The communities within the respective old and new fork Ether ecosystems have shared some friction over their ideologies. Since the Ethereum Foundation took action to trademark their project over a year ago (as any budding organization would do), some enthusiasts of the new Ethereum chain have found Ethereum Classic’s usage of their logos and trademarks unlawful and urge the Foundation to take action.
This article and release is from the Virtual Currency / Blockchain Technology division at Berns Weiss LLP, a Los Angeles-based law firm advocating for a legal and regulatory landscape surrounding this revolutionizing technology.
Read the full article below:
Should the Ethereum Foundation Take IP Action Against Ethereum Classic?
By: Jeffrey K. Berns, Managing Partner
Poonam D. Mehta, Attorney
Emmanuel Rayes, Attorney
On July 20, 2016, the Ethereum blockchain was successfully hard-forked in order to unwind a hack executed on the smart contract known as the Decentralized Autonomous Organization (DAO). As a result of this hard fork, a new blockchain came into existence. As the Ethereum Foundation, a large majority of developers and miners, and most other members of the Ethereum community adopted this new blockchain, it kept the name Ethereum. However, a vocal minority did not agree with the implementation of the hard fork, protesting that such action violated the principles of immutability and fungibility. These individuals opted to support the original, pre-fork blockchain. They named this blockchain “Ethereum Classic,” declared their independence from Ethereum, and set up their own website. The Ethereum Classic blockchain continues to exist, and its token, which is listed on several virtual currency exchanges, is the sixth largest crypto-currency in the world in terms of market capitalization.
Mr. Buterin and the Foundation have previously commented publicly about the Ethereum Classic blockchain, without any indication that they are concerned about the use of the term Ethereum Classic. Indeed, Mr. Buterin has welcomed Ethereum Classic supporters to focus on the original blockchain: “Anyone who feels sufficiently strongly in the other direction is welcome to focus on the [original] chain, and we will see if it remains viable.” Nevertheless, some vocal members of the Ethereum community have questioned whether the individuals supporting the original blockchain can continue to legally use the Ethereum source code, have Ethereum in their name, and use a logo that is very similar to the Ethereum logo. Some have even called upon the Ethereum Foundation, which owns the copyright for the source code and the trademark rights for the Ethereum name and logo, to issue a cease and desist letter to the Ethereum Classic community. There is no strong legal basis for pursuing this type of aggressive and unnecessarily divisive action.
- Copyright Infringement
Software, including source code and object code, is protected as a literary work under U.S. copyright law. Stern Elecs., Inc. v. Kaufman, 669 F.2d 852, 855 (2d Cir. 1982); Williams Elecs., Inc. v. Artic Int'l, Inc., 685 F.2d 870, 876 (3d Cir. 1982); 17 U.S.C. §§ 101, 102(a)(1). The applicable federal statute provides authors with certain exclusive rights in their original works, such as the right to 1) copy the copyrighted work; 2) prepare derivative works based on the copyrighted work; 3) distribute copies of the copyrighted work; 4) perform the copyrighted work; and 5) display the copyrighted work publicly. 17 U.S.C. § 106.
The software (i.e., source code) that runs the Ethereum blockchain has always been, and remains, available to developers and end users under the GNU Lesser General Public License (LGPL). That license provides for four essential freedoms that are inherent in free software:
- The freedom to run the program as you wish, for any purpose;
- The freedom to study how the program works, and adapt it to your needs (access to the source code is a precondition for this);
- The freedom to redistribute copies so you can help your neighbor; and
- The freedom to improve the program, and release your improvements to the public, so that the whole community benefits.
The LGPL incorporates the terms of version 3 of the GNU General Public License (GPL), including Section 2, entitled “Basic Permissions,” which states:
You may make, run and propagate covered works that you do not convey, without conditions so long as your license otherwise remains in force. You may convey covered works to others for the sole purpose of having them make modifications exclusively for you, or provide you with facilities for running those works, provided that you comply with the terms of this License in conveying all material for which you do not control copyright.
