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Blockchain Technology and Intellectual Property in the Fashion Industry

Info: 10593 words (42 pages) Dissertation
Published: 9th Dec 2019

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Tags: FashionInformation TechnologyIntellectual Property Law

In addition, if a mark is licensed, smart contracts could include the contiguous information such as if the mark has been licensed in whole or in part, for all or for some of the specified goods, or for the use of the mark in a particular manner, or a particular locality[2]. Another advantage could be a better control of the licensee-created IP, which is transferred to the licensor through either assignment or work made for hire.

Furthermore, blockchain technology will potentially make it possible for TM owners to control their intangible assets beyond the paper. During the performance of a contract, there are some obligations posed on the licensor or licensee that they must comply, for instance, maintenance of the registration of the licensed mark, the maintenance of the mark’s distinctiveness; the licence term; the character of the licence (exclusive, non-exclusive, sole licence).

Another huge advantage could be the monitor of quality control provisions. A trade mark licensor who does not monitor and control the quality of the licensed products is deemed to be granted a ‘bare o naked licence’, that may end up in abandonment and revocation of the TM. A case that illustrates how useful could be the technology in the monitoring of quality control provisions is Scandecor[3]. In that case, the TM owner was put in the risk of losing its TM because of the lack of quality control. Just imagine the possibilities if a smart contract in the form of ‘hybrid contract’ can bring for a brand in order to comply with this contractual obligation.

There are other bunch of cases in which the quality control provision was tested. For example, Eva’ Brdial (US)[4], in which the Court concluded that the mark was abandoned because no quality control had taken place and the mark’s function was destroyed[5]. In addition, in Barcamerica v Tyfield[6], it was held that this kind of provision requires that the contract expressly contemplates the methods whereby the control will be done and an actual control by the owner.

Smart contracts could assist fashion brands (especially luxury) to control closely their selective distribution clauses, which as pointed out in Copad v Dior[7], breaks not only the contractual obligationsbut also “the owner’s TM rights if such sale would damage the ‘allure and prestigious image which bestows on those goods an aura of luxury”. Moreover, it could also be more controlled non-authorized sub-licences. For example, in Leofelis[8],the licensee in a flagrant breach of the contract, sub-licence the mark to another party.

With regard to the execution of more complex provisions of licencing agreements, such as warranties and the treatment of confidential information, these provisions cannot be complied just by the blockchain. Sometimes there are even subjective and not suitable for being processed into a code. Taking into account these technical problems, for these provisions, I particularly agree with the argument proposed by one author, who proposes that parties can create “hybrid arrangements” that blend natural-language contracts with smart contracts written in code, which can represent better parties’ intentions. The combination of the two systems will allow companies to take advantages of both sides: traditional paper contracts and code-based rules[9].

In any case, it appears that it will be necessary the intervention of lawyers in the process of drafting the underlying contractual agreement, which will then trigger the smart performance terms[10]. Accordingly, as the law firm Hogan Lovells pointed out in one of its studies about the future of smart contracts, blockchain may not replace lawyers. On the contrary, in order ‘to write’ smart contracts, it is required a closer relationship between lawyers, clients, and programmers[11].

The firm concluded its study affirming that smart contracts are still in the experimental stage in many companies and traditional legal agreements are likely to remain for years, since smart contracts still present several legal and technical vulnerabilities[12].

  1. Evidence of Use in Trade

Blockchain technology could be of significant importance to generate evidence of use in trade. One of the main problems with registered TM is that given the monopoly that this regime gives to the owner, sometimes it is necessary to prove first use and genuine use in commerce of the sign[13]. There have been several cases in which this problem has arisen and the unfavourable result could have been avoided.

From my point of view, the complicated issue is the evidence that the trade mark owner needs to provide to defend himself from an application for non-use revocation. In order to demonstrate actual use, the proprietor must show that the trade mark has been used by him or with his consent within the territory of the EU or of the national TM within a five-year period. The evidence should demonstrate for which goods the trade mark has been used, the economical reward from sales of these goods bearing the TM during the relevant 5 year period or in the 5 years leading up to the date of the application, examples of sales records showing the mark in use for the goods for which use is claimed (e.g. copies of invoices or similar sales records, the advertisement of the goods bearing trade mark, if possible with examples of such advertising, use of the mark on labels, etc)[14].

The lack or even the inadequate evidence of use of a mark in commerce could be fatal for a brand when it is challenged on the grounds of non-use. As an example, see the decision of the UK IP Office (O-441-13), which shows that ‘losing a mark through inadequate evidence of use can happen to anyone, even Gucci’. The Italian high fashion manufacturer was immersed in a battle for its logo mark consisting of interlocking capital G’s. Gucci had a registration of that mark in the UK covering a range of goods in classes 3, 14, 18 and 25. In 2012, Gerry Weber International AG filed an application for revocation of the mark on the grounds of non-use. The UK IPO decided to revoke the GG trade mark covering classes 14, 18 and 25. The decision concluded that the evidence submitted by Gucci “is not sufficient to show “actuality of use” of the registered mark on the goods for which it is registered”[15].

Another case in which another famous fashion brand lost a mark on the grounds of non-genuine use of it is the decision of the Supreme Court of New Zealand of 2017, which revoked one of the Lacoste crocodile trademarks[16].

Moreover, this process could be even more complicated if the trade mark has been licenced. Taking into account the number of duties that a fashion enterprise, which manages a whole set of IP assets, must comply with today, through a conventional licensing agreement, it is easy to lose control over this crucial obligation or performance it deficiently, which would end up with the revocation of the TM. Thus, a smart contract integrated onto a blockchain which is interconnected with the IP Office or Registers will make this duty easier, simple and cost-effective.

