9 Dec 2021 | Patents and Utility Models

From Artworks and Copyrights, NFTs make their way into Inventions and Patents

While the world’s creativity and digital artwork sector have been reaping the benefits of NFT based transactions, more recently inventions and patents have also joined the trend.

The last few months have seen a tremendous increase in activities surrounding Non-Fungible Tokens (NFT). It started when Mike Winkelmann a.k.a. Beeple sold his digital art named "EVERYDAYS: THE FIRST 5000 DAYS" for 69 million dollars. Following that there were other successful sales as well, including the Canadian musician Grimes, who sold her digital artworks in an auction for $6 million.

In fact, IBM Corp and a start up, IPWe, had recently announced their plans of representing their patents as NFTs on a blockchain based network. Telling more, in 2019, Nike had secured a patent for a blockchain based system known as “CrpytoKicks” wherein ownership and transfer of ownership of trainers will be recorded. On purchase of a physical pair, the purchaser will get a corresponding NFT which verifies the authenticity of the shoe, along with some other perks. This is one of the unique ways in which NFTs are helpful in fighting counterfeiting.

What are NFTs?

NFTs, based on blockchain technology, certify digital assets as unique and non-fungible. What this means is that unlike fungible crypto currencies, NFTs cannot be broken down or exchanged for another NFT of an equal amount. Each NFT is unique in itself and has a different characteristic of its own. Once minted and tokenized, they are stored on a blockchain as a representation of an asset, such as a digital art. Once entered on the blockchain, the data is immutable and this is one of the main reasons why NFTs and blockchain technology are popular.

Background of NFTs

The basic concept of NFTs is not new. The concept of NFTs came into existence in December 2012, with the “Coloured Coins”. These coins were initially issued on Bitcoin blockchain, as a representation of real-world assets and a proof of ownership. This is where the idea of collectability was associated with the NFTs. The idea behind coloured coins was to use the blockchain for assets such as digital collectibles, coupons, property, etc.

In 2017, Cryptopunks was launched as the world’s first marketplace for rare digital, based on an Ethereum blockchain. Over 10,000 different cartoon characters were available to be claimed for free, by anyone who had an Ethereum wallet. The concept behind cryptopunks was that no two characters were the same and were limited in number, adding to their uniqueness.

The biggest leap in the popularity of NFTs took place with the arrival of CryptoKitties in 2017. The virtual cat with the ability to breed, with each carrying its own genome with DNA and distinct traits was the marker of NFTs coming out into the mainstream. This process of buying, breeding and trading cryptokitties had exploded to a volume of 5,000 ETH. The popularity was so huge that it led to an increase in pending transactions on Ethereum, along with taking up over 10 per cent of the traffic on Ethereum and causing a threat to other applications via crowding.

Following this explosion, market places like OpenSea and RareBits cropped up to further this phenomenon. In order to highlight the use of NFTs as artistic collectibles on blockchain, Germany’s ZKM Center for Art and Media Karlsruhe Museum had also featured CryptoKitties.

From digital art, NFT has expanded to popular culture and the commercial world as well. Nike’s CryptoKicks and Taco Bell’s taco art are examples for that. In pop music, artists such as Grimes, King of Leon, Stever Aoki have hopped on the trend with creating their own NFTs.

In the academia as well, NFTs have made their way, providing yet another use of their collectability. An example was seen with UC Berkely’s auction of an NFT that represented patent disclosure and research documents related to research concerning the CRISPR-Cas9 gene editing. While there was no transfer of patent rights in the transaction, the idea behind it was to provide bragging rights something magnificent.

How are NFTs helpful in the Patent world?

From providing a platform for transactions related to digital collectibles, NFTs are now moving into the Patent transactions by providing a way to exchange authorship or licensing of patents and research. In a collaboration with University of Kentucky, IPwe has launched an Advisory Committee for University Technology transfer, in order to explore methods and avenues through which universities can monetize and manage their patent portfolios. The collaboration between IBM and IPwe to create an NFT based marketplace for patent transactions is another example.

NFTs rely on distributed ledgers, or blockchain and this provides the biggest advantage of authenticity and verifiability. Complexities and execution time of transactions are reduced as the transactions are stored on the ledger for everyone to see and verify for themselves. This transparency is what makes NFTs particularly attractive.

Patent attorneys may spend hours searching different IP databases and reviewing assignments and transaction contracts in order to ascertain the true owner of a patent. NFTs have the potential to ease the process by providing a clear and assorted database of each transaction, making further transactions simpler and more cost-effective. For a company such as IBM, with large patent portfolios, a blockchain based marketplace can be beneficial. The distributed network verification system provided by blockchain brings certainty to transaction, which is an invaluable feature. When it comes to patent licensing and sales, the system provides confidence with having a clear current title and history of transactions. This provides a remarkable tool for standardization of the fragmented patent marketplace.

It is also important to highlight the difference between NFTs that represent digital art and the ones based on the model of IPwe and IBM. The former deals with collectability and ownership over an original artwork. The related artwork being traded is unique and cannot be reproduced. The latter concerns itself with ensuring transparency and efficiency in transactions, whereas ownership of the patent may or not be included.

Potential Risks

Along with the various benefits pointed above, it is also important to be aware and mindful of the risks that accompany transactions taking place on a distributed blockchain ledger. At the outset, the potential of NFTs to avoid counterfeiting has been lauded time and again, however, there are challenges too. NFTs are not a grand saviour of the issue. There is scope of withholding any information, or putting in erroneous information as there are no checks to ensure that correct data by authorised individuals are being entered. Once the information is entered on a blockchain, it is immutable, and this is where the major problem arises in cases where the information put up is itself false or wrong. The blockchain will keep perpetrating the wrong information. While some platforms are working towards solving this issue, it is advisable to be careful until completely fool proof systems are installed.

As pointed out above, unlike copyrights where NFTs deal with collectability and ownership, in terms of patents, the only use of NFTs is to ensure transparency by creating a database. However, some have voiced their concerns that this development is nothing but duplication of something that already exists. For one, the patent office holds an extensive database of patents and assignmentsalong with other important information. There are also other services providingpatent databases, such as patentinspiration.com and patents.google.com. Further, it is also doubtful as to how many companies will be ready to put their patents record as NFTs onto a public ledger.

While NFTs present a new opportunity to explore a new territory and find a new marketplace, the risks cannot be ignored. For patent transactions, NFTs and blockchain can help with easing the cumbersome search process and sifting through numerous patent databases. However, the biggest hurdle in the process is convincing the playersto adopt the a system based on blockchain. There is a famous quote by Mark Cuban on Blockchain, that says, “It’s like the early days of the internet’- brand new, no one really knows what it’s going to be. when ‘a lot of people thought we were crazy’”. Whether Blockchain technology and NFT turns out to be as big as the internet is something only time can tell. However, NFT has provided a solution to various issues that form a part of digital transactions, such as transparency and improved security.  NFTs hold immense potential to revolutionize the way transactions take place in future.

Guest author: Sonal Sinha, Blogger "The IP Press"