As per the LGPL, Ethereum Classic developers and miners are free to use the Ethereum software, as long as they abide by the above conditions. Although the software does not cost anything to license, a user who fails to abide by the terms of the LGPL can be liable for copyright infringement. A U.S. federal appeals court has held that a copyright holder does not waive his or her rights by making software freely available and can enforce conditions in a free software license against developers and end users of the software. Thus, while the Foundation has enforceable copyrights in the Ethereum source code, those rights are limited to the ability to pursue developers or miners who violate the terms of the LGPL. There is no indication that Ethereum Classic developers or miners have failed to comply with any of the LGPL conditions. Instead, Ethereum Classic has maintained the LGPL license and conditions intact.
Some members of the virtual currency community have pushed the Foundation to pursue action under the Digital Millennium Copyright Act (DMCA). The DMCA states that while an Internet Service Provider (ISP) is not liable for transmitting information that may infringe a copyright, the ISP must remove materials from users’ websites that appear to constitute copyright infringement after it receives proper notice. Thus, if a copyright holder believes that its rights are being infringed by a website, it can send a “takedown” notice to the website’s ISP. As set forth above, there is no indication that the Ethereum Classic community is violating the Foundation’s copyrights in the Ethereum source code. Thus, there is no basis for the Foundation to send a takedown letter.
- Trademark Infringement
An owner of a mark acquires trademark protection under U.S. law by using the mark in commerce in connection with goods or services, or by registering the mark with the United States Patent and Trademark Office (USPTO). The Foundation filed a trademark application with the USPTO for the name Ethereum on May 19, 2015. Although that application is still pending, it states that the Ethereum name and logo were first used in commerce on February 6, 2014. Thus, it is reasonable to assume that the Foundation potentially has legally protectable trademark rights to Ethereum.
As a U.S. trademark owner, the Foundation may enforce its rights under a statute known as the Lanham Act, or common law, to protect against the use of similar marks. To establish a trademark infringement claim under the Lanham Act or common law, the plaintiff must demonstrate that (1) it has a valid and legally protectable mark; (2) it owns the mark; and (3) the defendant's use of the mark to identify goods or services causes a likelihood of confusion. See A&H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198 (3d Cir. 2000).
The likelihood of confusion analysis focuses on whether the use of the allegedly infringing mark leads to confusion as to the “source or sponsorship of the goods or services because of the marks used thereon.” See, e.g., Paula Payne Prods. Co. v. Johnson’s Publ’g Co., 473 F.2d 901, 902, 177 USPQ 76, 77 (C.C.P.A. 1973). “The question is not whether people will confuse the marks, but rather whether the marks will confuse people into believing that the goods they identify emanate from the same source.” Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1205 (9th Cir. 2012).
On the remote chance that a court could find a likelihood of confusion with respect to the two blockchains, Ethereum Classic would have strong defenses. After all, the Ethereum Classic blockchain, which the Ethereum community has effectively abandoned, was originally called Ethereum. The fact that the new, post-hard fork chain is also named Ethereum is hardly the fault of the Ethereum Classic community.
While there is a great divide between the Ethereum and Ethereum Classic communities, Vitalik Buterin and the Ethereum Foundation have not taken an antagonistic attitude towards Ethereum Classic. Those in the Ethereum community that feel differently, and have advocated that the Foundation pursue intellectual property claims against Ethereum Classic, do not have a strong understanding of U.S. intellectual property law. The Foundation should be commended for its unwillingness to attack the Ethereum Classic community and should not give in to pressure from a vocal minority to pursue generally baseless IP claims.
 See Jacobsen v. Katzer, 535 F.3d 1373 (Fed. Cir. 2008) (copyright holder for software code permitted to pursue infringement claims against developers and end users who violated conditions imposed by open source “Artistic License”).
Jeffrey Berns is the Managing Partner of Berns Weiss LLP and is also CEO of Berns Inc, parent company to ETHNews.