The recent case Walton International Limited v Verweij Fashion BV[17] illustrates the importance of having a control over the use that a licensee makes of the licensed trade mark. In this case, as a consequence of an application for revocation, the trade mark proprietor had to provide evidence of use in a specific territory. The Court held that there was not sufficient evidence to establish genuine use of the licensed trade mark GIORDANO for clothing in the UK or EU during the relevant periods, and revoked it. This decision highlights the importance of demonstrating the use of the sign as a TM to indicate the trade origin of any of the goods and the importance of the use of it in the territory in which the registration is challenged. Sometimes it is not sufficient just to provide superficial proof which does not show honest use of the registered trade mark.

If all transactions relating to a product bearing a particular trade mark are entered on the blockchain, then that use of the trade mark on the blockchain could, at least in theory, be evidence of use, assuming that this is accepted by the law[18]. For instance, blockchain could be connected to actual sales or promotions to create automatic and “real-time evidence” of the use of the trade mark, which for sure would save money and time in TM disputes and revocation actions[19].

 

In my view, the verification of the use by the distributed ledger will make it easier the burden of proof placed on right holders, who have to collect relevant evidence to present before Courts, and at the same time would simplify the administration process at the respective IP Office at the time of registration[20].

  1. Anti-Counterfeiting Tool

Another possible application in the fashion industry is the ability to use blockchain technology to tackle counterfeiting.

There is a whole debate around the idea of whether counterfeiting really damage or not the industry. One may say that from the point of view of designers, counterfeiting deprives them of their legitimate economic rights to benefit from their work[21]. Regardless this discussion, I consider that counterfeit is a huge problem that affects not only the fashion industry, but also other fields. First, because of the loses that this illegal activity can carry for legitimate fashion houses, especially for small businesses, the damage to its reputation in relation to the cases in which although the buyer knows that he is acquiring a fake, others are likely to confuse and attribute bad quality to the original product. Secondly, this illegal activity also entails poor job conditions, damage the environment and legitimate economies[22]. Thirdly, because it encourages unfair competition, counterfeiters live outside the scope of the law and do not pay taxes.[23]

A report issued by the OECD/EUIPO in 2016 shows how alarming is the situation. This report establishes that in 2013 up to 5 % of goods imported into the European Union were counterfeit and IPR-infringing goods, amounting to approximately EUR 85 billion. Furthermore, this report points out that fake products cover a wide range of fashion apparel items from handbags, shoes, to perfumes[24].

In a recent study, Europol and the EUIPO (2017) stated that IP crime affecting the European Union continues to represent a cause for concern. IPR infringements are an important source of incomes for organised criminal groups. This groups are also often engaged in other crimes, such as drug trafficking, human trafficking or money laundering. This report confirms that counterfeiting and piracy in the EU is an ongoing challenge and that it is necessary the cooperation between organisations and education of people to combat this kind of illegal activity[25].

In those circumstances, implementation of this technology could be extremely beneficial. Since the EUIPO and Europol are actively looking for the best solution to solve this problem and collaborating with each other improving its own databases, blockchain could assist them with this aim, allowing customs authorities at the same time to deter quicker counterfeit goods.

One proposed method is to attach labels, barcodes or chips to products for provenance authentication, allowing consumers and customs authorities to scan it and know if the product is genuine or not[26]. A system which is able to show in real time verifiable details such as the owner of a product, a legitimate licensee, the place and the date of manufacture of the products, details about sources of raw materials and the manufacturing process, will make it easier the task of verifying genuine products from fake ones and prevent global trade in counterfeits[27]. Since one feature which makes blockchain special is its immutability, this system is incorruptible, counterfeiters should not be able to change information stored on the blockchain.

The fashion industry is already using blockchain technology not only as a solution to verify authenticity of a product, but also as a tool to enhance the brand’s customer experience. An illustrated example of the latter is the collaboration between New York/Shanghai-based fashion brand Babyghost, and VeChain, a blockchain platform which aims to connect blockchain technology to the real world[28] focused on the protection of brands. Babyghost decided to launch its spring collection of 2017 incorporating technology to the clothes. The brand put a Vechain chip in each piece of cloth, containing a public key which was also stored on a blockchain. Through the use of a mobile app the purchaser of an outfit was able to verify its provenance, as well as extra details, such as where the designer got the inspiration to create the garment[29].

I totally share the opinion of some authors who expressed that for obvious reasons, the use of this technology will not help with purchasers who shop counterfeit goods with complete knowledge of its non-genuine nature. However, this will help with consumers who do not differentiate between authentic and fakes, as well as, and more importantly, blockchain could help to educate consumers about the risks or drawbacks[30] that shopping counterfeits products entails by placing the task of checking on their hands[31].

Another potential application of the technology is to use it to verify certification or collective marks (e.g. cotton mark), to check that the products certified comply certain standards[32], for which would probably be necessary a private blockchain[33].

  1. Blockchain controls the Supply Chain

Intrinsically linked with the previous point, another revolutionary application of blockchain technology is to ensure transparency in the supply chain. It is not new that the fashion industry is regarded as the second industry most polluting in the world, and that consumers are concern about the materials used to manufacture their clothes. At the same time, in response to these consumer awareness, the trend among companies is to produce ethical fashion. Fashion clothing that is produced under fair trade principles, no violating any human rights in sweatshops, and respecting the environment is considered ethical fashion[34].

