Nonfungible tokens, or NFTs, are digital data of the possession of property. The asset varieties mostly related to NFTs are digital property, akin to paintings like memes, GIFs, or gaming characters or properties. Assets represented by NFTs, nevertheless, could also be digital, bodily, tangible or intangible. Examples of asset varieties which have been transferred or which have had their possession recorded using NFTs embody sports activities memorabilia, copyrights in music, paintings and actual property. Intellectual property property and, particularly, the possession and switch of possession of patents might also be recorded and transferred as NFTs.
The possession of actual property could also be recorded in a registry of deeds, the possession of patents could also be recorded within the United States Patent and Trademark Office (USPTO), and the possession of written works or music could also be recorded within the Library of Congress by the copyright system. Because related techniques for recording possession don’t exist for asset varieties akin to collectibles, video clips, memes, digital avatars or innovations which can be deemed ineligible for patentability on account of being too summary, there’s a enormous profit to using NFTs. However, even property which have present techniques for recording possession, such because the USPTO for patents, should profit from utilizing NFTs to help potential consumers, sellers or licensees in understanding the proprietor and worth of a selected patent.
NFTs and blockchain technology
The possession of NFTs are recorded on a blockchain, a distributed digital ledger that gives for immutable data of transactions and for transfers of possession of property by way of software program code often known as good contracts. Blockchain technology is greatest often known as the technology for recording transactions involving cryptocurrencies, akin to Bitcoin (BTC).
The recording of NFTs on a blockchain gives a number of advantages. On a blockchain, data akin to NFTs is recorded in a collection of blocks of knowledge of a sure dimension, relying on the blockchain implementation. When the quantity of data to be recorded is enough to satisfy the block dimension requirement of the blockchain, a new information block is created and appended to the top of the prevailing chain of blocks within the blockchain. The new information block features a cryptographic code, known as a cryptographic hash, generated from a mixture of knowledge related to the knowledge within the new block and the cryptographic hash of the previous block. This renders the knowledge within the blocks of a blockchain safe. If a malicious celebration have been to aim to change data in a block of a blockchain — for instance, an possession document included in an NFT — this might end in a change to the cryptographic hash of the related block. This change would end in mismatches or modifications to the cryptographic hashes within the subsequent information blocks, offering a sign of the unauthorized change to the recorded data.
Further, the information blocks in a blockchain, collectively known as the blockchain ledger, usually are not recorded in a centralized location. Rather, the blockchain ledger is recorded in a number of completely different laptop techniques, usually of customers who’ve carried out a transaction by way of the blockchain or who created a number of new blocks on the chain. The lack of a single centralized location for the blockchain ledger additional will increase the safety of the knowledge recorded on the blockchain. A malicious celebration couldn’t hack a single laptop system to change the data in a blockchain as a result of the ledger on that single laptop system would then not match the ledgers recorded on different laptop techniques within the community. If there was a sign of a change in data beforehand recorded on the blockchain — for instance, on account of a change in a cryptographic hash of a number of blocks — the ledgers of a number of or all the completely different techniques during which the ledger was recorded may very well be in comparison with decide which system had been compromised. Thus, recording possession, assignments, and prior gross sales or licenses of property, akin to patents, as NFTs on a blockchain would profit potential consumers, sellers and potential licensees by offering an unalterable public document.
Patents and NFTs
Currently, there are not any necessities for recording assignments or gross sales of patents with the United States Patent and Trademark Office, so it’s typically troublesome to know the proprietor of a patent. It can also be troublesome to judge the worth of a patent as a result of the phrases of gross sales or licenses of patents are not often made public. If a patent was bought or licensed by way of NFTs, a document of the sale and present proprietor or licensee of the patent can be immediately out there to the general public. To additional profit potential consumers, sellers or licensees, the gross sales or licensing of patents by way of an NFT may very well be automated by means of good contracts.
The first NFT was created in May 2014, however NFTs didn’t acquire a lot public consideration till 2017 when Larva Labs released a project dubbed CryptoPunks for the commerce of cartoon characters on the Ethereum blockchain and Dapper Labs launched the CryptoKitties gaming project, which allowed gamers to buy, commerce and “breed” digital cats.
The market related to the gross sales of NFTs grew considerably in 2021, with an estimated gross sales worth of greater than $250 million. Notable NFT gross sales embody: an algorithm-generated pixel artwork picture of an alien from the CryptoPunks project in March 2021 for $7.57 million; Twitter CEO Jack Dorsey’s first-ever tweet from 2006 in March 2021 for $2.9 million; and lots of extra. In one of many highest-priced NFT gross sales so far, the public sale home Christie’s bought a digital paintings, “Everydays: The First 500 Days,” by the digital artist Mike Winkelman, also known as Beeple, for $69.3 million in March 2021. NFTs might now be created and bought on digital public sale websites or by conventional auctioneers, akin to Christie’s.
Creating an NFT-based market for asset varieties, akin to patents, will take time and would require patentees to undertake a new paradigm with respect to recording patent possession, transfers and licensing. A lot of preliminary work can be required to create the digital representations of possession of present patents as NFTs. Difficulties might come up if transfers or licenses have been made however not recorded on the blockchain, thus creating conflicting data of possession; nevertheless, work on such a market has begun. For occasion, IBM has introduced plans to work with the patent market IPwe to create a digital market to document and supply for the switch of possession of patents by way of NFTs. True Return Systems LLC has begun the primary public sale for a patent within the type of an NFT, appropriately for a patent directed to blockchain technology.
This article doesn’t comprise funding recommendation or suggestions. Every funding and buying and selling transfer entails threat, and readers ought to conduct their very own analysis when making a choice.
The views, ideas and opinions expressed listed below are the creator’s alone and don’t essentially replicate or symbolize the views and opinions of Cointelegraph.
Greg Gerstenzang is a accomplice at Boston intellectual property regulation agency Lando & Anastasi LLP. Greg works with shoppers of all sizes to leverage their intellectual property by strategic patent portfolio improvement and administration primarily within the chemical and materials sciences, laptop technology and software program, shopper merchandise, electronics, and mechanical and industrial engineering industries. He prosecutes patent functions domestically and overseas in a variety of applied sciences from water remedy to strong state physics. Greg’s intellectual property regulation follow focuses on patents, post-grant evaluation course of and strategic counseling. Greg is an energetic member of the MIT Club of Boston, the Cornell Club of Boston, the Boston Bar Association and the Boston Patent Law Association.