A New Paradigm for Intellectual Property Assets?

Non-fungible tokens, or NFTs, are digital records of ownership of assets. The types of assets most commonly associated with NFTs are digital assets, such as artwork such as memes, GIFs, or game characters or properties. The assets represented by NFTs, however, can be digital, physical, tangible or intangible. Examples of the types of assets that have been transferred or whose ownership has been registered using NFT include sports memorabilia, music copyrights, works of art, and real estate. Intellectual property assets and, in particular, ownership and transfer of ownership of patents can also be registered and transferred as NFTs.

Related: Legal non-fungible tokens

Ownership of real property can be recorded in a Deeds Register, ownership of patents can be registered with the United States Patent and Trademark Office (USPTO), and ownership of written works or music can be registered with the Library of Congress through the copyright system. Since there are no similar ownership registration systems for types of assets such as collectibles, video clips, memes, digital avatars or inventions deemed ineligible for patentability in Because of their too abstract nature, the use of NFTs has a huge advantage. However, even assets with existing property registration systems, such as the USPTO for patents, can still benefit from using NFTs to help potential buyers, sellers or licensees understand the owner and the value of a particular patent.

NFT and blockchain technology

Ownership of NFTs is recorded on a blockchain, a distributed digital ledger that provides immutable records of transactions and transfers of ownership of assets through software code known as smart contracts. Blockchain technology is best known as the technology for recording transactions involving cryptocurrencies, such as Bitcoin (BTC).

Related: How the NFT market leveraged blockchain technology for explosive growth

Registering NFTs on a blockchain offers multiple advantages. On a blockchain, information such as NFTs are recorded in a series of data blocks of a certain size, depending on the implementation of the blockchain. When the amount of information to be recorded is sufficient to meet the blockchain block size requirement, a new data block is created and added to the end of the existing blockchain in the blockchain. The new block of data includes a cryptographic code, called a cryptographic hash, generated from a combination of data associated with the information from the new block and the cryptographic hash from the previous block. This secures the information contained in the blocks of a blockchain. If a malicious party attempted to modify information in a block of a blockchain – for example, a property record included in an NFT – it would cause the cryptographic hash of the associated block to change. This change would result in mismatches or changes to the cryptographic hashes in the following data blocks, providing an indication of the unauthorized modification of the recorded information.

Additionally, blocks of data in a blockchain, collectively referred to as the blockchain ledger, are not stored in a centralized location. Instead, the blockchain ledger is recorded in several different computer systems, usually users who have made a transaction through the blockchain or who have created one or more new blocks on the chain. The lack of a single centralized location for the blockchain ledger further increases the security of the information stored on the blockchain. A malicious party would not be able to hack a single computer system to modify the records of a blockchain, because the registry of that single computer system would then not match the records recorded on other computer systems in the network. If there was any indication of a change in information previously recorded on the blockchain – for example, due to a change in a cryptographic hash of one or more blocks – the registers of several or all of the different systems in which the registry was recorded could be compared to determine which system had been compromised. Thus, registering ownership, assignments, and previous sales or licenses of assets, such as patents, as NFTs on a blockchain would benefit potential buyers, sellers, and licensees by providing an unalterable public record.

Patents and NFT

At present, there is no requirement to register assignments or sales of patents with the United States Patent and Trademark Office, so it is often difficult to know the owner of a patent. It is also difficult to assess the value of a patent because terms of sale or patent licenses are rarely made public. If a patent were sold or licensed through NFTs, a record of the sale and of the current owner or licensee of the patent would be instantly available to the public. To further benefit potential buyers, sellers or licensees, the sale or licensing of patents through an NFT could be automated through the use of smart contracts.

The first NFT was created in May 2014, but NFTs didn’t gain much public attention until 2017, when Larva Labs released a project dubbed CryptoPunks for trading cartoon characters on the Ethereum blockchain. and Dapper Labs released the CryptoKitties game project, which allowed players to buy, trade, and “breed” virtual chats.

The market associated with NFT’s sales grew significantly in 2021, with an estimated sales value of over $ 250 million. Notable NFT sales include: an algorithm-generated pixel art image of an alien from the CryptoPunks project in March 2021 for $ 7.57 million; Twitter CEO Jack Dorsey’s very first tweet from 2006 in March 2021 for $ 2.9 million; and much more. In one of the most expensive NFT sales to date, auction house Christie’s sold a digital artwork, “Everydays: The First 500 Days”, by digital artist Mike Winkelman, also known as name Beeple, for $ 69.3 million as of March 2021. NFTs can now be created and sold on digital auction sites or by traditional auctioneers, like Christie’s.

Creating an NFT-based marketplace for types of assets, such as patents, will take time and require patentees to adopt a new paradigm with regard to the registration of ownership of patents, patents and patents. transfers and licenses. Much initial work would be required to create the digital representations of the ownership of existing patents as NFTs. Difficulties can arise if transfers or licenses have been made but not recorded on the blockchain, thus creating conflicting ownership records; however, work on such a market has started. For example, IBM announced its intention to work with the IPwe patent marketplace to create a digital marketplace to register and enable the transfer of patent ownership through NFTs. True Return Systems LLC has launched the first auction of a patent in the form of an NFT, appropriately for a patent on blockchain technology.

This article does not contain any investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.

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