Meta Title:
 "Balancing Innovation and Safeguarding: Unravelling the Nexus of Intellectual Property Rights and Cryptocurrency"

Introduction

A new era of digital innovation has begun with the emergence of cryptocurrencies and blockchain technology, disrupting conventional ideas about money and altering several businesses. The value of intellectual property rights (IPR) cannot be emphasized enough in this decentralized environment. Blockchain-based cryptocurrencies heavily rely on IP protection to protect their inventions, innovations, codes, and unique technologies. However, the nexus between cryptocurrencies and intellectual property rights provides unique difficulties and opportunities, calling for an effective compromise between promoting innovation and guaranteeing adequate protection.

Keywords: Intellectual Property, cryptocurrency, regulations, Patent, Trademark, Blockchain

What is Crypto?

Blockchain technology is an incredibly secure mechanism that saves data in blocks and is used by cryptocurrencies. A digital ledger of transactions for various kinds of cryptocurrency is maintained in this database. You can keep track of your transactions because all of these data are transparent and cannot be changed or removed.

Cryptocurrencies come in a variety of forms, including Bitcoin, Solana, and Dogecoin. Cryptocurrencies are stores of value. Some people use them as investments, while others use them as forms of payment for everything from product purchases to ransoms! But as the recent decline in most cryptocurrencies has shown, these assets are very volatile1.

Many additional forms of tokens exist, including Non-Fungible Tokens (NFTs), which are digital assets that denote ownership of real-world objects like art. Blockchain tokens are utilized for financial reasons and are sometimes referred to as "crypto," but there are many other sorts of tokens as well. NFTs are exclusive (or at least constrained) in comparison to a currency where each coin or note is the same and exchangeable.

How does blockchain help cryptocurrencies?

Blockchains serve as decentralized ledgers utilized for storing cryptocurrencies. For example, Bitcoin relies on its blockchain, while other cryptocurrencies like Mana operate on Ethereum's blockchain, which is utilized by Ethereum.

Due to their decentralized nature, blockchains operate on peer-to-peer computer networks, without any central control. In the case of blockchains, computers initially opt to utilize their processing power to operate nodes, contributing data blocks to the crypto infrastructure. Additionally, they engage in solving puzzles to maintain and secure the network. In return for these efforts, computers are rewarded with cryptocurrencies through a process known as "crypto mining." However, cryptocurrency mining consumes a significant amount of energy, leading to the emergence of a new energy-efficient mechanism called "proof of stake," which is gradually replacing traditional mining methods.

Regulation of Crypto in India

Cryptocurrency in India has always been a controversial topic based on the legal discourse around it and the regulatory framework governing it. In a move to protect the interests of the people and market integrity, the RBI through its circular in 2018 issued a blanket ban on cryptocurrency, and prohibited its use by all types of financial institutions in any kind of transaction. The said circular was challenged by The Internet and Mobile Association of India (IMAI) in the Supreme Court, alleging violations of principles of fairness and equality of opportunity. It was also argued by the organization that the circular was arbitrary as it imposed disproportionate restrictions. The verdict of the Court was given in March 2020 in the case of Internet and Association of India vs. Reserve Bank of India2, wherein the blanket ban imposed by the RBI was lifted3.

However, though having been declared legitimate, cryptocurrency still suffers from being severely unregulated in the country. To tackle the same, the government planned to introduce The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in Parliament, which was aimed at banning all private digital currency while putting forward a regulated and standard way in which cryptocurrency can be introduced officially. This would imply various cryptocurrencies following a set path to become legal in India.

The RBI also has further plans of introducing its official cryptocurrency under Central Bank Digital Currency (CBDC) when the bill becomes an act. Whenever this bill gets passed, it is bound to make cryptocurrency in India a well-known term. This is why a common question arises: can its unpredictability be tackled by determining ownership through the help of IP protections such as patents and trademarks? The expectations thus arise of many startups using cryptocurrency technologies resorting to legal protection through IP for their methods and processes4.

How Intellectual Property Can Assist and Protect Cryptocurrencies

Trade Mark

If a new kind of cryptocurrency has been developed, its name may be trademarked. Additionally, like any other trademark, your logo has the potential to be registered as a trademark.

One cryptocurrency, for instance, has trademarked its name "Ripple," as well as the terms "Ripplenet" and "PayString."

A trademark may be used in a variety of ways, such as:

  • word;
  • phrase;
  • logo; or
  • slogan.

You must develop a mark that is distinctive and one-of-a-kind to successfully apply to register a trademark before the Intellectual Property Office (IPO). To be sure that your mark has not previously been registered, you can check the online trademark database.

Greater protection and exclusivity within the classes of goods or services you selected are two benefits of registering your trademark.