Technology can assist to control better ethical supply chains which is also a marketing tool to engage conscious consumer to purchase eco-friendly fashion products[35]. Being able to demonstrate consumers through a chip that a fashion house is selling environmental sustainable products, will provide these companies with a competitive edge since trustworthy supply chains tend to have an effect on the reputation of a fashion enterprise[36].

Unfortunately, today there is still lack of transparency in supply chains. Using blockchain businesses will be able to connect the physical piece of cloth and its complete history to a public blockchain, which will let consumers to check readily the provenance of the good[37]. For instance, Rosie Burbidge proposes that distributed ledgers can be used along with unique identifiers such as ‘QR codes or RFID chips’[38] linked to the good to track completely its manufacture process. Since today the vast majority of products include security tags, the addition of the cited ‘token or identifier’ do not have to be difficult[39].

Examples of three platforms[40] that are already using blockchain technology to make their supply chains transparent include Provenance[41], VeChain and SourceMap[42]. These companies’ initiative is to provide the entire supply chain history of a product (from the raw material to the shop). On the one hand, brands who choose to partner with Provenance could place “Powered by Provenance” on their label. They assign to every piece a unique digital token, which allows companies to verify the whole digital journey of a product. Consumers can access to that data by scanning the label. According to this platform, “72 % of millennials in the UK are willing to pay more for products from companies committed to positive social and environmental impact, and 8 in 10 shoppers check the origin when purchasing food products”[43].

 

One fashion designer who has partnered with Provenance is Martine Jarlgaard[44], who thinks that technology plays a significant role “in helping to solve some of the industry’s biggest challenges”[45]. Not only her, Stella McCartney has declared to be in favour of incorporating new technology to achieve ethical and sustainable fashion[46].

This system makes possible for brands to be connected with the whole chain of suppliers. However, this will only work for brands which are willing to invite their suppliers to adopt the technology. I agree with this[47].

It should be noted that the ultimate objective of platforms like Provenance, SourceMap, VeChain is that an individual, who enters to a shop to purchase a product, could scan with their mobile phone the label and read the entire story of the product. However, this has not been broadly adopted[48].

Overall, as Dr. Stefan M. Weber pointed out at the EUIPO, blockchain has many advantages for supply chain because it enhances transparency, documents a product’s journey, reveals its true origin and touchpoints, which eliminates opaque supply chain and increases consumer’s trust[49].

  1. TMs Clearance

Another important process that takes a lot of time is Trade mark searching. When a brand starts or decides to launch a new line under a specific mark, should make sure that another company or individual have not already obtained rights to a similar or identical mark for similar or identical goods. The method commonly used is a trade mark search (such as ‘TMview’). No doubt that for a fashion enterprise, the failure of adequately search before adopting a new mark can result in considerable problems and extra costs. Hence, the importance of a trade mark search[50].

However, despite this process good intentions, there are still some limits that could be addressed by the adoption of blockchain technology. Blockchain can establish a more efficient clearance of TM for registration, since the immediate availability of the information would save money and time. With conventional databases, the information is not automatically updated and the full access to it is not granted.

For example, in Thomas Pink v Victoria’s Secret[51], the Judge found that the defendant Victoria’s Secret’s use of the word ‘PINK’ in the UK and EU infringed the claimant’s registered trade mark rights. This decision demonstrates the importance for any business to take preventive measures to ensure there is no competing mark registered for competing goods which may be a problem in the future, irrespective of the fame of the fashion brand.

  1. Blockchain and secondary meaning

Blockchain could also help fashion houses to provide evidence of acquired distinctiveness at IP Offices or Courts. Section 3(1)(b)-(d) of the TMA allows this possibility when a mark is inherently non-registrable because it is non-distinctive, descriptive or generic. It is possible to become registrable through use, if before the date of application, it has, effectively, acquired a distinctive character as a result of the use made of it. It should be noted that Courts have made clear that recognition and association are not sufficient, it is necessary perception that the goods designated by the mark originate from a particular undertaking.

In this sense, the applicant must show that he has appropriated the sign and given it a new meaning. It is necessary for consumers to perceive the sign as an indication of origin. In Windsurfing[52], the CJEU set the types of evidence that Courts should take into account at the time of examination, such as the market share held by the mark; how intensive geographically widespread and long-standing use of the mark has been; the amount invested in promoting the mark; the proportion of the relevant class of persons who, because of the mark, identify goods as originating from a particular undertaking; etc.

Just imagine that this kind of proof could be generated automatically by a decentralized, reliable distributed ledger. This will be, for sure, the remedy for some headaches among fashion businesses that have been struggled to collect the required evidence.

  1. Combining Blockchain technology and design protection

Blockchain technology may be of special importance in the context of UCD. Although its consideration as the “secret weapon”[53] for the protection of fashion designers in Europe, since it arises without formalities, it also requires specific evidentiary proof, which turns its enforcement difficult. When a claimant faces a trial of infringement, they must show that the design was first made available to the public within the Community and that the prior disclosure occurred within 3 of the alleged infringement. Secondly, they must indicate what constitutes the individual character of their Community design[54].

One of the differences between the CDR and UCD is that the presumption of ownership under Art. 17 -for CDR-, does not apply to UCD. This means that when the claimant faces infringement proceedings, they must show that that they are the proprietor’s right of the UCDR. The designer has to demonstrate in detail the process, the date and by whom the design was created. Additionally, a consistency in design documentation is essential to prove ownership. This means that the claimant must provide evidence that the claimed design is the same that was created and disclosed.This burden of proof in the case of UCD, could get more difficult in the case of commissioned designs, where it is possible that some disputes between employers and designers[55] with respect to entitlement arise[56].

