Intellectual Property – A never-ending Discussion

Exponents of the Bitcoin world are known for initiating fundamental debates. This also applies to intellectual property and trademark protection. For many emerging companies in the blockchain space, one question arises: Open source or trademark and brand protection?

How often do people talk about alternatives, counter-arguments and changes in the political process? However, if you look closely, you will notice one thng: These are almost always empty promises and hollow phrases. Real alternatives are hardly ever found in politics. Political thinking and action, regardless of the camp, ultimately resembles a single, soft-boiled mishmash.

A new challenger arises: Bitcoin

Bitcoin was born in 2009 as a phenomenon that is different in nature and in many respects represents the antithesis of the existing financial world. Bitcoin is not just a cryptocurrency. It is not a product of any kind, but a meta-idea that challenges beliefs and practices commonly regarded as sacrosanct and makes its proponents see the world in a radically different way.

Fundamentally, Bitcoin challenges the state’s monopoly on money. A new community is emerging around the new, alternative money that Bitcoin aspires to be, and with it a new economic structure. A number of companies, associations and groups are endeavoring to advance Bitcoin and its cause.

Dilemma for startups

Just as Bitcoin itself clashes with established world practices due to its uniqueness, many Bitcoin startups also face a conflict on one significant issue: Intellectual property and trademark protection. It is impossible to imagine the current economy without both. It is the state that defines intellectual property today and provides the institutions as well as the procedures to protect and enforce it if necessary.

More than other entrepreneurs, a Bitcoin entrepreneur faces a clinch in this regard. Those who take Bitcoin seriously do so primarily out of conviction. It is not uncommon for this conviction to be libertarian in origin, as Bitcoin’s roots can unmistakably be traced to the libertarian-minded group of cypherpunks. It is this unorthodox essence of Bitcoin that causes incomprehension and even hostility among many people.

Philosophically defensible?

However, libertarians are not just some cranks or fantasists. Many interesting, intellectually very challenging thinkers originate from this school of thought. One topic that libertarian thinkers deal with extensively and in full depth is that of intellectual property. As elaborated in several works (for example, in the books of Stephen Kinsella or Butler Shaffer), the assessment of it is not as clear-cut as is commonly believed. As their arguments show: Intellectual property can be criticized quite reasonably.

Libertarian thinkers, with whom many Bitcoiners sympathize, argue as follows: Unlike physical property, which is subject to natural scarcity and therefore rivalrous, the same is not true in the realm of intellectual ideas. A new idea that is incorporated as an innovation into a novel, more efficient mode of production for a good, for example, can be used in the same way by someone else without restricting the original creator of the idea in the use of his novel, more efficient modes of production.

No underlying scarcity

In the realm of ideas, there is no economic scarcity and therefore no possibility of conflict over the use of scarce resources. However, this is precisely what property rights are designed for. Among rival goods and resources, they create a clear boundary. The artificial creation of a category such as intellectual property ultimately restricts economic agents in the use of their physical property.

Among Bitcoiners, this reasoning finds approval, after all. Quite a few of them have little to gain from state-enforced intellectual property or trademark protection. Without the latter, of course, charlatans and fraudsters could misuse the concepts and trademarks of others. However, taking legal action against them – or, in libertarian terms, using “state force” – is seen as the wrong way to go about it.

Measures by the Bitcoin industry itself are seen as far more effective: Trading exchanges that delist projects, associations that do not invite scammers, and media houses that neither give a stage to imitators nor run their ads. Punishment by the industry and the community is ultimately more efficient and cheaper, according to the conviction on this side.

Innovation or stagnation?

On the other hand, proponents (including some libertarians) of intellectual property often do not focus their justification on legal philosophical grounds. Utilitarian or (business) economic arguments are put forward: Without the protection of intellectual property, whether product, service or brand, there would be little incentive for innovation and wealth creation. Only the possibility of being able to protect one’s own ideas, findings and flashes of inspiration makes economic activity worthwhile. At a minimum, it must be possible to ensure that the costs incurred to realize the innovation can be repaid, according to the proponents’ arguments.

Opponents turn the tables. Those who can rely on trademark or patent protection would have less incentive to continuously innovate. The objections of the opponents are that the protection of intellectual property would sooner or later lead to a decline in innovative strength within a society.

The transformation through digitalization

One element that has stirred up the theoretical debate in recent decades is the digital transformation. In the course of this revolution, the relevance of various types of intellectual property has changed, it is argued. The current Bitcoin phenomenon and the rise of the Internet in recent decades generally demonstrate this change in dynamics.

Indeed, many of the great innovations of the Internet era are based on the ethos of open source. In other words, code that is publicly available and can be used by anyone. Copyright and trademark protection hardly play a meaningful role. Certainly, the online and software world is less capital-intensive in many respects – an argument that is repeatedly put forward for the protection of intellectual property, especially in the old economy. But the fact that the Internet, especially in its early days, and currently the Bitcoin world, are developing so quickly and innovatively is no coincidence and can be traced back to open-source thinking, according to an argument put forward by opponents of intellectual property.

Pragmatism needed

The discussion surrounding the justification of intellectual property is extremely exciting. To entrepreneurs and creators, it seems pointless and useless. But especially in the Bitcoin world, whose exponents are known for initiating fundamental debates, there should be room for a somewhat philosophical discussion of the topic.

After all, just because one has dealt with this topic on a philosophical-critical level at some point does not mean that one cannot resort to trademark protection as a pragmatic entrepreneur. After all, anyone who officially registers and protects their trademark as a legal entity or natural person is protected from both imitators and free riders, but also from unfortunate coincidences.

Quite rational for entrepreneurs

Since a trademark sometimes represents the largest company asset or can become so, it is advisable not to forego registering a trademark. Especially for startups, a well-registered and strongly protected trademark as well as registered patents are always an advantageous argument for future investors; after all, these intangible assets can also be included in the company’s own assets.

From the point of view of a pragmatic entrepreneur, it therefore seems to make sense to secure one’s trademark sooner rather than later. Ultimately, it is like a prisoner’s dilemma. In a game theoretic manner, the individual entrepreneur is tempted to apply for his own trademark protection before others. This is the only way he can ensure that the work he has done and the resulting profits are not suddenly wasted.

A follow-up article will address the topic of trademark protection on an informative level.

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About the author

Pascal Hügli

Pascal Hügli is Head of Research for the asset manager Schlossberg&Co. He is also a moderator, debater and lecturer at the HWZ, where he teaches about Bitcoin, cryptoassets and fintech. In his work, he always strives to understand and interpret the real world as objectively as possible.

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