business is prepared and understands that their time in the limelight is limited and then must be ready to move on to the next big thing.

What, aside from words and logos, can be trademarked?

By Kurt Leyendecker

Gene Simmons (of the rock band, “Kiss,” fame) recently filed a trademark application for the registration of a variation of the “devil horns” hand gesture, and it has caused some uproar in the music community among fans and fellow metal musicians. Can Gene Simmons trademark a hand gesture that is essentially identical to the “I Love You” gesture in American Sign Language (ASL) and prevent others from using it?

We may never know the answer.

The Kiss bassist, apparently buckling to negative press, abandoned the application 11 days after filing it. Nevertheless, this instance begs the question: What, aside from words and logos, can be trademarked, and what are the bounds of protection of these non-traditional marks?

Even if trademark registration of the gesture were issued, it would have only prohibited the use of the mark by others in commerce as it relates to live musical performances and celebrity appearances. It would not have prevented the use of the gesture in commercial pursuits, outside of musical performances and celebrity appearances, and registration would not have prevented the non-commercial use of the mark. In other words, Simmons’ trademark would not have sent the users of ASL scrambling for another way to tell their loved ones how they feel about them.

When most people think of trademarks, they think of words, phrases and logos. This ill-fated attempt to trademark a gesture demonstrates the potential breadth of trademark protection to be larger. Some of the non-traditional things that can be the subject of a trademark registration include colors, packaging, sounds scents and even potentially tastes. In almost all cases, non-traditional trademark registration is more difficult to obtain than registration on words and logos. In many instances, the applicant must demonstrate that the proposed non-traditional mark is not functional and that it has acquired distinctiveness among relevant consumers of the goods or services associated with the mark. The applicant must demonstrate that the non-traditional trademark itself acts to identify the source of a good or service and is not viewed as an incidental feature of a particular product or service.

Early in the year, Hasbro filed a trademark application for the smell associated with Play Doh®. The Trademark Office issued an initial rejection of the application in May, warning the scent could be a non-distinctive feature of the product’s design, and citing the fact that many other modeling compounds are scented to make the products more desirable and do not necessarily identify the source of a modeling compound made by a specific manufacturer. The Trademark Office commented that substantial evidence would be required to demonstrate the scent has acquired distinctiveness. I bet if exposed to the scent with the Play Doh® sight unseen, a significant portion of relevant consumers would be able to identify the source as Play Doh®. This survey would be sufficient evidence to gain registration of the scent trademark on the primary trademark registry.

Harley Davidson tried to protect the unique sound of its engine, caused in large part by the specific design of the engine utilizing a common crankpin, and failed. Trademarks are not intended to be, and are generally prohibited from, being a means to prevent the competition from making a certain product that functions in a certain way. The protection of functionality is covered exclusively under patent law. Registration of the Harley engine sound would likely inhibit or even prevent competitors from making a certain type of engine for their motorcycles, even though the engine’s design is relatively old and in the public domain. An example of successfully registered sound trademarks, wherein the sound itself is not a functional byproduct, include the Looney Tunes theme song, the 20th Century Fox fanfare and General Mill’s green giant “ho ho ho.”

Colors can be trademarked as well. Do you know the name of the company that makes green lawn tractors? For the women, if your significant other gives you a small teal box, can you identify the brand of jewelry you are hoping is in the box? If a brown delivery truck delivery truck stops at your house and a person dressed in brown steps out of it, who is delivering your package?

The take away of all of this is to expect some serious negative push back if you are an aging rocker looking to prevent other rockers from telling their audience that they love them. And perhaps more importantly, if you are going to start a company selling vegetables, you may not want to base your marketing campaign on a driver pulling a cart of vegetables with a green tractor while yelling “ho ho ho.”

Employ smart shopping tactics to the patent acquisition process

By Kurt Leyendecker

Every three to 10 years, the average consumer embarks on the process of buying a shiny new (or new-used) car. There are many decisions to be made as to the type of vehicle, amenities desired or considered essential; and the buyer’s budget. Considering price alone, there are few who would suggest there is no difference between a new Mercedes Benz S600 and used Yugo GV. And yet, when it comes to hiring legal counsel to write and file a patent application, many don’t see the difference in hiring one attorney over another, shy of price.

In March 2017, the World Intellectual Property Organization (WIPO) reported that 2016 represented a record-breaking year for patent application. Moreover, the U.S. retains its No. 1 ranking for number of patents filed. That means more people and entities are creating more intellectual property that is potentially patentable than ever before.

Yet, patent seekers often don’t dedicate the amount of time spent while car shopping to secure the best financial investment, as they do when it comes to patent acquisition.

One myth patent seekers often subscribe to is the notion that a simple online form does the trick. A patent, however, is a complex written document typically comprising anywhere from 2,500 to 7,500 words, and there are usually significant reasons why one attorney may quote a price considerably higher than another attorney.

Several factors affect the price of preparation and filing of a patent application:

1. The time the attorney intends to devote to the project

2. The attorney’s level of experience and skill

3. The attorney’s overhead.

Not surprisingly, for a similar level of experience, the attorney who spends more time writing and preparing the patent application is likely to charge more than an attorney who spends less. All other things equal, a $7,000 patent application is going to be more complete, more detailed and usually of much higher quality than a $2,000 patent application.