 

Another evidentiary burden that arises regarding UCD is to prove “individual character”, which is interpretation was clarified in Karen Millen Fashions v Dunnes Stores, the CJEU hold that the UCD holder has to indicate what constitutes the individual character of the design[57].

Under those circumstances, blockchain could be of enormous help to relax the burden of proof of designers in the case of UCD enforcement. If an original design document and details of the designer and conception are recorded on a blockchain, this creates a time-stamped record and facilitates the evidence to prove these requirements[58].

Furthermore, I believe blockchain would be useful to prove that the grace period has not expired when a fashion designer for strategic reasons decides to disclose and exploit first its design and then apply for a design registration during the grace period of 1 year after the disclosure[59]. In addition, blockchain will give more control to fashion enterprises to its international disclosures to avoid unfortunate situations such as Case R9/2008-3 Crocs v Holey Soles[60], in which Holey Soles successfully challenged the validity of Croc’s CRD, for lack of novelty and individual character. International fashion enterprises must be aware that for the purposes of the grace period does not matter if the sales were in the US market, because the launch of a new product inevitable draws attention of the business circles.

Finally, this technology could help right holders to control better the creations of 3D-printing technologies. If the digital file is recorded on the blockchain, the access to the file could be restricted, which effectively allows three-dimensional objects to be printed in a controlled way[61].

  1. Examination of the blockchain evidence in Courts

The only question that remains to be solved is how courts will evaluate this kind of evidence of registration provided by blockchain technology. Certainly, the main function of blockchain is to act as a verification system, however, in order to display its features and become a reality, Courts must admit the evidence (data) generated by this distributed ledger in future litigations[62]. Nevertheless, given that this technology is still in an early stage, Courts have not had the opportunity to deal with any blockchain cases, at least in the IP field[63].

It drew my attention one approach taken by an author regarding the admissibility of blockchain as evidence in Court. This author makes some theories on how this evidence will be treated by Courts. Certainly, Blockchain evidence would be use by IP owners to demonstrate the truth of ownership, transactions such as licences, use in trade, which will be documented with the record generated by the blockchain. Under this author’s opinion this proof would be treated as ‘hearsay evidence’[64]. I respectfully disagree because, in my view, if the evidence is verified by a decentralized, immutable and more fundamentally incorruptible system, the evidence generated would be an unquestionable technological solution which grants credibility to Courts.

  1. CHALLENGES DERIVED FROM THE IMPLEMENTATION OF BLOCKCHAIN TECHNOLOGY

 

  1. IP Crimes

Despite all the benefits that blockchain promises, some experts point the threats of the misuse of this technology. As Marc Kaufman pointed out at the EUIPO, although blockchain and IP have an interdependent relationship and the application of this technology could be extremely beneficial for the protection of IP assets, he also highlighted that this application could be a “double-edge Sword”, from the notion that if two sides of the same blade are sharp, it cuts both ways. First, he explained that the first edge is composed by criminal threats presented by the use of blockchain technology. Secondly, the other edge is integrated by blockchain technology as a method for law enforcement. This means that blockchain technology provides opportunities for both pirates and law enforcement[65].

The inherent characteristics that blockchain technology offers are crowded by advantages and drawbacks. The inevitable nature of this new technology allows its use for preventing several criminal activities, but at the same time this can provide an opportunity for criminals, who, omitting the law, would seek to take full advantage of data exchange to commit crimes. For instance, digital currencies are being used to launder money and avoid financial regulations. Blockchain technology could also make it easier for people to trade counterfeit or illegal goods[66].

It is paradoxical that precisely the characteristics that make blockchain so especial and appealing for the IP world, brings also a landscape for criminals. The untraceable, anonymous, instantaneous, and free currency system which make transactions easier and cost-effective, result also in an evident choice for criminal activity. The online marketplaces for illicit goods have taken advantage of the rise of Bitcoin[67].

One of the main drawbacks of this new technology and which have the potential to put in risk the whole system of detection of counterfeit goods is the “anonymity”. The techniques that authorities used to employ to track IP infringements by locating IP addresses in order to identify the human being who is behind of the criminal offence of trading in counterfeits cannot be done anymore and is the technology which takes that away[68]. Consequently, this ultimately means that these all new possibilities that blockchain involves give also rise to new concerns and challenges that the law should address. Officials organisations such as the Europol has to come up new ways to tackle the counterfeit of trade marks[69].

For instance, in May 2016, a criminal network specialised in the illegal distribution of pay TV channels was dismantled in Spain. The group laundered its proceeds through bitcoin mining. The operation ended up in the dismantling of 6 bitcoin mining centres with XBT 78.3 (31,320 €) and important amounts of cash and bitcoins[70].

As this report highlights, the modus operandi in counterfeiting and piracy have changed over the years and this alteration will continue in the future. The increasingly important role that technology plays and online trade dictate then new rules for the commission of crimes. Almost every stage of organised criminal activity can be influenced by technological developments[71]. It is undeniable that technology continues to facilitate the organisation and coordination of criminal activities such as trade of counterfeit goods. Communication between members of criminal groups is no longer limited to telephones and the internet, but also relies on encrypted communication tools and anonymization software. In some cases, bitcoins are being use by criminal groups[72].

It is quite unrealistic to think that criminals will not find a way to continue committing illegal activities, even if blockchain is not adopted. First was the Internet, which provided criminals with a relatively easy way to commercialise counterfeit products. Online trade offers numerous advantages for criminal groups[73]. However, in my view, blockchain technology presents huge opportunities for the apparel industry by means that it can make it possible to design a much cheaper and faster systems of management of IP rights and a major control of a fashion house’s transactions that we cannot ignore. For all of these reasons, even it would be necessary the intervention of the law to avoid any notions of anarchy of this technology and the development of new strategies to addressed these challenges, I consider that the benefits outweigh the disadvantages[74].

