A new trademark dispute between the Electric Coin Company (ECC) and the Zcash Foundation (ZF) could spill over into other negotiations, potentially threatening the future of a prospective development fund.
Zooko Wilcox-O’Hearn, ECC CEO and one of the founders of the Zcash project, has announced that the company will not move forward with existing plans to split the Zcash trademark with the ZF. In a blog post on Thursday, he raised concerns that sharing the trademark could lead to further complications in the future.
ECC, the for-profit company which develops Zcash, is currently the sole owner of the trademark, allowing it to decide what products and services are labelled as Zcash. ECC has been in talks with ZF for months on how to share ownership.
They eventually settled on a double-veto legal agreement that gives both entities authority to permit or prevent the trademark’s use. Before Thursday’s announcement, they had reportedly been waiting on their legal teams to draw up a framework before moving forward to share ownership.
But the “inherent problem with double-veto is that it is prone to inaction or deadlock,” Wilcox-O’Hearn wrote. It only works if ZF and ECC can agree on everything; if not, then any further discussion on the trademark “would be at a dead-end.”
In a follow-up this morning, Wilcox-O’Hearn added that he had had “misgivings” over organizations using the trademark to determine development. “[T]he [F]oundation recently suggested that it could use the resulting veto power to impose conditions on what decisions the community would be allowed to make”, he wrote.
In private discussions with the Foundation, Wilcox-O’Hearn argued that as part of distributing the trademark neither side should be able to use it as a de facto veto power. He also suggested the agreement be extended to include a third party chosen by ZF’s Community Advisory Panel.
Wilcox-O’Hearn now suggests that ECC hold sole proprietorship of the trademark until a viable alternative presents itself, one which preferably gives the community itself more control.
“[W]e believe that we should wait for the governance process to work itself out and we advocate for further decentralization of control over the trademark,” Wilcox-O’Hearn wrote.
Unsurprisingly, the news was not received well by the Foundation. In a reply to the original post, board member Matthew Green called it “really disappointing news” and a renege against a longstanding agreement. The decision had reportedly not been communicated to ZF before the public announcement.
The ECC CEO has promised to distribute ownership to the community and only use the trademark in accordance with their wishes. But Green commented that the company had gone back on sharing control with the only community entity that actually exists, the Foundation, “in exchange for a nebulous promise.”
The timing for the trademark dispute could not have been worse. The Zcash community is currently debating whether to create a chain-sanctioned development fund before the Founders’ Reward (FR) runs out in October 2020.
Wilcox-O’Hearn has publicly called for the creation of a new dev fund, as others have pushed against it. The founder of Summa, another Zcash development company, has warned the community to be “extremely wary” of agreeing to any further funding, given the ECC’s poor track record of fiscal management.
ECC reported last Thursday that it had been running at an average 30% monthly deficit during Q1. While the company had revenue of approximately $449,000 per month, outgoings often came to $635,000.
One source familiar with the matter told Crypto Briefing that there has been a “serious breakdown” in relations between ZF and ECC. The Foundation had been involved in coordinating the community’s responses for a new dev fund.
Some members of the Zcash community forked the codebase in July to create Ycash (YEC), which has redirected the remaining FR over to the Ycash Foundation.
Crypto Briefing asked ZF whether this would likely prejudice or disrupt future negotiations. A spokesperson said they had managed “to find common ground” with ECC in the past, and “expect that to be the case this time around as well.”
But for the moment ZF is suspending any further involvement. In a statement released late last night, ZF’s Executive Director, Josh Cincinnati, said ECC can “arbitrarily enforce a new dev fund” if it holds the trademark, making further actions “ultimately meaningless.”
“The Foundation was not established to engage in decentralization theater, and we will not lend our credibility to legitimize a hollow process,” Cincinnati continued. “[W]e are delaying our community sentiment collection and any decision-making regarding NU4 until the ECC recommits to the 2-of-2 agreement that was already agreed upon.”
ECC rebranded from Zcash company earlier this year to distinguish it from the cryptocurrency. “[T]he company isn’t “Zcash,” wrote Josh Swihart, ECC’s VP for Marketing and Business Development. “Zcash is the cryptocurrency we build and support, with the help of others in the community.”
If the Electric Coin Company does not consider itself Zcash, the Foundation may need some convincing.
This article has been updated to include comments made by Wilcox-O’Hearn this morning.