You work in a particular industry called a trademark class. Consequently, the commercial sectors will defend your trademark. If you want to strengthen the protection of your mark, you can select numerous trademark classes in your application. However, there are additional costs associated with each class. You can pick from 45 different classes. You must be sure to select the class or classes that are pertinent to your trading business if you want to ensure that your trademark obtains the optimum level of protection.

Does crypto, like Bitcoin, function as a trademark?

There are over 1000 applications for trademarks for the term "BITCOIN" in various nations throughout the world, even though the word "Bitcoin" is probably too descriptive to qualify as a trademark. Some are piggybacking, such as the Mexican BITCOIN Tequila or the Indian BITCOIN cookery application! Others, particularly those in class 36 (a trademark classification for financial and banking services), are presumably descriptive. An example of this is the Barcelona-based application for a Spanish BITCOIN mark for financial services.

When attempting to integrate cryptocurrency terminology and names, trademarks will face difficulties with descriptiveness and distinctiveness. Only distinctive marks are eligible for registration and are enforceable against infringement parties, thus understanding the distinction between distinctive and descriptive trademarks is crucial. In the sense that there is no obvious association between a name and a service or good other than its literal meaning, descriptive trademarks are not "distinctive."

Patent

One must demonstrate that they have invented something and that this invention has gone above and beyond the typical course of development to successfully obtain patent protection. Additionally, it must have an industrial use and never have been made public before the patent application.

Due to their innovative and complicated algorithms, cryptocurrency inventors frequently assert the creation of new processes. Consequently, it is possible to patent cryptocurrencies.

The most well-known cryptocurrency, however, Bitcoin, is not protected by a patent. Experts claim that the lack of IP protection is what allows such cryptocurrencies to flourish at such a rapid rate. I would contend that it also functions as a counter, though. Due to the IP, the rise and decline rate of cryptocurrency is erratic and dependent on a wide range of external circumstances.

Numerous people say that Bitcoin must stay open-sourced because it already has built-in self-policing systems and does not require IP protection. As a result, there are many arguments against IP protections for cryptocurrencies. The most likely outcome is that efforts have to be made to use IP protection to apply for ownership as Bitcoin expands in popularity in India and the technology underlying it, blockchain, becomes more useful beyond the economic arena.

The disadvantage of not protecting cryptocurrency trademarks

Failure to properly credit trademark ownership may have several negative effects due to improper deployment of such technology. Think about a regular internet user who wants to buy cryptocurrencies because they are interested in them. After considering his alternatives, he chooses to buy bitcoins from a person who is actively promoting the exchange of the currency while simultaneously acting as a fictitious investor. The owner of the aforesaid crypto cannot stop someone who is operating in such a fraudulent capacity from destroying the digital currency brand's image because it isn't owned and protected under trademark law.

The consumer may have unwanted difficulties as a consequence of a lack of available treatments if they choose not to refrain from the action mentioned above. Additionally, terminology like "Bitcoin" and "Blockchain" have become more prominent, making it simple to use them without breaking the law to refer to other products or services. Therefore, it's crucial to learn how to protect cryptocurrencies to prevent customers from being scammed by unreliable cryptocurrency suppliers and to protect the reputations of recognized providers.

As a result, one option for sole proprietorship over these kinds of technologies is the attribution of shared authorship to owners in the form of "collective marks." The same would solve the problem of decentralized administration while acting as a safeguard against fraud by consumers. This is not a problem-free route, either, as establishing trademark ownership might be difficult.

Conclusion

The nexus of cryptocurrencies and IPR offers the digital economy both opportunities and challenges. IPR protection is very crucial to encourage innovation and ensure the integrity of decentralized networks as blockchain technology continues to disrupt numerous sectors. The successful development of the Bitcoin ecosystem depends on finding the ideal balance between promoting collaboration and maintaining proper protection. To create uniform regulatory frameworks that support innovation, encourage responsible development, and safeguard creators' rights in the dynamic world of cryptocurrencies and blockchain technology, policymakers, entrepreneurs, and stakeholders must work together. By doing this, we can successfully balance innovation and protection while promoting a prosperous and inclusive digital future.

Footnotes

1. Nick Redfearn, Cryptic IP issues in the Crypto and Blockchain world, 27th Jun 2022, https://rouse.com/insights/news/2022/cryptic-ip-issues-in-the-crypto-and-blockchain-world

2. 2020 (2) CTC 528

3. Utkarsh Singh, India: Indian Cryptocurrency Saga: Regulation And IP Protection, 25th June 2021, https://www.mondaq.com/india/fin-tech/1084772/indian-cryptocurrency-saga-regulation-and-ip-protection

4. Ms. Kritika Pandey and Mr. Amitosh Dubey, Cryptocurrency and IPR in India- A Legal Perspective, 10th Jan 2022 https://amlegals.com/cryptocurrency-and-ipr-in-india-a-legal-perspective/

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.