 

  1. Is privacy in danger?

Since blockchain technology is still in an early stage it is not surprising that it raises a multitude of legal questions that should be tackled before its widely adoption. There is a current lack of regulation in this area and if the use of blockchain is mainstream adopted, there will be necessary a legal landscape to facilitate it. In this sense, blockchain technology has the potential to put in risk privacy. Blockchain is feed by data, and here is where it enters in conflict with other regulations such as the data protection laws. Privacy is some of the problems that should be addressed before the implementation of this new system.

The new General Data Protection Regulation (GDPR), entered into force last May 2018 in Europe, harmonises the law across Member States and gives data subjects stronger rights, imposing essential obligations which take the form of principles that should be complied by data controllers and data processors[75]. This recent change in the regulation may cause a conflict between some data protection principles and the main characteristics of blockchain technology, taking into account that, first, despite its encryption, some transactions require personal data and are not entirely anonymous. Second, the difficulties that the lack of a centralised intermediary as data controller entails for regulators. Third, it would face some difficulties at the time of complying with the key principles of the GDPR, such as the principle of minimisation and the right to be forgotten[76]. Fourth, the nature of this technology is in direct conflict with the subject’s rights to access, rectify and delete, or object to the processing of their personal information stored on the blockchain, and to receive an account of its use and disclosure.

The GDPR applies if the data that is being processed belongs to EU data subjects, regardless if the data controller or processor is established in the EU or abroad. The potential problem that the implementation of this technology will face with this is the determination of who can be considered data controller in a public distributed ledger[77].

We cannot forget that according to the Article 4(1) GDPR, for the application of EU data protection law, it is crucial that the information stored on the blockchain characterizes for being personal, which means that could be attributable to an identified or identifiable subject. In the case C-582/14 Breyer v Germany, Advocate General established that dynamic IP addresses are personal data “if there is a known third party holding additional information necessary to identify an individual”, in connection with the dynamic IP address. Under those circumstances, if the data remains anonymous the GDPR will not apply[78].

Thus, the application or not of the GDPR depends on the character of personal of the information stored. If we take into account the kind of data that fashion houses, registers or IP offices in the model proposed in this paper would store on its blockchains, it is unavoidable to find some personal information involved, especially regarding smart contracts. These contracts store information related to right holders, owners, licensees. For instance, if a smart contract contains “a payment to a supplier, a settlement payment to a former employee, or a sensitive financial transaction”[79]. Moreover, there are some transactions such where the link between the data and the data subject will arise since it is necessary to know the transaction parties[80]. Some examples of fashion houses transactions include the name of the employee who created a design and licenced or assigned it to the company. This is personal data, which affects directly to an identifiable subject. Consequently, if we expect smart contracts to be successful within the world of IP, there will be completely necessary to implement strong privacy protections.

In addition, there are some information that qualifies as personal data, that is required in order to verify that a transaction in the blockchain is valid. For instance, with regard to bitcoin, sometimes it is necessary to rebuilt the whole financial history of a person who is trying to exchange with bitcoins to check that this person have enough bitcoins to do the transaction[81].

In this sense, even when the parties involved are not identified, because they are based on “pseudonymous accounts” rather than anonymous ones, identification tools could be used to discover the identity of the parties who has signed a smart contract. It is certain that despite the success of this process is relative, the fact that a great number of transactions are recorded on a blockchain, will result in the difficulty of hiding identification and risks of association to the same identity[82], making this blockchain technology inside the scope of the GDPR.

Moreover, Art. 25 GDPR requires data controllers to implement appropriate technical and organisational measures which complies with its basics principles. Regarding the principle of minimisation, under the Arts. 5(1) (e) and 5 (1) (c), companies should comply with the data minimisation principle when collect personal data. This means that they should retain just this personal information for no longer than is necessary for and proportionate to the purposes for which the personal data is processed, avoiding keeping it for a future useful purpose. Therefore, companies should conduct impact assessments to evaluate ex ante the future impact of the implementation of blockchain on the personal privacy with regard to this principle[83].

Additionally, while the immutability of blockchain is appealing in terms of preventing fraud and keeping accurate records, the technology could enter into a battle with the right to be forgotten[84]. As I noted, data stored in a blockchain cannot be changed, which means that the recorded personal data cannot be removed. The irreversibility and transparency of blockchains can play also against this technology for its use when there is privacy involved[85]. After a case [C-131/12 Google Spain SL and Google Inc. v AEPD and Mario Costeja Gonzalez], which involved the inaccurate pages of a newspaper that appeared in the results of the Google search engine when the name of the subject was searched, the CJEU decided that individuals can ask Google to stop referring to certain information about them. This is a manifestation of the exercised of the ‘right to be forgotten’, which primarily aims to protect an individual’s digital reputation[86]. Art. 17 GDPR strengthens this right to claim erasure of personal data if these information is no longer necessary for the purposes for which it was collected or processed, or if the data subject withdraws its consent and there is no other legal ground for processing.

Blockchain technology creates two obstacles regarding the compliance of the mentioned principle. First, it would be even more difficult to identify a data controller in a public blockchain who could address data subjects’ claims. Second, the decentralised, distributed, and immutable features of blockchain make almost impossible the removal after the request by the data subject, at least in public distributed ledger. Even if a court orders the deletion of the data from a blockchain, this will be a decision very difficult to accomplish.

