What Are Penalties For Crypto Trademark Infringement?

Litecoin Hard Fork - What is the penalty for crypto trademark infringement?

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The founder of Litecoin, Charlie Lee, wants you to know that he has nothing to do with its upcoming hard fork.

Worse, Mr. Lee claims Litecoin Cash is a complete scam.

The unauthorized Litecoin fork, called “Litecoin Cash” or LCC, is scheduled to occur on or around February 19th, 2018 at 02:00 UTC at block number 1371111.

I use the word “unauthorized” because Mr. Lee, a former Google and Coinbase employee, took some steps to protect his hard work when he created Litecoin.

So, to me, this raises a question… What is the penalty for crypto trademark infringement?

Litecoin Cash is Confusingly Similar to Litecoin

According to two separate trademark filings, Litecoin is a registered trademark in both the U.S. and Singapore.

The former is for the U.S. business and was filed on December 21st, 2017, and the latter was filed on February 9th, 2018 and seems to be an organization for promoting Litecoin. It lists Mr. Lee as part of the Board of Directors and as Managing Director.

These are both service mark filings.

Litecoin Cash’s name includes the word “Litecoin”. And the Litecoin Cash logo looks very similar to Mr. Lee’s Litecoin logo. The owners of Litecoin Cash claim that the use of “Litecoin” is only based on convention.

Mr. Lee (aka @satoshilite on Twitter) has openly sparred with people on Twitter about Litecoin Cash.

In the thread below he clarifies that Litecoin Cash is not affiliated with him, that it is a scam, and that the use of “Litecoin” in the name of the project is a problem.

Litecoin hardfork trademark infringement?

Protecting an open source software, whether it’s a cryptocurrency like Litecoin, or Linux, is very important.

Why?

Because the value and reputation of the software is often synonymous with its brand. Users of the OSS are relying on the goodwill that has been built up by the founders of the original brand.

To some this may run counter to the concept of disintermediation and removing “trusted third parties” from the cryptocurrency ecosystem, but in this case, by having a trademark for Litecoin, Mr. Lee is protecting both his work and his customer base.

What is the Penalty for Crypto Trademark Infringement?

One According to NOLO, trademark infringement is the unauthorized use of a trademark or service mark on competing or related goods and services.

A lawsuit to stop the infringement turns on whether the defendant’s use causes a likelihood of confusion in the average consumer.

The owner of the trademark, the plaintiff, may file a lawsuit against the infringing user to prevent further use of the mark and collect money or damages for the wrongful use.

NOLO continues, “The success of an infringement normally turns on whether the defendant’s use causes a likelihood of confusion and so weakens the value of the plaintiff’s mark.

Items of “proof” of trademark infringement are based on a concept called the “Polaroid factors“, derived from a 1961 case (Polaroid Corp. v. Polarad Elecs. Corp.).

Enforcement of a trademark usually starts with a Cease and Desist Letter. Penalties for trademark infringement include an injunction, monetary damages and legal fees.

What About Trademarks and Free and Open Source Software?

FOSSmarks.org, a site for furthering the understanding of trademarks in free and open source software (FOSS), trademarks are an important consideration for anyone building open source software.

The organization is quoted below:

Despite the openness of your software, you will still want to protect the name of your project, and the names of your individual software programs. You don’t want others to claim their software is the official software or that they offer official services when they aren’t associated with you. In the worst case scenario, if a bad actor takes your software, designs malware around it and distributes it under the same name, users will blame you for the infection of their computers (and this isn’t at all hypothetical).

So what are they allowed to do, what can you do about it, and what do you want to do?

I’m not an attorney, and don’t play one on the Internet, but it seems pretty obvious to me that this is the type of thing that could be raised as a legal issue by Charles and his team.