The more detailed and complete an application is, the more flexibility the attorney will have in working with an examiner at the United States Patent Office to gain allowance of a patent that offers reasonably broad meaningful protection to the patent holder.

Broader patents are more difficult for would-be copiers to design without infringing the patent. In contrast, hastily drafted low-cost patents are often narrow in scope and consequently very easy for copiers to design without infringing the patent. Over the years, I have seen patents written by so-called mills (firms dedicated to obtaining inexpensive patents over quality patents) that are at best wall decoration offering very little protection for the core aspects of a particular invention.

Skill and experience are most often reflected in an attorney’s hourly rate. A more experienced attorney can write a quality patent more quickly than a less experienced attorney. The amount an attorney can charge for his or her services is dictated by both market forces and the attorney’s own perception of self-worth relative to other attorneys in the marketplace. Be wary of an attorney who claims his hourly rate is well below market for his/her years of experience. Usually, there is a reason.

Even if you receive flat fee quotes to prepare and file your application, knowing the attorney’s nominal hourly rate is instructive in determining how much time he/she intends to spend on your application, and it can give you insight into whether something may be amiss.

For example, attorneys with many years of experience who have abnormally low rates, attorneys that have high rates but charge relatively little to prepare an application, or attorneys who decline to share their hourly rate because the application is prepared for a flat fee should all cause one to raise an eyebrow.

Overhead can also have a significant effect on cost. High-rise downtown offices, personal secretaries, and a cadre of docketing, research and operations support are all expensive. The services offered by large firms are not without value to Fortune 500 companies that rely on the staff to manage their extensive patent portfolios. However, for the entrepreneur or small business with one or at most a handful of patents and patent applications, a large support staff only adds to the cost of an application without any significant benefit.

If your purpose for obtaining patent protection is less about creating value and more about having a fancy plaque to hang on the wall, a low-cost patent mill will likely serve you well. Just as a Yugo is a car, a patent mill patent is a patent, but don’t expect much from either.

If your company has an extensive portfolio of patent and patent applications that need to be managed and maintained, a large firm with a large staff is likely the better option. Just as with the Mercedes you will have all the bells and whistles at your disposal. The key is to pick a firm that best matches your needs.

Why a cheerleader’s uniform had the power to change the law of the land

By Peter Lemire

Anyone who works in the fashion or the arts is likely aware of the difficulty of protecting your designs, with the constant battle with knock-offs and copycat products. While brand names and distinctive elements can be protected under trademark law, smaller designers and brands often find themselves without recourse if their ideas are replicated.

While clothing designs could possibly be safeguarded under a patent, such protection would be exceedingly expensive and would often take longer to procure than the average lifespan of the garment in question. Additionally, courts have long held that the look and feel of a particular product design is not copyrightable under federal law, given that copyright protection does not extend to the functional or useful aspects of an article.

Courts have also said that generally the design of clothing cannot be separated from its functional and utilitarian purpose of covering the human body. While patterns (the print or decorative design of the fabric used to make the clothes) or graphical images that appear on apparel may be copyrightable, the overall look of the garment is not. Bills are introduced in Congress on an annual basis to extend copyright protection to clothing design, however such efforts have been unsuccessful to date.

Recently, the Supreme Court issued a decision in Star Athletica, L.L.C. v. Varsity Brands Inc. that gives apparel companies additional clarity and possible expanded protection for their products.

The case dealt with cheerleading uniforms and the two-dimensional designs that appear on the surface of the uniforms. Images from the Court’s opinion help give some context to the analysis and discussion:

It is important to note that the stripes and shaded areas are not actually different pieces of fabric, but are printed onto the fabric itself, thus making the design 2-D artwork.

The court ruled that features incorporated into the design of a useful object are eligible for copyright protection only if the feature:

(1.) Can be perceived as a two or three-dimensional work of art separate from the useful article

(2.) Would qualify as protected pictorial, graphic, or sculptural work – either on its own or fixed in some other tangible medium of expression if it were imagined separately from the useful article onto which it is incorporated.

In this case, the court reasoned that because the designs could be removed from the surface of the uniforms and transferred to another medium such as a canvas, and that in this new medium the design would be protected as a 2-D work (the striped designs didn’t have any utilitarian function themselves), that the stripped patterns of uniform designs were eligible for copyright protection. The Court emphasized that the cut and style of the uniform was not protected and that its decision would not prevent a competitor from making a similarly configured uniform without the stripped design.

On some levels the Court’s decision is not all that groundbreaking.

It has been universally accepted that pictures and graphics are copyrightable and that a graphical design doesn’t lose its protected status just because it appears on a good, such as a T-shirt or a mouse pad. In fact, Supreme Court Justice Ruth Bader Ginsburg’s concurrence basically would apply that rationale to the case as opposed to the Court’s new two-pronged test.

However, I believe that this decision could open the door for some forward-thinking apparel companies to see if they can use this case to claw some protection for essentially what amounts to the overall design and cut of the garment.

A potential situation where this could happen is in the case, much like the cheerleading uniform, where the 2-D artwork outlines the garment and defines the cut and fit of the garment. There could conceivably be a point where protection of the artwork and 2-D design effectively protects the cut and fit of the garment itself.

It will be interesting to see if apparel companies observe this opportunity and test the bounds of this new decision. If a company is successful in this strategy, clothing and apparel companies could get one step closer to protecting their original garment and clothing designs.