All of these without taking into account that one of the examples proposed as a tool for the fashion industry to enhance its brand is to provide the product information in the actual product. This would be possible through the management of “big data”. A fashion company will be able to share with its customers the information about a product which could include information about suppliers or even employees which have designed that article of fashion which includes the chip.

However, as one author highlights blockchain would no enter in conflict with privacy. There are ways to design it in a manner that limit the level of disclosure. At the time of designing a blockchain, it should be carried out a due diligence on the assessment of its impact on privacy, which must ensure that the recorded data noes not violate the law regarding personal information[87].

  1. CONCLUSION

I started this paper with a question formulated by Rosie Burbidge in her commentary to this new technology. After analysing the potential benefits that this innovative technology could entail for the fashion industry, the conclusion that I reach is that despite the several legal and technical issues that should be addressed before its implementation, the inherent characteristics of blockchain, such as transparency, immutability, decentralisation, distribution, accuracy and immediacy, described above, makes of blockchain the perfect ‘outfit’ for the fashion industry.

As the idea of protecting innovation and branding is increasing among the industry, intellectual property becomes more important, which lead to the importance of the adoption of a solution that allows an efficient management of rights. Managing the rising demand for IP protection is a big challenge for IP offices. Is precisely here where blockchain technology could offer an interesting alternative to improve the administration of IP processes of registration and maintenance[88].

I truly believe that blockchain would be a perfect option for the management of IP rights of fashion houses, especially when it is involved a licencing agreement, which as I noted, could be done through smarts contracts. It is certain that in the world of transactions, confidence is of utmost importance, thus a system which could offer reliable technology, in which parties can make transactions, regardless its trust in each other, since rather than in the other’s goodwill, they trust in the code which embodied the contractual obligations.  At the end, one of the purposes of the whole system of IP is to reward creators for its efforts. If the integration of smart contracts on a blockchain, allows fashion houses to take advantage to the full of the opportunities that this combination of elements offers, why be against to its mainstream adoption.

The latter does not mean that there were not be place for lawyers. By contrary, as described above, first, there are still needed at the negotiations stage between parties until they meet an arrangement. Secondly, there are some subjective provisions which cannot be coded and should still need a third-party supervision. Thirdly, Courts still will retain jurisdiction to solve disputes around this at the time of providing evidence, which would be automated generated by the blockchain network.

Regarding the other applications, there is no doubt that official registers should embrace this emerging technology in order to provide a more efficient system of management of rights to innovators. Just imagine the opportunities that a public worldwide ledger could offer if it replaces the traditional way of TM search, in which, in practice, when someone decides to lunch a TM, they have to search the individual databases of each jurisdiction and rely in its accuracy, when blockchain offers to update automatically this information. Furthermore, the promise of blockchain is to smooth the burden of proof of IP owners in the case of UCD, secondary meaning or evidence of first use of TM.

Technology is changing everything, from the way of commercialising products to the way in which designs are created (just see 3D printers), or even bringing products into live (IoT). The IP world, and particularly the fashion industry, should take advantage of the technology at this ‘immature’ stage and engage with the subject and explore its potential applications. It is certain, and I respectfully agree with several authors[89] at this point, that blockchain is here to stay and all of the resources should be aimed to explore its potentiality to help an industry which has struggled when protecting and enforcing its IP rights, especially in the case of small businesses.

It is undeniable that Blockchain is actually being adopted by several industries and companies. For example, the industry of music because of the possibility to eliminate multiple layers of intermediaries[90] which make its compensation rewards less fair. Moreover, in the diamonds field, the start-up Everledger is using blockchain technology to prove authenticity of diamonds[91].  The Fashion Industry is also taking advantage of this technology to protect and enforce its rights. Examples of designers who are embracing the technology are Martine Jarlgaard or the fashion brand ‘Babyghost’, who are already using blockchain for both protection, transparency and enhancement of the customer experience.

It is true that there are a lot of challenges, such as the commission of IP crimes through the use of bitcoins or privacy issues. Nevertheless, I might be quite optimistic or for others even naive, but I consider that the merger of smart contracts and blockchain technology have the potential to change the way in which fashion companies and IP institutions collaborates to achieve a dreaming system of protection, in which the effectiveness of the management of IP rights will end up in a competent protection, exploitation and enforcement of IP assets which worth enormous amount of money.

This is not the end, is just the beginning of something amazing that can transform the premises of the application of IP law by the fashion industry.


[1] Rosie Burbidge (n 1) 1264.

[2] S. 25 UK TMA.

[3] Scandecor Developments AB v Scandecor Marketing AB and others, 4 April 2001, UKHL 21.

[4] Eva’s Bridal Ltd v Halanick Enterprise, 639 F.3d 788 (7th Cir. 2011).

[5] Gail Evans, ‘Licensing Trade Marks’, available at QMPlus.

[6] Barcamerica Int’l USA Trust v. Tyfield Importers, Inc., 289 F. 3d 589 (9TH Cir. 2002).

[7] Case C-59/08, 23 April 2009, Copad SA v Christian Dior Couture SA.

[8] Leofelis SA v Lonsdale Sports Limited [2008] ECWA Civ 640.

[9] Primavera De Filippi and Aaron Wright (n 4) 77-78

[10] Ruth Burstall and Birgit Clark (n 43) 13.

[11] Steven Norton, ‘Law Firm Hogan Lovells Learns to Grapple with Blockchain Contracts’ (The Wall Street Journal, 1 February 2017) https://blogs.wsj.com/cio/2017/02/01/law-firm-hogan-lovells-learns-to-grapple-with-blockchain-contracts/, accessed 1 August 2018

[12] Ibid.

