Tari Labs, LLC v. Lightning Labs, Inc.

Background

Tari Labs, LLC brought a trademark-infringement lawsuit against Lightning Labs, Inc. Tari alleged that Lightning’s use of “TARO” for a blockchain-based protocol infringed Tari’s trademark for “TARI,” a blockchain and cryptocurrency-related platform and protocol. Both protocols are intended to enable the creation and transfer of digital assets. Tari said the companies target similar software developers, use overlapping marketing channels, and may reach consumers through products built with the protocols, including wallets.

Tari contacted Lightning several times during 2022, warning that “TARO” could cause confusion and asking Lightning to change the name. Lightning nevertheless publicly released its open-source TARO protocol in September 2022. After Lightning announced that a newer version would soon be released, Tari sought a temporary restraining order, or TRO, to prevent further action that Tari said would harm its brand, reputation, and business.

Legal standard

The court applied Federal Rule of Civil Procedure 65, which governs temporary restraining orders and preliminary injunctions. Tari had to show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm without relief; (3) that the balance of hardships favored Tari; and (4) that an order served the public interest.

For Tari’s trademark claim under the Lanham Act, the court considered whether Tari had a protectable ownership interest in its mark and whether Lightning’s use of “TARO” was likely to confuse consumers. The court evaluated the relevant likelihood-of-confusion factors, including the marks’ strength, the relatedness of the products, consumer care, similarity of the marks, overlapping marketing channels, actual confusion, Lightning’s intent, and possible business expansion.

Court’s analysis

The court found that Tari was likely to prove ownership of a protectable mark because Tari submitted evidence of its registered trademark. On the record before it, the court also found that the “TARI” and “TARO” marks were very similar in appearance and sound: both use the same first three letters, have two syllables, and are pronounced almost identically. The different final letters, capitalization, logos, and meanings did not outweigh those similarities.

The court found the protocols related because both allow developers or other users to build and transfer digital assets. Although Lightning argued that TARO was intended only for Bitcoin developers and that the protocols operated on different blockchains, the court found evidence of overlap in the parties’ developer audiences and potential wallet users. The parties also used common marketing channels, including Twitter, Substack, and GitHub.

The court treated evidence of actual confusion as limited but slightly favorable to Tari. The evidence included typographical mistakes involving “Tari” and “Taro,” a blog post that repeatedly used “TARI” while discussing TARO, and a mistake by Lightning’s former counsel referring to “Taro Labs” instead of “Tari Labs.” The court said the evidence did not definitively establish actual consumer confusion, but actual confusion was not required to show a likelihood of confusion.

The court also found that Lightning knew of Tari’s mark and its concerns before continuing to use TARO. Lightning offered explanations for choosing the name, including its connection to Bitcoin’s Taproot functionality and a founder’s personal connection to the word “taro.” The court concluded that, at this stage, those explanations did not overcome Tari’s showing that Lightning continued using the name despite repeated warnings and the risk of reverse confusion.

The court found that Tari was likely to show that Lightning could expand its business into areas competing with Tari’s products. In particular, the court considered the development of a “Taro Wallet” and the possibility that developers using the TARO protocol would put that name on consumer-facing products.

Because Tari showed a likelihood of success on its trademark claim, the court applied the statutory rebuttable presumption of irreparable harm. Lightning argued that Tari waited too long to seek emergency relief, but the court found Tari had a reasonable explanation: it had first tried to resolve the dispute and filed the TRO motion after Lightning announced an upcoming protocol milestone. The court found that Lightning did not rebut the presumption.

The court further found that the balance of hardships favored Tari. It was not clear that maintaining the status quo would cause Lightning irreparable harm, especially because Lightning could continue development if it changed the protocol’s name. The court also found that preventing likely consumer confusion served the public interest.

Disposition

The court granted Tari’s motion for a TRO. It did not require Tari to post a bond. The order restrained Lightning from making external updates to its TARO protocol, merging internal updates with its public-facing open-source code, and announcing or otherwise launching the next TARO stage or milestone.

The order did not wholesale restrain Lightning from responding to communications from non-Lightning developers and users. Lightning could answer questions about when features would be implemented, but it could not use those communications to further develop its internal or public code repositories, including by substantively responding to submitted bug reports, code, or feedback.

The TRO was to remain in effect until a hearing on a motion to dissolve the TRO or for a preliminary injunction, with the parties directed to meet and confer about the schedule and any necessary discovery.