In a sign of the growing importance of intellectual property in the emerging Web3 economy, startup Unstoppable Domains announced on Wednesday that it would not enforce a key patent against other members of an industry group called the Web3 Domain Alliance.
The alliance consists of dozens of firms that offer a naming service that makes it easier to use Web3 by converting the long string of alphanumeric characters the make up a wallet address to an easy-to-remember handle such as jeffjohnroberts.eth or jeffjohnroberts.crypto. Many in crypto view these names not just as a convenient tool but as a form of digital identity.
In January, the U.S. Patent Office granted Unstoppable Domains a patent titled "Resolving Blockchain Domains" that describes a process for using smart contracts to decipher the naming process. Like other patents, it grants the owner a 20-year monopoly to bar others from using the technology without permission.
While patents can serve as a means to encourage innovation, they can also be misused, such as when so-called "patent trolls"—many of which are just shell firms—file flimsy claims against a productive company in a bid to extract a payoff. In response, firms like Google have developed broad patent alliances where members enter legal agreements not to sue each other.
In the case of Unstoppable Domains, which was valued last year at over $1 billion, it's not clear if its pledge is enforceable since there are no legal agreements to back it up.
According to the company's lawyer, Elizabeth Grabowski, the pledge is nonetheless significant since Unstoppable Domains would suffer serious reputational harm if it decided to renege. More broadly, Grabowski told Fortune that the company is trying to foster a sense of collaboration and innovation across the Web3 naming industry, and that it obtained the patent primarily as a defensive tool against big Web2 companies—some of which offer web identities of their own, and could be challenged by Web3's decentralized model.
In announcing the patent pledge, Unstoppable Domains also noted that an additional 51 projects have joined the Web3 Domain Alliance, including the crypto exchange Blockchain.com and NFT forum Rarible.
A primary goal of the alliance, according to Senior Vice President Sandy Carter, is to help prevent collisions in the Web3 naming space. This would occur if two competing entities both offered a way to obtain the same handle such as jeffjohnroberts.eth.
According to Carter, there is not a lot the industry can do to stop a bad actor from offering a copycat naming service, but she pointed out that, from a practical perspective, the rival service unlikely would gain much traction. That's because the alliance is working to establish reciprocal recognition of good actors—a process that will help a legitimate domain name function across hundreds of crypto wallets and applications. Conversely, wallet and application providers are unlikely to provide domain name integration to a bad actor.
One notable name missing from the list of Web3 Domain Alliance partners is the Ethereum Name Service, or ENS, which supplies names with the popular ".eth" suffix, and is the biggest company in the space alongside Unstoppable Domains. In a recent interview with Fortune, ENS's lead developer expressed reservations about its rival's decision to acquire intellectual property in a field where open-source values are paramount. A spokesperson for Unstoppable Domain's says the concerns are misplaced.
Unstoppable Domains says it's also entering discussions with ICANN, the body that overseas conventional domain names such as Fortune.com, in order to get trademark recognition for Web3 names.
The popularity of Web3 names is growing quickly. According to the alliance, users and companies created more than 3.4 million such names in 2022 alone.