[13] S. 46 of the Trade Marks Act 1994 and art. 51 of Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark.

[14]  UK IPO, Guidance Revocation (non-use) proceedings (updated 14 June 2018) <https://www.gov.uk/government/publications/trade-marks-revocation/revocation-non-use-proceedings>, accessed 1 August 2018

[15] Gerry Weber International AG v Guccio Gucci S.p.A [2013] O-441-13.

[17] Walton International Limited v Verweij Fashion BV [2018] EWHC 1608 (Ch).

[18] Birgit Clark (n 60), 32

[19] Rosie Burbidge ( n 1) 1267.

[20] Brian Hilton, Chong Ju Choi and Stephen Chen, ‘The Ethics of Counterfeiting in the Fashion Industry: Quality, Credence and Profit Issues’ (Kluwer Academic Publishers 2004) 55 Journal of Business Ethics, 345-354.

[21] Ibid.

[22] EUROPOL and EUIPO, ‘2017 Situation Report on Counterfeiting and Piracy in the European Union’ https://www.europol.europa.eu/publications-documents/2017-situation-report-counterfeiting-and-piracy-in-european-union, accessed 3 August 2018

[23] Benoit Godart, ‘IP crime: the new face of organized crime. From IP theft to IP crime’ (2010) Vol. 5 JIPL&P, 378.

[24]  OECD/EUIPO (2016), ‘Trade in counterfeit and pirated goods mapping the economic impact’ (2016), 11 <https://euipo.europa.eu/tunnel-web/secure/webdav/guest/document_library/observatory/documents/Mapping_the_Economic_Impact_study/Mapping_the_Economic_Impact_en.pdf>

[25] Simon Jupp (n 39) 40.

[26] Ibid. 13

[27] Ruth Burstall and Birgit Clark, ‘Blockchain, IP and the fashion industry’ (2017) Managing Intellectual Property 9, 12. See also Rosie Burbidge, ‘Commentary: The Blockchain Is in Fashion’ (2017) Vol. 107 The Trademark Reporter, 1262, 1266.

[28] For further information visit <https://www.vechain.org/#brief>, accessed 28 July 2018

[29] Ruth Burstall and Birgit Clark (n 43) 9,13.

[30] These risks are explained in detail by Professor Susan Scafidi, Steven Kolb, among others in ‘An Insider’s Perspective on the Counterfeit Industry’ (9 December 2014) available at <https://www.youtube.com/watch?v=Is9Hxn7Wr5w>

[31] Birgit Clark, ‘Blockchain and IP law: a match made in crypto heaven?’ (2018) WIPO MAGAZINE, 32, 34. See also Ruth Burstall and Birgit Clark, ‘Blockchain, IP and the fashion industry’ (2017) Managing Intellectual Property 9, 13.

[32] Birgit Clark (n 60) 32, 34.

[33] Ruth Burstall and Birgit Clark, ‘Blockchain, IP and the fashion industry’ (2017) Managing Intellectual Property 9, 11.

[34] Bin Shen Yulan Wang Chris K.Y. Lo Momoko Shum, ‘The impact of ethical fashion on consumer purchase behaviour’ (2012) Vol. 16 Journal of Fashion Marketing and Management: An International Journal, lss 2, 234-245. See also Rosie Burbidge, The Blockchain is in Fashion, 1262

[35] Professor Johanna Gibson, ‘Fashion Ethics’ (2018), slides 26 and 27, available at QMPlus

[36] Ellie Mertens, ‘Blockchain party’ (2018) Managing Intellectual Property, 15.

[37] Ibid.

[38] As Rosie Burbidge explains <QR (Quick Response) codes are static barcodes that consist of a series of small black boxes within one larger box. When scanned by a smartphone, QR codes provide the users with access to data, e.g. product care information or a link to a website or video. RFID (Radio Frequency Identification) chips use radio waves to automatically identify and track tags attached to objects (e.g. clothing and accessories)>.

[39] Ibid.

[40] Whitney Bauck, “The beginner’s guide to how blockchain could change the ethical fashion game’ <https://fashionista.com/2018/04/what-is-blockchain-explained-ethical-fashion-supply-chain>, April 2018, accessed 23 July 2018.

[41] Provenance information <https://www.provenance.org>

[42] Sourcemap information <http://www.sourcemap.com>

[43] Ellie Mertens (n 48) 15.

[44] Simon Jupp (n 39) 40, 41.

[45] For more information about her blockchain-powered supply chain transparency <http://martinejarlgaard.com/About>

[46] Whitney Bauck, ‘How technology is shaping the future of sustainable fashion’ (23 October 2017) <https://fashionista.com/2017/10/fashion-design-technology-sustainable-textiles-2017?utm_source=site&utm_campaign=related> accessed 23 July 2018

[47] Whitney Bauck, “The beginner’s guide to how blockchain could change the ethical fashion game’ <https://fashionista.com/2018/04/what-is-blockchain-explained-ethical-fashion-supply-chain>, April 2018, accessed 23 July 2018.

[48] Ibid.

[49] Dr. Stefan M. Weber Presentation, ‘Blockchain Technology to protect the supply chain, workshop on relevance of blockchain technology for the protection of IP’ (EUIPO, 27 October 2017) <https://euipo.europa.eu/knowledge/course/view.php?id=3038> accessed 22 June 2018.

[50] Glenn A. Gundersen, ‘Trademark Searching and Clearance’ (2015) International Trademark Association, 2-5.

