In a legal first, Litecoin Foundation Limited (“LFL”), the developer of Litecoin, has won the appeal in its claim that an application for a trademark itself and alone, can amount to a passing off. LFL is a peer-to-peer cryptocurrency and open-source software project and a spinoff of bitcoin.
It is an illustration that crypto businesses are no exception. They need to protect their brands as soon as possible and research the market for brand conflicts.
The case
The Defendants in this case were two companies, Inshallah Limited (“Inshallah”) and Nasjet Limited (“Nasjet”), with the same individual behind them, John Pepin. LFL claimed that the companies were seeking unlawfully to exploit the Litecoin name.
The claims made by LFL centred around two separate issues:
- Firstly, in December 2017, Inshallah made an application to register the trade mark “Litecoin”.
- Secondly, in February 2018, Nasjet changed its name to “Litecoin Exchange Limited”.
In May 2018, LFL issued proceedings in the Intellectual Property and Enterprise Court, seeking an injunction to restrain the Defendants from passing off any goods, services, or business as the goods, services, or business of LFL whether using the trade name Litecoin or similar. It also sought an injunction requiring Nasjet to change its name so that it did not contain the word Litecoin.
In its pleadings, LFL claimed that by filing its trademark application, Inshallah was misrepresenting that it had a genuine intention to use the Litecoin mark and that this would cause the public to think that Inshallah was connected or associated with LFL’s business. The change of name by Nasjet was also said to amount to passing off.
LFL also pleaded that the Defendants actions amounted to fraud as the application for the trademark and the name change were made in bad faith in order to extract money from LFL.
In response, amongst other things, the Defendants denied that LFL had any goodwill in the UK in the trade name “Litecoin”.
The determination
At first instance, the Court determined that LFL had built up sufficient goodwill in the trade name Litecoin, that the Inshallah trademark application gave rise to a misrepresentation to the public, that both the trademark application and name change constituted instruments of fraud and that LFL had suffered damage as a result. However, the lower court found that the name change did not give rise to a misrepresentation to the public.
John Kimbell QC, on appeal sitting in the Intellectual Property and Enterprise Court, agreed with District Judge Hart, finding, amongst other things, that:
- The judge was correct to apply the ratio that a small amount of trading may be sufficient to establish goodwill.
- As such, the judge did not err in finding that LFL had established sufficient goodwill or reputation in the UK.
- The judge was correct in finding that an application to register Litecoin as a trade mark was an actionable misrepresentation because trade mark applications “appear in a publicly accessible journal, the filing of the Inshallah TM Application was a public announcement to the world of a purported connection between Inshallah and the Litecoin trade name; inherent in the application is an assertion of the right to use the sign and an intention to do so; in fact, Inshallah had no such connection or intention. Its intention was simply to seek to dishonestly benefit from and appropriate goodwill in accordance with a previous course of conduct.”
- There is no requirement for actual damage to have occurred in order to obtain an injunction to prevent a passing off. It is sufficient that the court concludes that what is going on is calculated to infringe the claimant’s rights in future. A threatened passing off by a company which has not traded but which has made an application amounting to an instrument of fraud suffices.
This is an extension of the decision in 1999 in the One in a Million case which related to the application by a company to register as a trademark an internet domain name. In that case, the judge determined that:
“The placing on a register of a distinctive name such as “marksandspencer” makes a representation to persons who consult the register that the registrant is connected or associated with the name registered and thus the owner of the goodwill in the name. Such persons would not know of One In A Million Ltd and would believe that they were connected or associated with the owner of the goodwill in the domain name they had registered. Further, registration of the domain name including the words “Marks & Spencer” is an erosion of the exclusive goodwill in the name which damages or is likely to damage Marks & Spencer Plc”
What this teaches us
The Litecoin case establishes the principle that an application to the IPO to register a trademark can be a representation to the public of a connection or association with the name seeking to be registered. That representation alone can, in certain cases, amount to trademark infringement.
This ruling has implications for not only trademark disputes, but also for broader commercial unfair competition disputes, broadening the scope to argue that another party is taking unfair advantage of another’s brand and/or goodwill.
Rosenblatt can help
The regulatory regime which applies to crypto assets is complex and dynamic. A thorough understanding is needed to minimise the risk businesses face in this space. Rosenblatt’s tech team advises on all aspects of crypto assets and regulatory law. We can help navigate companies through obtaining the necessary registrations/authorisations from the Financial Conduct Authority for their operations. We can also work with you to provide the required AML and other policies needed to support your application to the FCA.
The Rosenblatt dispute resolution team helps corporates, entrepreneurs, and individuals, across multiple jurisdictions and sectors to achieve their best outcome. We provide pre-emptive advice, advise on negotiations, taking injunctive action and undertaking investigations. We act in litigation, arbitration, and tribunals, advise on alternative dispute resolution and in regulatory or white-collar criminal proceedings.
We also have a wealth of experience in capital markets, acting for issuers, brokers, nomads, and other corporate advisers, across diverse sectors and we collaborate closely with institutions, large and small companies (both public and private), start-ups, scale-ups, and individual entrepreneurs.
Contact us
Should you have any questions or wish to discuss your crypto business with us, please contact Laura Clatworthy at laura.clatworthy@rosenblatt-law.co.uk.
Authors
Laura Clatworthy, Partner (laura.clatworthy@rosenblatt-law.co.uk)
Matthew Littlestone, Senior Associate (matthew.littlestone@rosenblatt-law.co.uk)
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