Nonfungible tokens: A new paradigm for intellectual property assets?
The sales or licensing of patents via NFTs, automated by the use of smart contracts, could benefit potential buyers, sellers, or licensees.
Nonfungible tokens, or NFTs, are digital records of the ownership of assets. The asset types most commonly associated with NFTs are digital assets, such as artwork like memes, GIFs, or gaming characters or properties. Assets represented by NFTs, however, may be digital, physical, tangible or intangible.
The ownership of NFTs are recorded on a blockchain, a distributed digital ledger that provides for immutable records of transactions and for transfers of ownership of assets via software code known as smart contracts.
The recording of NFTs on a blockchain provides multiple benefits. On a blockchain, information such as NFTs is recorded in a series of blocks of data of a certain size, depending on the blockchain implementation.
Currently, there are no requirements for recording 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 evaluate the value of a patent because the terms of sales or licenses of patents are rarely made public.
Creating an NFT-based marketplace for asset types, such as patents, will take time and would require patentees to adopt a new paradigm with respect to recording patent ownership, transfers and licensing. A lot of initial work would be required to create the digital representations of ownership of existing patents as NFTs.
Difficulties may arise if transfers or licenses were made but not recorded on the blockchain, thus creating conflicting records of ownership. For instance, IBM has announced plans to work with the patent market IPwe to create a digital marketplace to record and provide for the transfer of ownership of patents via NFTs.