[51] Thomas Pink Limited v Victoria’s Secret UK Limited [2014] EWHC 2631 (Ch).

[52] Joined Cases C-108/97 and C-109/97, 4. May.1999, Windsurfing Chiemsee Produktions –und Vertriebs GmbH v Boots-und Segelzubehör Walter Huber and Franz Atenberger.

[53] Kamal Preet, ‘Why America needs a European Fashion police’ (2008), Vol. 3, Journal of Intellectual Property Law & Practice, 387.

[54] Lionel Bently and Brad Sherman (n15) 703.

[55] Arts. 14 (1) and 14(3) Council Design Regulation (EC) No. 6/2002 of 12 December 2001 on Community Designs

[56] Anna Tischner, ‘The role of unregistered rights-a European perspective on design protection’ (2018), Vol. 13 JIP&P, 303

[57] Case C-345/13 Karen Millen Fashions v Dunnes Stores (Limerick) Ltd. [2014].

[58] Ruth Burstall and Birgit Clark, ‘Blockchain, IP and the fashion industry’ (2017) Managing Intellectual Property 9,

[59] Art. 7 Council Regulation 6/2002.

[60] Crocs Inc v Holey Soles Holding Ltd R 9/2008-3, Third Board of Appeal of the OHIM.

[61] Alexandra Sims, ‘Blockchain technology and intellectual property’ (2017) New Zeland and Intellectual Property Journal, 77.

[62] Angela Guo, Blockchain Receipts: Patentability and admissibility in Court, 16 Chi.-Kent J. Intell. Prop., 440 (2016), accessed 11 July 2018.

[63] Ellie Mertens, ‘Blockchain party’ (2018) Managing Intellectual Property, 15.

[64] Angela Guo, Blockchain Receipts: Patentability and admissibility in Court, 16 Chi.-Kent J. Intell. Prop., 440 (2016), accessed 11 July 2018.

[65] Marc Kaufman speech and presentation, ‘Blockchain and Intellectual Property: An interdependent relationship’ (EUIPO, 2017) < https://euipo.europa.eu/knowledge/course/view.php?id=3038>, accessed

[66] Primavera and Aaron Wright, 46

[67] Angela Guo (n 25) 443.

[68] Conference ‘Conclusions and discussion’ regarding IP crime and blockchain (EUIPO, 26 October 2017) < https://euipo.europa.eu/knowledge/course/view.php?id=3038>

[69] Ibid.

[70] 2017 Situation Report on Counterfeiting and Piracy in the European Union, 35. See also ‘Spanish Network behind the illegal distribution OF Pay-TV channels dismantled’, 2016, available at https://www.europol.europa.eu/newsroom/news/spanish-network-behind-illegal-distribution-of-pay-tv-channels-dismantled, accessed 4 August 2018

[71] Ibid. 35.

[72] Ibid. 35.

[73] Ibid. 36

[74] Primavera De Filippi and Aaron Wright (n 4) 7.

[75] Just to clarify briefly according to the Art. 4.7 GDPR, a ‘controller’ is a natural or legal person, public authority, agency or other body that, alone or jointly with others, determines the purposes and means of the processing of personal data. While, Art. 4.8 defines ‘processor’ as a natural or legal person, public authority, agency or other body that processes personal data on behalf of the controller (excluding the data controller’s own employees) [defined by Paul Voigt and Freiherr Axel von dem Bussche, ‘The EU General Data Protection Regulation (GDPR): A Practical Guide’ (Springer International Publishing, 2017), 17-20].

[76] Matthias Berberich; Malgorzara Steiner (n 32) 422.

[77] Ibid. 422, 423

[78] Ibid.

[79] Examples of actions that put in risk personal privacy if they are disclosed, quoted by Primavera and Aaron Wright, 83.

[80] Matthias Berberich; Malgorzara Steiner, ‘Blockchain Technology and the GDPR-How to reconcile privacy and distributed ledgers’ (2016), 2 Eur. Data Prot. L. Rev, p. 422, 424.

[81] Jeni Tennison, ‘What is the impact of blockchains on privacy? (2015) <https://theodi.org/article/what-is-the-impact-of-blockchains-on-privacy/> accessed 4 August 2018

[82] Primavera De Filippi and Aaron Wright (n 4), 83

[83] Alessandro Mantelero, ‘Competitive value of data protection: the impact of data protection regulation on online behaviour’ (2013), Vol. 3 International Data Privacy Law, 233.

[84] Simon Jupp, (n 39) 40.

[85] Jeni Tennison https://theodi.org/article/what-is-the-impact-of-blockchains-on-privacy/

[86] Bart Custers and Helena Ursic, ‘Big data and data reuse: a taxonomy of data reuse for balancing big data benefits and personal data protection’ (2016), Vol. 6 Journal of International Data Privacy Law, 4.

[87] Jeni Tennison, ‘What is the impact of blockchains on privacy? (2015) <https://theodi.org/article/what-is-the-impact-of-blockchains-on-privacy/> accessed 4 August 2018.

[88] Catherine Jewell (Editor) ‘The future of intellectual property: opportunities and challenges’ (October 2017) N. 5 WIPO MAGAZINE 3.

[89] Rosie Burbidge (n 1), 1267: Zeilenger, Martin (n 26), 24; Simon Jupp (n 39), 41.

[90] Nikolas Guggenberger, ‘The Potential of Blockchain Technology for the Conclusion of Contracts’’ in Reiner Schulze/Dirk Staudenmayer/Sebastian Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Hart 2017), 83

[91] Ruth Burstall and Birgit Clark (n 43), 9, 12.

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